Corporate Governance and Risk Management: A Reflective Essay

This essay discusses the role of management in establishing socially responsible organisations by maintaining the ethical aspects in decision making pertaining to corporate governance and risk management. It also highlights the importance of identifying the weakest critical controls in risk management and the role played by corporate directors and risk managers in responding to shareholders’ needs.

Running head: CORPORATE GOVERNANCE AND RISK MANAGEMENT
A Reflective Essay on Corporate Governance and Risk Management
Name of the Student
Name of the University
Author note

1CORPORATE GOVERNANCE AND RISK MANAGEMENT
Introduction
The advent of 21st century has recognised the role of the Board of Directors in the area
of Strategic Management in marketing finance and operations divisions. The essence of
Corporate Governance correlates with uniting the day to day business of the enterprise with
the Codes of Company Law (Davies 2016). Such responsibilities are generally administered
by the experts of banking and monetary regulations, auditors and primarily, the board of
directors who are in charge of managing the massive liquidity of the enterprise. A business
enterprise operates amidst various levels of risk that are deep-seated within its processes.
Only with effective recognition of these significant risks can an organisation operate
successfully. The following essay iterates the role of management in establishing socially
responsible organisations by maintaining the ethical aspects in decision making pertaining to
corporate governance and risk management.
Role of Managers in Corporate Governance
The framework of laws and regulations followed by a Public Company comprise of
necessary flexibility due to which they are easily capable of adjusting their business
requirements to the ever-changing environment (Mason and Simmons 2014). This furthers
the proactive engagement of the important shareholders and investors of the firm who,
reaping benefits from the customised practices, are able to dedicate resourceful proposals,
governance outreach and efficient portfolios to the firm. As observed by Elkington (2013),
these institutional investors also participate in the strategic decision making and play
noteworthy role in corporate social responsibility along with the board of directors. Often, the
board of directors encourage the shareholders to share their valuable inputs in matters of
capital allocation and implementation of programs and campaigns that are in compliance with
the ethical standards of corporate strategies. Thus, empowering the shareholders and

2CORPORATE GOVERNANCE AND RISK MANAGEMENT
investors, in a way of making them partial owners, the new-age business enterprises strive to
set an example of the modern corporate governance (Brower and Mahajan 2013).
Risk Management in Corporate Governance
In my experience as an associate in such an enterprise which is established on a
framework of flexible implementation strategies, I have been able to understand the
importance of identifying the weakest critical controls in risk management. In my
organisation the approach to risk management is adapted after careful consideration of its
potential impact and benefits on the business processes, the production process, the operators,
the investors, suppliers and the services provided. After a thorough analysis of all such
aspects, a comprehensive route to decision making is formulated which is embedded with the
effective tactics and strategies to deal with the risk. By following such method, our
organisation is able to acquire an upper-hand on the risks.
Role played by Corporate Directors and Risk Managers in responding to
Shareholders’ needs
A common practice that I have encountered in our organisation is that to sustain the
agency costs, the management encourages the dynamic participation of shareholders. The
shareholders possess the unique capability of mobilising the resources even though they lack
the perspective or outlook of the company’s managers. Through such mobilisation and
transparency, new incentive mechanisms evolve and lead to value creation over time
(Todorovic 2013). In our organisation, the external shareholders are known to deliver
propositions that are more commonly known as ‘short-termism’ to our management body.
However, the ultimate decision is always in the hands of the board of directors whether or not
to give in to those compelling intentions.

3CORPORATE GOVERNANCE AND RISK MANAGEMENT
Ethical Issues in Corporate Decision Making with respect to Governance
and Risk Management
An important aspect of Corporate Governance is social welfare (Tricker and Tricker
2015). In our organisation, the expectation on part of all the stakeholders like company’s
employees, customers and suppliers, are taken into account in large scale operations. Primary
focus is lent on achieving fairness in the deals and minimising the constraints generated from
the external environment. The recruitment of the right CEO plays a vital role in attaining the
above mentioned objective. The CEO being the most powerful and influential part of the
Board of Directors, it is imperative that his or her perspectives are aligned to the company’s
needs for betterment otherwise, the reluctance or resistance on part of the CEO leads the
company to a very disadvantageous position in terms of stock price and market reputation. In
light of proper monitoring under the guidance of the right CEO, the Board of directors can
focus on the advisory roles. Such roles usually essay occasions like resolving conflict
between the management and the shareholders’ interests. However, in my experience as an
associate, I had witnessed situations where the board of directors had to bend in front of the
strong biases of the investor community. Such occasions are far from being beneficial to any
public company. Therefore, it is essential to have an alternate route sketched for such
situations instead of being overconfident about the smoothness in relationship with the
shareholders.
Organisational Approaches in Corporate Governance and Risk
Management
In simple terms, risk is defined as the adverse effect of uncertain consequences on
objectives of an organisation (Cardona 2013). The impact of risk can be of short term,
medium or long term depending on the strategies adapted by the organisation in fulfilment of

4CORPORATE GOVERNANCE AND RISK MANAGEMENT
its core operations. In our organisation, the strategy of risk management is associated with
detailed planning over three years. In these three years, our company typically analyses all
the small scale and large scale operations such as important mergers and acquisitions,
development of new product or service, or implementation of any new policy of change
management. After close assessment of all risks and uncertainties, the management
segregates them based on their degree of averseness. Depending on the nature of each of
those risks, complete resolutions are framed and treated as and when required to terminate the
negative effects. Further, the resources that are discovered in this entire process are kept as
means of reaction planning and monitor the performance after risk aversion (McNeil, Frey
and Embrechts 2015).
Conclusion
Thus, to conclude the essay, it can be highlighted that employees such as myself have
been able to acquire the right perspectives of operating in a competitive environment by
adopting the corrective notions and knowledge about corporate governance and the suitable
strategies of risk management. The knowledge is essential for every employee because it
helps in understanding the ultimate objective of these two aspects which is achieving
sustainable development of an organisation.

5CORPORATE GOVERNANCE AND RISK MANAGEMENT
References
Brower, J. and Mahajan, V., 2013. Driven to be good: A stakeholder theory perspective on
the drivers of corporate social performance. Journal of business ethics, 117(2), pp.313-331.
Cardona, O.D., 2013. The need for rethinking the concepts of vulnerability and risk from a
holistic perspective: a necessary review and criticism for effective risk management.
In Mapping vulnerability (pp. 56-70). Routledge.
Davies, A., 2016. Best practice in corporate governance: Building reputation and
sustainable success. Routledge.
Elkington, J., 2013. Enter the triple bottom line. In The triple bottom line (pp. 23-38).
Routledge.
Mason, C. and Simmons, J., 2014. Embedding corporate social responsibility in corporate
governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), pp.77-86.
McNeil, A.J., Frey, R. and Embrechts, P., 2015. Quantitative Risk Management: Concepts,
Techniques and Tools-revised edition. Princeton university press.
Todorovic, I., 2013. Impact of corporate governance on performance of
companies. Montenegrin Journal of Economics, 9(2), p.47.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.