Corporate Governance and Risk Management: TAFP Case Study Analysis

This report examines the corporate governance and risk management failures within Terra Australis Financial Planning Limited (TAFP), a financial planning arm of Terra Australis Bank (TAB). The case study reveals a significant fraud scheme involving rogue financial planners who manipulated client files and invested in high-risk ventures. The report analyzes the actions of senior management, the role of remuneration plans, and the involvement of the Australian Securities and Investments Commission (ASIC). It explores the importance of whistleblower protection, the media's role in exposing fraud, and the challenges in promoting ethical behavior. The analysis covers key issues such as transparency, accountability, and regulatory compliance, providing insights into the complexities of corporate governance and risk management in the financial sector. The report also suggests improvements for mitigating similar risks in the future and emphasizes the significance of ethical conduct and effective oversight.

Running Head: CORPORATE GOVERNANCE AND RISK MANAGEMENT
CORPORATE GOVERNANCE AND RISK MANAGEMENT
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................3
Answer to Question 3.................................................................................................................3
Answer to Question 5.................................................................................................................4
Answer to Question 4.................................................................................................................5
Answer to Question 6.................................................................................................................6
Reference....................................................................................................................................7

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Answer to Question 1
The action taken and the behavior of the senior management were not satisfactory in
terms of enterprise risk management. At first when But Don has raised the issue to its
manager after witnessing the dishonest act by his colleague Dodgy Don, then the manager
brushed the issue aside due to the fact that the Don was under the protection of management
for his position as the top earner. Further, he has raised the issue to the middle management;
then again the response was vague and indefinite. Moreover, senior management has also
arranged certain documents for being processed by the legal department for giving legal
privileged. Apart from this, the management also pressurized Bloe for identifying who has
leaked the information to media. Hence, it was finding that, the senior management was itself
protecting the fraudulent acts of financial planners of the company (Bromiley et al. 2015).
The action that was taken by the senior management was not only inappropriate but
potentially high risk. It was because the senior management of TAB was encouraging the
fraudulent activities of the financial planner. It was due to their encouragement in terms of
bonus and commissions from indulging the client’s wealth in highly risky investment. The
biggest culprit here is the senior management because due to this encouragement, the client
has suffered great loss and the company gained their profit (Mikes and Kaplan 2014).
If I would be in position of Sam Venus, the steps that would be taken by me for
addressing the risk of the awareness of fraudulent activities in the origination would be not
support any kind of fraud activities in the organization, finding reasons of the fraud and
person involve in it and taking prompt and immediate actions in case of any whistle blowing
(Lam 2014).
The suggestions that can be given for the management of these activities by
mitigating similar risk in the future would be protection of whistle blower of the organization,

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taking strict steps in finding any such activities in future and making strict mechanism of
regulation for taking legal actions for these conducts (Gatzert and Martin 2015).
Answer to Question 2
The key area that was of major concerns in the remuneration plan of TAB was the
dependence of the remuneration on the short-term incentives such as bonus. The commission
was set on selling of the highly risky investment assets. Hence, this has encourages the
employees for encouraging the clients for major extent for investing in those risky investment
portfolio. Therefore, they get higher commission and incentive for this (Breault et al. 2017).
It has influenced the culture of the organization and employees behavior to large
extent. It is because the employees were very much pressurized for achieving the sales target.
The management was so strict in this matter, as per them the employees either achieve the
target or either surrender. This culture was so much pressurized that the employees was
bound to conduct fraudulent activities and being dishonest towards their work (Urbancová
and Šnýdrová 2017).
The changes that would be done in the remuneration system for minimizing the
agency conflict will be for providing the incentive to the employees, but not for only one
investment plan but disclosing clear fact about all the investments plans to client. More than
one criteria of measuring the performance of the employees should be incorporated and their
performance should be measured by other aspects as well. In order to review the
compensation, committee should be formed (Urbancová and Šnýdrová 2017).
Answer to Question 3
Throughout the course of financial planning scandal of the TAB, there were various
actions taken by ASIC. During the year 2008, as a part of surveillance program, the ASIC has
issued the warning notice to the TAFP by indicating the list of 38 financial planners of the

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company who were classified as being “critical risk” for not complying with the appropriate
protocols of financial planning. In addition, even after the whistle blowing by the employees
of the company to ASIC, they have not taken any steps for months in order to obtain
evidences from TAFP. However, they have opted for discussing with the company and taking
joint solutions for closely supervise (Donald and Nicholls 2015). Later, even after the
immense pressure by the management of the company to the employee who have blowed the
whistle, for identifying the source of leak to media, ASIC have not taken any step. Moreover,
after the pressure of the whistle blower in 2010, the corporation act has been revised in 2004
for providing stronger protection to whistleblower. It was then in the year 2010, ASIC
marked the first sign of confrontation by giving order to TAFP for handing over the files of
client for the investigation. Finally, in the year 2011, ASIC have declared and confirmed the
frauds of Don as well as other financial planners of TAFP (Donald and Nicholls 2015).
The difficulties faced by the ASIC during their investigation are that even though
issuing of the list of critical risk financial planners, the management has no supported for
taking any further actions. The management of the company was not giving any type of
support to ASIC in terms of detecting any fraud. In addition, no evidences of client’s file
were given to ASIC for doing the investigations (Price 2014).
Answer to Question 5
The media has played the important role in the exposure of the fraud in TAFP. The
roles which media plays in promoting good governance are as follows:
 Media plays vital role in acting as watchdog for promoting transparency,
accountability and public scrutiny.
 Media reflects strong as well as independent source for disbursement of information
to mass

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 Journalist are free to shares their views by monitoring, investigating and criticizing
the administration of public through their policies and actions which ensures good
governance.
 It provide platform for raising voices of stakeholders about any concern that is
addressed to all public in general and have a greater influence.
 It reports the corporate actions
 It ensures independent investigations.
In spite of the media potential for playing significant governance role, there are several
factors that limit its effectiveness. It is because the outlet of media is occupied with their own
set of interest that have to be fulfilled as well as the journalist are most often have cognitive
bias that would limit their ability in holding leaders accountable (Aguilera et al. 2015).
Yes, social media can play the role of enterprise risk management by creating the new
challenges for the internal as well as external stakeholders.
Answer to Question 4
The importances of a good whistleblower protection policy are as follows:
 The clarity in the policy of whistle blowing encourages the culture where there can be
quick address to the wrongdoings before any action of regulatory.
 It reinforces the staff for the importance of their duty regarding confidentiality for
their company and the clients.
 It provides safe, protected and trustworthy environment for sharing the information.
 It promotes the culture of integrity and accountability for safeguarding in both the
public and private institution by encouraging reporting of the fraud, misconduct and
corruption (Dhamija 2014).

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The policy has not sufficiently protected Bloe as well as his fellow whistleblowers. It
is because they were pressurized by the management of the company for revealing who
have leaked the information (Dixon 2016).
The further improvements that can be done for encouraging those who are aware of
the wrongdoings in an organization, instead of remaining silent can be done by providing
safe and protected environment so that they can disclose any wrong doings without any
hesitation. In addition, the organization should also ensure the timely action (Dixon
2016).
Answer to Question 6
The challenges face by the organization in the promotion of ethical behavior,
compliance and good behavior are as follows:
 The most important and essential an ethical challenge that is faced by the
organizations is honesty and integrity.
 The second challenges face by the organization is the promotion of transparency in
the services and operations.
 The third challenge of the organization is the culture of the organization.
 The fourth challenge is the regulatory compliance of the organization.
 The fifth challenge of the organization is employees’ engagement at the workplace.
 The last challenge face by the organization in the promotion of ethical behavior,
compliance and good behavior is intention and behavior of top level management
(Johnson 2017).

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Reference
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