Corporate Governance and Risk Management: TAFP Case Analysis Report

This report analyzes the TAFP case, where financial planners engaged in fraudulent activities, forging documents and misusing client funds for personal gain. The analysis covers failures in corporate governance, including lack of supervision, conflicts of interest, and poor management, which led to significant financial losses and reputational damage. The report examines the role of the CEO, proposes actions such as imposing fines, demoting responsible parties, and implementing stricter protocols to prevent future occurrences. It also addresses the impact of corporate culture, particularly the 'meet your sales targets' mentality, which incentivized unethical behavior. Furthermore, it discusses the challenges faced by ASIC, the investigation group, and the importance of media involvement and whistleblower protection policies in promoting good governance. The report concludes by highlighting the challenges organizations face, such as lack of supervision, conflicts of interest, and poor management, and emphasizes the need for improved ethical practices and robust risk management strategies to mitigate similar risks.

Corporate Governance and Risk Management 1
Corporate Governance and Risk Management
Name
Institution
ANSWER Q1
TAFP was involved in a fraud case during the year 2003 to 2012.The financial planners
interfered with their customers files and forged their documents by forging their signatures,1 to
transfer clients’ money and invest it in extremely high risk investments. Even though they knew
that what they were doing was wrong, they did this in order to personally benefit by earning
higher commissions and bonuses from the bank. The senior management has highly contributed
to the failures and loses faced by the clients who entrust their bank and opt to deposit and save
their money with them. The managers convinced the clients of taking care of their money and
being safe in their bank, 2 yet they used the clients’ money in the wrong way. They would forge
their documents to get access to the money and use it maximize their profit making in
collectively getting high commission without caring how it would affect the client in future. The
account owners would be upset if they find out that their money was invested in risk projects to
1. V, Aebi, Sabato, G. and Schmid, M., 2012. Risk management, corporate governance, and bank
performance in the financial crisis. Journal of Banking & Finance, 36(12), pp.3213-3226.
2. Risk management. Accounting, Auditing & Accountability Journal, 21(3), pp.337-361.

Corporate Governance and Risk Management 2
work for the benefit of the bank. The managers would defend themselves when caught. They told
the clients that their money got lost in misfortunes. These kinds of behaviors are inhuman for it
caused a great hurt to the affected clients. Losing money which one has worked upon saving for
another man’s greed really hurts and this behavior should be discouraged from any money
dealers that belong to many people rather than individual. As the saying goes once beaten twice
shy, the clients who experienced the results of this risky game decided to completely withdraw
from that bank and even filled a complaint to be compensated. This caused a great lose to both
the clients and also the bank at large. If placed in the place of Sam Venus, 3 the CEO of TABS, I
would suggest that heavy fines be imposed on the irresponsible people who had indirectly stole
people’s money, but directly tarnished the name of the bank. They would pay back the clients’
money and at the same time lose their jobs. I would have handled the case as early as the
whistleblowers started to react, 4 not allowing further loses to be incurred. Those who have
acquired higher positions in the company using this dangerous method should be demoted and
even temporarily stop job for investigations to take place. If with evidence found guilty,
consequences would follow without any delay. These cases would lead to some new additional
rules that no money that would be moved from anyone’s account to the risky investment without
their physical appearance before the manager rather than just signing of the documents. All this
would be for the benefit of both the bank itself and its members to mitigate similar future risk
from reoccurring.
3. A, Bhimani, 2009. Risk management, corporate governance and management accounting:
Emerging interdependencies.
4. C, Francoeur, Labelle, R. and Sinclair-Desgagné, B., 2008. Gender diversity in corporate
governance and top management. Journal of business ethics, 81(1), pp.83-95.

Corporate Governance and Risk Management 3
ANSWER Q2
A company’s culture would therefore influence the behavior of its employees either positively or
negatively. A positive culture that shows benefit to the company and the people working within
should be encouraged and supported from all directions while that which causes harm to either
the company or any of the employees or clients should be discouraged and diminished.
According to TABs remuneration plan, 5there culture consisted of a saying, “meet your sales
targets, or surrender your rice bowl”. This meant that, if one wishes to see increment in their
commissions and enjoy their bonuses, they had to work hard in convincing more clients to
participate in investing in the risky investments. The employees tried their level best including
dishonest and unfair means, like forging their client’s documents to win them without their
knowhow and permission, fearing to surrender their rice bowl. For example in the case study,
Don being one of the top most writers,6he was amassing a big number of clients investing with
him, notched sales through corrupt means and other dishonest acts. When Bloe reported the
matter, he didn’t believe what response was taken. The manager brushed the issue aside instead
of dealing with the case appropriately. Little did they know that Don was under protection and a
top earner of TAB due to his status? This encouraged the kind of behavior observed from the
5. P.C, Godfrey, Merrill, C.B. and Hansen, J.M., 2009. The relationship between corporate social
responsibility and shareholder value: An empirical test of the risk management hypothesis.
Strategic management journal, 30(4), pp.425-445.
6. E, Humphreys, 2008. Information security management standards: Compliance, governance
and risk management. Information security technical report, 13(4), pp.247-255.

Corporate Governance and Risk Management 4
financial planners because of the personal benefit to get, for they got what they paid for. Agency
conflicts would be minimized by encouraging the workers to have a place for honesty and
discouraging forgery and fraud too.
ANSWER Q3
ASIC was an investigation group which got complaints from TAB clients. It could take longer
period of time to respond to the cases though the victims felt that they should be dealt
immediately. Despite the situation, the whistle blowers emphasized until action was taken. ASIC
took long to respond because it had a couple of files to deal with. As it was handling one case
others pop in and need to be dealt with too. It managed to deal with a few at a time and
sometimes didn’t manage to get chance to solve. Some of the challenges might include impatient
clients, 7 unsatisfactory of their response and too many complaints waiting to be attended to
among others.
ANSWER Q4
The media can take part in promoting good governance. This happens when the media exposes
anything done against the law and people’s will to a broad area. When it reaches many people in
its reality without any alteration of content it has to be dealt with immediately before they riot.
This helps improve the way 8of doing things. Media also faces some challenges like,
7. K, John, Litov, L. and Yeung, B., 2008. Corporate governance and risk‐taking. The Journal of
Finance, 63(4), pp.1679-1728.
8. H, Kerzner, and Kerzner, H.R., 2017. Project management: a systems approach to planning,
scheduling, and controlling. John Wiley & Sons.

Corporate Governance and Risk Management 5
living in fear that a superior person may indulge them leading to their dismissal from work. In
the same way it can respond to enterprise risk management issues if forwarded to them in good
time.
ANSWER Q5
A good whistle blower protection policy is important since it covers all whistleblowers.
Whistleblowers often recognize their fellow whistleblowers, and protect them whenever
possible. With a good policy9 which can protect them from any threat as they are doing their
work. This strengthens them enabling them to investigate and feel free to air any issue affecting
the many without fear or favor. There is one thing that whistleblowers must do. Whenever
caught in a crime, they should be willing to come forward before being forced to do so, since it is
an agreement. Establishing an Office of Whistleblower10 to allow quicker response to
whistleblowers and commencing an organization-wide improvement process of its
communications and transparency. Whistleblowers11 will have a meeting point in case one
identifies a burning issue to report, they will not hesitate anymore.
9. G, Kirkpatrick, 2009. The corporate governance lessons from the financial crisis. OECD
Journal: Financial Market Trends, 2009(1), pp.61-87.
10. A, Kolk, 2008. Sustainability, accountability and corporate governance: exploring
multinationals' reporting practices. Business Strategy and the Environment, 17(1), pp.1-15.
11. H, Van Greuning, and Brajovic-Bratanovic, S., 2009. Analyzing banking risk: a framework
for assessing corporate governance and risk management. World Bank Publications.

Corporate Governance and Risk Management 6
ANSWER Q6
Some of the challenges faced by organizations such as TAB include;
Lack of close supervision–TAFP being a financial planning arm of TAB, lacked close
supervision from the senior managers. This is the reason as to why they could have fraud and
forging documents and no one close would notice until the whistleblowers tipoff. This tends to
be a big challenge to most organizations.
Conflict of interest-though the whistle blowers wanted Don to be dealt with for his dishonest
acts the managers seemed to care not for he was the highest12 trustee and even promoted. Some
organizations fail to succeed due to differences in their interests.
Poor management-the senior managers used to cover up evil whenever exposed by whistle
blowers.
12. M, Pirson, and Turnbull, S., 2011. Corporate governance, risk management, and the financial
crisis: An information processing view. Corporate Governance: An International Review, 19(5),
pp.459-470.

Corporate Governance and Risk Management 7
BIBLIOGRAPHY
Aebi, V., Sabato, G. and Schmid, M., 2012. Risk management, corporate governance, and bank
performance in the financial crisis. Journal of Banking & Finance, 36(12), pp.3213-3226.
Risk management. Accounting, Auditing & Accountability Journal, 21(3), pp.337-361.
Bhimani, A., 2009. Risk management, corporate governance and management accounting:
Emerging interdependencies.
Francoeur, C., Labelle, R. and Sinclair-Desgagné, B., 2008. Gender diversity in corporate
governance and top management. Journal of business ethics, 81(1), pp.83-95.
Godfrey, P.C., Merrill, C.B. and Hansen, J.M., 2009. The relationship between corporate social
responsibility and shareholder value: An empirical test of the risk management hypothesis.
Strategic management journal, 30(4), pp.425-445.
Humphreys, E., 2008. Information security management standards: Compliance, governance and
risk management. information security technical report, 13(4), pp.247-255.
John, K., Litov, L. and Yeung, B., 2008. Corporate governance and risk‐taking. The Journal of
Finance, 63(4), pp.1679-1728.
Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to planning,
scheduling, and controlling. John Wiley & Sons.
Kirkpatrick, G., 2009. The corporate governance lessons from the financial crisis. OECD
Journal: Financial Market Trends, 2009(1), pp.61-87.
Kolk, A., 2008. Sustainability, accountability and corporate governance: exploring
multinationals' reporting practices. Business Strategy and the Environment, 17(1), pp.1-15.

Corporate Governance and Risk Management 8
Van Greuning, H. and Brajovic-Bratanovic, S., 2009. Analyzing banking risk: a framework for
assessing corporate governance and risk management. World Bank Publications.
Pirson, M. and Turnbull, S., 2011. Corporate governance, risk management, and the financial
crisis: An information processing view. Corporate Governance: An International Review, 19(5),
pp.459-470.