Corporate Governance and Risk Management: A Detailed Report

This report delves into the critical aspects of corporate governance and risk management, highlighting their significance in today's business environment. It emphasizes the role of upper management and the board of directors in establishing strategic objectives and ensuring ethical conduct. The report underscores the importance of stakeholder satisfaction, transparency, and accountability in achieving high profitability and sustainability. It explores the impact of globalization and economic changes on corporate governance, advocating for a robust system that fosters ethical management. The report also examines risk management practices, including risk identification, assessment, and monitoring, and their contribution to organizational success. References to academic literature are included to support the arguments presented, along with real-world examples like the Satyam fraud case to illustrate the implications of poor governance and ineffective risk management. The report concludes that effective governance is contingent upon careful risk management, encompassing proper communication and a holistic approach to business uncertainties.

Running head: CORPORATE GOVERNANCE AND RISK MANAGEMENT
CORPORATE GOVERNANCE AND RISK MANAGEMENT
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1CORPORATE GOVERNANCE AND RISK MANAGEMENT
In the current scenario, corporate scandals and degrading confidence in financial
reporting among the creditors and investors have renewed the corporate governance practices in
an organization. Corporate governance is the system through which companies are controlled
and directed (Berger, Imbierowicz and Rauch 2016). It is the duty of upper management and
board of directors for proper governance of the companies. The main responsibility of the upper
management includes establishing the strategic aims of the company. The shareholder is the one,
who governs the organization by appointing the auditors and directors.
It is the duty of shareholders to satisfy the management that adequate structures were in
the place. I think the corporate governance is mostly about what the top level management
practices to achieve the desired mission. They are the ones setting the values and standards of the
company to maximize profitability and productivity. It is to be distinguished according to them
from the daily operational management of the organization with the help of full-time executives.
The primary purpose of corporate leadership is to generate profit both ethically and
legally. This therefore creates high level of satisfaction to the important five constituencies. This
includes employees, customers, vendors, investors and society at large (Soltanizadeh et al. 2016).
The main aim of every organization is to ensure high profitability and sustainability year after
year. An organization is generally a congregation of different stakeholders. It is important for the
company to be transparent and fair to both the internal and external stakeholders while dealing
with all the transactions. The major essence of the corporate world is completely dependent upon
promoting compliance of law adequately. It should be practiced with transparency, high spirit
and accountability.

2CORPORATE GOVERNANCE AND RISK MANAGEMENT
With the advent of globalization and changes in the economy, our corporate world needs
a high-class governance system. It is vital for our firm to demonstrate and embrace ethical
conduct for effective management. The only tool that can help the management to achieve the
desired goals is via corporate governance (Iliev et al. 2015). It is a combination of strong
commitment for the management that safeguards shareholders interest, corporate ethics and
openness in ideas. Therefore, this helps in providing parameters of control, accountability, and
reporting system by the management. This also helps in encompassing the interactive
relationship among various constituents that is required for determining the performance and
direction of the corporation.
In the recent times, scandals and scams are undermining our lives to a large extent. The
challenges and issues have been never so unpredictable and turbulent as they are currently.
Therefore proper corporate governance is highly significant to foster the world economy. Good
corporate governance mainly comprises of effective board that governs the organization with
high integrity (Lebedeva et al. 2016). It is the board of our company that is responsible for
achieving the objectives of the company. Moreover, the other factors like, business environment
and ethics creates an impact on our legitimate shareholders and societal interests. This further
influences the long-term interest and reputation of our business enterprise.
Corporate governance is not just about promoting transparency, accountability and
fairness of corporate (Calomiris and Carlson 2016). In fact it is about finding a balance between
social and economic goals to work ethically. There have been various cases of excessive debt
financing that is laced with frauds and executives unequal rise in payments. The largest scam
involving ones the largest IT firm, Satyam Company has discredited the corporate governance

3CORPORATE GOVERNANCE AND RISK MANAGEMENT
concept virtually. The Satyam fraud case is the reflection of the economic scenario of our
organization that we live in. corporate governance is highly important for the entire firm to
properly managed the risks within the organization. All the successful organization throughout
the world lays down framework for creating long-trust trust between the external providers of the
capital and companies (Elshandidy and Neri 2015).
Since the beginning, the business faces immense risk in a day-to-day basis. Large
organization is gaining success in the recent times only due to efficient risk management
practices. Risk management is the approach that aims to assist the firm by understanding,
evaluating and implementing action on its risk. The main idea is to increase the rate of firm’s
success and also reduce any chances of failure (Eling and Marek 2014). Effective risk
management provides benefits to the employees, customers, shareholders, and also the society at
large. Adequate risk management ensures that our company’s compliance with the requirements
for corporate governance.
Risk management is important for all companies, whether, large or small. Proper risk
management practices include performance management, risk and accountability approach.
Reward is also included in our firm, which ensures higher rate of efficiency throughout all the
levels of the organization. Risk management practices also require a clear understanding and
knowledge of the firms as well as the various processes that is involved within the business
(Eling and Marek 2014). It is the responsibility of board to maintain proper internal control
system and sound risk management.
I think it is important for the boards to conduct review for ascertaining the risk
management system within the organization. Proper review of the internal control system should

4CORPORATE GOVERNANCE AND RISK MANAGEMENT
be done at least annually and report should be given to all the shareholders. The review should
adequately contain all the material controls, which includes financial, compliance and
operational control (Jizi et al. 2014). Generally it is the main responsible for the boards to
determine the extent and nature of vital risks so hat strategic objectives of our company can
easily be attained. Certain risks are exploited so that advantage for strategic opportunities can be
made.
Corporate governance and risk management issues in the recent times are increasing at
rapid rates. The management and organizational practices that includes all the operational
activities are also extensively affected. Disciplined and structured governance helps the
corporations to manage all the business uncertainties through holistic and integrated approach.
Therefore it can be concluded that effective governance in the company is only possible if the
organizational risks are managed carefully. This includes risk identification, management and
proper monitoring and reporting. Moreover, reliable and relevant upward communication from
risk owners to top-level management is imperative for effective governance and risk
management.

5CORPORATE GOVERNANCE AND RISK MANAGEMENT
References:
Berger, A.N., Imbierowicz, B. and Rauch, C., 2016. The roles of corporate governance in bank
failures during the recent financial crisis. Journal of Money, Credit and Banking, 48(4), pp.729-
770.
Calomiris, C.W. and Carlson, M., 2016. Corporate governance and risk management at
unprotected banks: National banks in the 1890s. Journal of Financial Economics, 119(3),
pp.512-532.
Eling, M. and Marek, S.D., 2014. Corporate governance and risk taking: Evidence from the UK
and German insurance markets. Journal of Risk and Insurance, 81(3), pp.653-682.
Elshandidy, T. and Neri, L., 2015. Corporate governance, risk disclosure practices, and market
liquidity: comparative evidence from the UK and Italy. Corporate Governance: An International
Review, 23(4), pp.331-356.
Iliev, P., Lins, K.V., Miller, D.P. and Roth, L., 2015. Shareholder voting and corporate
governance around the world. The Review of Financial Studies, 28(8), pp.2167-2202.
Jizi, M.I., Salama, A., Dixon, R. and Stratling, R., 2014. Corporate governance and corporate
social responsibility disclosure: Evidence from the US banking sector. Journal of Business
Ethics, 125(4), pp.601-615.

6CORPORATE GOVERNANCE AND RISK MANAGEMENT
Lebedeva, T.E., Akhmetshin, E.M., Dzagoyeva, M.R., Kobersy, I.S. and Ikoev, S.K., 2016.
Corporate governance issues and control in conditions of unstable capital risk. International
Journal of Economics and Financial Issues, 6(1S).
Soltanizadeh, S., Abdul Rasid, S.Z., Mottaghi Golshan, N. and Wan Ismail, W.K., 2016.
Business strategy, enterprise risk management and organizational performance. Management
Research Review, 39(9), pp.1016-1033.