Corporate Governance implies securing the fiscal
health of the organization through ably maintaining and expanding the structure
base. In 1979 the word Corporate Governance originated through a series of
papers published at UK’s Institute of Chartered Secretaries and Administrators,
and later gained eminence in 1984 through the efforts of British Chartered
Accountant and financial expert Robert Ian Tricker in his book "Corporate Governance".
The broader framework of Corporate Governance includes Risk Management where Monitoring,
Reporting and Comprehensive Control structure are its vital core factors. These
secure and sound health directives enable the organization to follow the growth
prospective positively by multiplying and flourishing through able Management
guidelines.
RISK MANAGEMENT STRUCTURE
The Risk factors in an Organization include Operational Risk, Market Risks, Credit Risks and other hidden forms of Risks. There effective Identification, planning & assessment and prioritization form the crux factor of the Risk Management Team.
The
Stock Market reflects sudden Market risks from volatile changes in policies, prices, indices, rates, volatilities, correlations
relating to products, services and companies. It reflects the potential loss in
the value of the product or organizations net worth. On the other hand Credit
Risk relates to potential risk arising from the Depreciation, Decline and
Disappearance of the asset values of the organization. Deteriorating creditworthiness
or credibility, on and off balance sheets and defaulting on credit granted
entities are its signs. Whereas Risk arising from insufficient and inefficient
processes, policies, systems merged with external factors are known as
Operational Risks. Then there is Social and Environmental Risk which might
arise from neglect and non compliance on organization’s part in adhering to
social norms where they operate.
So to avoid
market & credit risk, timely assessment of
all financial transactions has to be done very carefully. The Risk Management
Department should priorly access risks and contain them within their framework
by regularly apprising and training staff of its potential impact on the
organization. All social norms and compliances should be strictly followed to
avoid any natural or social calamity. For the benefits of the organization,
society and country as a whole, the Corporate Social Responsibility initiatives
and its Sustainability measures should be seriously followed.
Thus Corporate Governance
and Risk Management are interrelated closely. Companies imply different
strategies to achieve their objectives and almost all of them have some minimal
or maximum risk factors. These have to be carefully studied, managed and
aligned with the Organizational goals without disturbing the equilibrium.
Adhering to sturdy Corporate Governance Guidelines which focus on the impending
risks through Risk Management Scrutiny is the Winning Mantra.
Some Golden Corporate Governance Tips
For Sustainable Growth To Be Incorporated With The Risk Management Initiatives.
1 Policies
relating to achievement of short term goals relating to spurt in increase in
prices of stocks should be discouraged.
2 Long term
value creation strategies should be promoted & merged with effective
compensation plans after carefully monitoring the deceptive incentive risks.
3 Have a
Competent Risk Management Team, Systems and Plan ready to counter the unseen
and excessive risk parameters and give the diverse team authority to access the
Risk Profile of the Organization.
4 Promote
flourishing of Performance linked with Integrity Culture.
5 Strict
Adherence to all the Monitor Procedures
& Processes relating to Risk Management through Internal Controls and implement
“Tone at the Top” policy as far as frauds, malpractices and unethical practices
are concerned.
6 Closely &
Constantly Integrate Governance, Management, Strategy and Risks.
7 Use
Transparent measures and share vital information among colleagues by educating
them about risk factors and enabling them taking wiser decisions during Work,
Voting and Investment Procedures.
Manjul Thapliyal
Principal Consultant
www.visionsahead.com
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