CORPORATE GOVERNANCE AND RISK MGT

Topics: Risk management, Corporate governance, Board of directors Pages: 58 (3814 words) Published: March 19, 2015
CORPORATE GOVERNANCE & RISK
MANAGEMENT
July 2012

Agenda
1

What is Corporate Governance?

2

What is Risk Management?

3

How do they intersect ?

4

Why is Risk Governance important - What is
consequence of failure?

5

What to do (how do we respond?)

5

Discussion
2

1

WHAT IS CORPORATE GOVERNANCE?

Corporate Governance
• What is Corporate Governance?
• There are many definitions. The CBN Code of Corporate Governance defines it as follows:
• Corporate governance refers to the processes and structures by which the business and affairs of an institution are directed and managed. In order to improve long-term shareholder value by enhancing corporate performance and accountability, while taking into account the interest of other stakeholders. • Corporate governance is therefore about building credibility, ensuring transparency and accountability as well as maintaining an effective channel of information disclosure that would foster good corporate performance.

Corporate Governance
• For me, it is simply:
• Doing the right things and doing things right.
• In other words, “Doing the right things for the organization and doing things the right way independent of personal interests”

• We could say it is the Processes and Systems by which a company is governed which ensure appropriate checks and balances”.
• Essence is to ensure:
– Good performance of the organization
– proper accountability to all stakeholders
– mitigation of conflicts of interest
• Stakeholders include: Customers, Staff, Shareholders, Suppliers, Regulators, Communities

Corporate Governance
Shareholders

Board of
Directors

Put in equity to set up the
business

Shareholders nominate a Board of
Directors to run the business on their
behalf. They set the business policies

MD

Board includes a Management team led by
the MD/Executive Directors who manage the
business on a day-to-day basis. They design
appropriate strategies to implement agreed
policies

Executive
Directors

Marketing

Product
Development

Support

Senior Management is recruited to develop
business plans/processes/ procedures to
execute the strategies
6

Corporate Governance
• FOUR PILLARS OF CORPORATE GOVERNANCE
– Fairness
– Accountability
– Independence
– Transparency
• Major elements of corporate governance
– Board Commitment
– Good board practices,
– Functional and effective control environment,
– Transparent disclosure,
– Well defined shareholder rights

2

WHAT IS RISK MANAGEMENT?

Risk Management
• What is Risk Management?

• Risk management is the identification, assessment, and prioritization of risks. • It is defined in ISO 31000 as the effect of uncertainty on objectives (whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.

Risk Management
Key Issues
• Probability (Likelihood) of event occurring
• Severity (Impact) of the event on set objectives
• The strategies to manage risk typically include transferring the risk to another party, avoiding the risk, reducing the negative effect or probability of the risk, or even accepting some or all of the potential or actual consequences of a particular risk. • Let's look at common risks in financial institutions

Risk Management
• Credit Risk - Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. • Market Risk - Market risk refers to the risk of loss to an institution resulting from movements in market prices, in particular, changes in interest rates, foreign exchange rates, and equity and commodity prices.

• Operational Risk – This is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external...
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