Governance and Risk Management Practices - Case Study Example

Governance and risk management practices Student name: Student p number: Module: Module code: Submission deadline: Introduction Corporate governance is handling of work issues within an organization; this determines the failure or success of a business or corporation. It is ensuring that all staff members are treated equally with the respect they deserve; they do not face unnecessary challenges and so on. This has been a key issue in various corporations within Australia and the rest of the world. It manifested in Frasers case were several employees were sexually harassed by other staff members creating tension among them, this hugely affects the productivity of an organization (PSAROS, J. 2008). Corporate governance refers largely to the rules, process, or laws by which businesses are handled, and controlled. The term may refer to interior factors defined by the officers, shareholders, or foundation of a corporation, as well as to exterior forces such as consumer groups, clients, and government policy. A corporation is a legal body or person who has a split legal character from its members. The essential legal rights and focus of the corporation comprise the capability to sue and can be sued, the capacity to hold assets in its own name. The company enjoys all rights that a person enjoys. This would be to sign contracts, conduct business, and make rules to govern it. This means the rules govern its interior affairs (PSAROS, J. 2008). Well-defined and enforced corporate control provides some makeup that, at least in theory, works for the advantage of everyone concerned by ensuring that the venture adheres to acknowledged ethical principles and best practices as well as to formal laws. To that end, corporate have been shaped at the local, national, and universal standards (GIBSON, A., BEAUCHAMP, T. L., FISHER, C. M., & PSAROS, J. 2011). In recently, corporate governance has received amplified attention because of high-status scandals relating to the abuse of corporate authority and, in other some cases, suspected illegal activity by corporate officers. An essential part of a valuable corporate governance management includes provisions for public or criminal suit of people who conduct unethical or unlawful acts in the forename of the enterprise. Risk management is the recognition, evaluation, and prioritization of risks. This enables harmonizing, low-cost use of assets reducing, supervising, and controlling the likelihood of fateful events. Risks may emanate as of insecurity within monetary markets, assignment collapse, unlawful activities, as well as intentional attack from a foe, or actions of unsure or unpredictable nature. Numerous risk supervision measures are created together with the, Project managing institution, countrywide institution of standards and expertise. Their aims differ extensively according to whether the danger management technique is in the perspective of project supervision, safety, manufacturing processes, monetary portfolios or community health and safety (PSAROS, J. 2008). David Jones pty ltd did not follow proper risk management processes and governance to avoid liability, leading to the filing of the suit against the company. Hereunder is an analysis of the poor governance and risk management practices of the organization. Risk management process includes of the following steps and none is reflected in David Jones pty ltd matter. Identification The organization did not do anything to enable it to identify risks within its operations. It had not put up any measures that would enable the identification of potential risk and tackling it prior to it becoming an issue; ending up in a suit. Risk sources can be shareholders of a project, workers of a corporation. Looking at the case the risk comes within the organization itself, as employee misconduct. This can be easily identified through forms given to employees to air their grievances. The organization did not do any such task to identify or eradicate any risks. Problem analysis, Risk is connected to known threats. An example would be the danger of losing funds. The threats can live with diverse entities, like the shareholders, clientele, legislative bodies such as the government and the workforce. In David Jones pty ltd, the risk emanates from the employee. This should institute an investigation towards the acts of such worker to make it possible for such risk to be dealt with in the right manner but due to lack of proper channels of dealing with risks within the organization, nothing was done (Michael Fuchs 2010). When any source of the problem is identified, then can the proceedings to which pilot the predicament be looked in to? An instance, shareholders retreating at some stage in a venture might put in danger financial support of the project (PSAROS, J. 2008). The selected technique used to identify risk could be dependant on background, manufacturing practices, or conformity. Common risk detection techniques can be numerous among them are, goals-reliant danger detection, all organization, with the development team contain goals. Whichever incident may perhaps jeopardize attaining an idea partially or else entirely is recognized as a risk. Scenario-based risk detection - here diverse scenarios are formed. The scenarios are the substitute way to attain an objective, or an investigation of the communication of forces. For instance, David Jones pty ltd, wanted to create an excellent work environment for its workers and this could not be achieved through the various misconduct of its employee's, and so this will be identified as a risk. This hinders the attainment of the goals the organization has set just because workers are not comfortable with their work environment. (PSAROS, J. 2008). Taxonomy-based risk detection – lay basis on the classification as well as facts on finest practice, a response form is made. Responses to the questions highlight the risk. If David Jones pty ltd, used this method it would have been a reliable way to make it known to the employers, about the conduct of its staff. Facilitating coming up with a means on how to deal with such issues; however, the company had no such means of identifying risks a symbol of poor governance and risk management. Assessment Once the risks are identified, they have to be assessed as to their possible harshness or harmful impact. They can be either effortless to measure or as difficult as in making out of cost of a damaged structure, or not possible making out f the likelihood of an improbable event happening. Hence, the evaluation process is significant in making the best decisions to the execution of the risk management plan. This is being able to determine whether a certain worker is important more than the other regardless of the danger he posses to the company or other staff. If David Jones pty ltd had implemented the assessment, it would have been able to know whether Mcinnes should stay on board or have him fired. The essential complexity of risk evaluation is been able to determine the regularity of happening as numerical information would not be obtainable on all passed occurrences. In addition, assessing the ruthlessness in awarding penalties makes it frequently hard for vague possessions. Property evaluation also needs to be looked at. Therefore, most excellent refined opinions and accessible figures are the major providers of the information (PSAROS, J. 2008). David Jones pty ltd did not determine the frequency of the risk because even in the first place they had no mechanism of risk identification in place. However, risk evaluation should make this kind of information for the running of the institute showing the main dangers are effortless to comprehend and the danger managing decision can be given priority. Consequently, there are numerous ways and attempts to calculate the dangers. Many, diverse risk calculation ways exist, maybe the one that is extensively received way of risk quantification is: Possibilities of the happening multiply by the force of the event this equals risk scale. Composite Risk Index The above method can also be rewritten in conditions of a Composite Risk Index, as hereunder: Composite Risk Index = blow of Risk event x likelihood of Occurrence. The vigor of the risk event is usually assessed on a scale of 1 to 5, where one and five symbolize the least amount and highest probable impact of incidence of a risk. The likelihood of happening is similarly regularly assessed on a range of 1 to 5, where one stands for an unusually low chance of the risk event truly occurring whereas five represents an extremely high probability of happening. The axis may be articulated in both mathematical terms or may be articulated in Basic English (Michael Fuchs 2010). The Composite Index, therefore, can take values ranging from one to 25, and the ranges are arbitrarily separated into three sub ranges. The overall risk evaluation is then high, low, or medium, depending on the range containing the intended value of the compound Index. The likelihood of risk occurrence is not easy to estimate, given that the past data on frequencies are not readily accessible, as mentioned herein. After all, likelihood does not imply certainty. Equally, the impact of the risk is not effortless to estimate since it is often tricky to estimate the possible loss in the occurrence of risk incident. Additional, both the above factors can alter in magnitude depending on the sufficiency of risk evasion and prevention actions in use and yet to be used to changes in the outside business environment. Thus, it is necessary to reassess occasionally risks and strengthen measures, or as necessary. Changes in events, skill, schedules, budget, market environment, political surroundings, or other factors normally require reevaluation of risks (Corporate governance 2012). Risk Options Risk easing measures are formulated according to the following main risk options, which are: Plan a new business procedure with enough built-in risk management and containment procedures from the start. Shift risks to an external organization (insurance companies) or keep away from risks altogether. Later study has revealed that monetary profits involved in risk managing are not entirely reliant on the method applied, but on regularity of the risk and performance of the risk evaluation. Business-wise, it is crucial being able to come up with the conclusion of the danger assessments in monetary market, or schedule provisions. Robert Courtney Jr. anticipated a way of presenting the danger in financial terms (Michael Fuchs 2010). His formula has been acknowledged as the authorized risk examination technique for the American lawmaking agency. These methods propose the calculation of (annualized loss expectation) and make comparison to the probable defeat worth to the security control. Applicable risk treatment ways Upon recognition and the assessment of risk, the measures required to handle the risk fall under one of the various ways below. Risk avoidance this is engaging in conduct that will not amount to risk. An example would not be indulging in activities that would carry a risk as in Mcinnes case avoids un-wanted sexual advances towards other staff members. In the matter avoidance may be the answer to all risks solving, if Mcinnes avoided all his misconduct he would not be a risk to the organization or its staff members. The management could also have avoided the risk by terminating x from working as their employee (VALLABHANENI, S. R. 2008). Hazard prevention means the avoidance of risks. The thing that causes the risk is the one to be referred to as a hazard; the most effective part of danger deterrence is the abolition of the danger. This would mean getting rid of all that causes the risks, making the work environment more welcoming and bettering the results of the work done by every worker. When this takes long, it becomes costly, or otherwise impractical. Had David Jones pty ltd implied this then it would have been the perfect remedy for their matter. Risk reduction involves reducing the harshness of the loss or the probability of the loss from taking place. This means firing the employee who poses a risk to the company, which may also be a greater loss to the company, so to reduce the risk would mean imposing a charge on the employee every time they wrong this will operate as a safe guard to the staff and the company, as well (PSAROS, J. (2008). Accepting that risks can be constructive or unconstructive, optimizing risks mean finding stability between unconstructive risk and the profit of the process or activity and between risk decrease and effort applied. Risk avoidance would have been the perfect governance approach to tackle the Fraser matter, the parties involved especially the company should have got rid of the risk factors or in other words the employee posing a risk to the company and or its staff. This was to be done by using the identification of the risk through questioners and transparency among the workers and management all together. Getting rid of McInnes would have avoided all suits filed against the company. This would have saved the company time and money that now has to go to payments of court fees and awarding damages to the harassed employees. The company should also work towards making sure that all the staff members are treated equally and with respect according to their code, conduct, and ethics as set by the organization. If the company had lived up to its work ethics it would have looked at the matter and correct it early enough, but nothing was done by the management on the issues that arose within its jurisdiction. Reference list Corporate governance 2012, viewed 10 October 2012, . Farrar, J. H. (2001). Corporate governance in Australia and New Zealand. Melbourne [u.a.: Oxford Univ. Press. GIBSON, A., BEAUCHAMP, T. L., FISHER, C. M., & PSAROS, J. (2011). Business law and ethics. French's Forest, N.S.W., Pearson Australia.. PSAROS, J. (2008). Australian corporate governance: analysis of key issues and a review. Pearson Education SCHWARTZ. ROBERT J., & SMITH, C. W. (1997). Derivatives handbook: risk management and control. New York, Wiley. VALLABHANENI, S. R. (2008). 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