Page 11 - Risk Management Bulletin Jan- Mar 2022

RMAI BULLETIN JANUARY - MARCH 2022

3. Lack of Collective Responsibility
While the buck may stop with boards for pursuing a
flawed strategy or for failing to implement a good one,
others are also culpable. According to U.K.-based risk
consultant Keith Blacker, there is increasing evidence
that those who are supposed to provide independent
assurance on risk and corporate governance are not
doing their jobs properly. “Auditors, advisors, non-
executives, risk managers, internal auditors, in-house
legal, compliance and others are all meant to present
a challenge to the board and act as a ‘critical friend,’”
he said. “No area of discussion should be left
unchallenged, including corporate strategy. But
somehow, their contribution often falls short or they to ensure independence from management
are not listened to. Boards may have ignored them, but influence and having an appropriate proportion of
there is also a case to say that these people did not independent directors—both on the board and
shout loud enough.” internal audit committees—will promote greater
accountability and bring fresh, diverse
In the case of Carillion, the company’s non-executives perspectives,” said Kurt Rothmann,
were supposed to challenge boardroom strategy but It is also important to have a whistleblowing policy
were “unable to provide any remotely convincing in place empowering whistle blowers that creates
evidence of their effective impact,” the MP report a comfortable environment for employees to
found. Professional services firms were also slammed anonymously report any suspicious behavior.
for being unable to effectively identify to the board or
Risk managers also need to share some
persuade executives about the seriousness of the risks
responsibility for corporate collapses. “People in
associated with their business practices. “The
the profession can be more intent on putting
appearance of prominent advisors proves nothing
processes in place for people to follow than
other than the willingness of the board to throw
looking at whether the underlying business is
money at a problem and the willingness of advisory
actually at risk,” Brown said.
firms to accept generous fees,” the report said.
Corporate organizations have been advised to
establish research and development departments
4. Lack of Corporate Governance
to continuously monitor their performance and to
From the analysis, it is found that distress is mostly
introduce effective ways by which they could
caused as a result of poor corporate governance. To
satisfy their consumers and service their operating
stem distress and its debilitating effect, there is a need
environments to effectively continue as going
for the adoption of new audit framework which
concerns.
stresses on time limit of audit tenure with a client,
forensic audit, retrospective audit procedure, and Another most important stakeholder the
auditor’s skepticism. This will ensure and yield Regulator plays a big brother role in smooth
effective corporate governance that can curve and continuity of a corporate business. Improvement
detect potential failure. required in Law regulatory systems for a proper
balance and checks.
Satyam Computers is a good example of a big failure
However, one must understand no matter how
of corporate governance.
strong a regulatory system is, it cannot always
prevent fraud. There are limits to legislations as a
Remedies lot depends on the integrity and ethical values of
Following remedies are few important steps to be various corporate players. The key lies in
taken in order to monitor and control the risks management decisions and its commitment to
Consistently rotating auditors is an excellent way establish and follow rigorous systems.

9