Page 33 - Insurance Times March 2022

listened to. Boards may have ignored them, but there is also
a case to say that these people did not shout loud enough.”

In the case of Carillion, the company’s non-executives were
supposed to challenge boardroom strategy but were “unable
to provide any remotely convincing evidence of their
effective impact,” the MP report found. Professional services
firms were also slammed for being unable to effectively
identify to the board or persuade executives about the
seriousness of the risks associated with their business
practices. “The appearance of prominent advisors proves
nothing other than the willingness of the board to throw
money at a problem and the willingness of advisory firms to
accept generous fees,” the report said.
ways by which they could satisfy their consumers and
service their operating environments to effectively
4. Lack of Corporate Governance continue as going concerns.
From the analysis, it is found that distress is mostly caused
Y Another most important stakeholder the Regulator
as a result of poor corporate governance. To stem distress
and its debilitating effect, there is a need for the adoption plays a big brother role in smooth continuity of a
corporate business. Improvement required in Law
of new audit framework which stresses on time limit of audit
tenure with a client, forensic audit, retrospective audit regulatory systems for a proper balance and checks.
procedure, and auditor’s skepticism. This will ensure and Y However, one must understand no matter how strong
yield effective corporate governance that can curve and a regulatory system is, it cannot always prevent fraud.
detect potential failure. There are limits to legislations as a lot depends on the
integrity and ethical values of various corporate players.
Satyam Computers is a good example of a big failure of The key lies in management decisions and its
corporate governance. commitment to establish and follow rigorous systems.

Remedies Lessons
Following remedies are few important steps to be taken in In short, exceptional organizations are those that go beyond
order to monitor and control the risks detecting and analyzing failures and try to generate
Y Consistently rotating auditors is an excellent way to intelligent ones for the express purpose of learning and
ensure independence from management influence and innovating. It’s not that managers in these organizations
having an appropriate proportion of independent enjoy failure. But they recognize it as a necessary by-
directors—both on the board and internal audit product of experimentation. They also realize that they don’t
committees—will promote greater accountability and have to do dramatic experiments with large budgets. Often
bring fresh, diverse perspectives,” said Kurt Rothmann, a small pilot, a dry run of a new technique, or a simulation
will suffice.
Y It is also important to have a whistleblowing policy in
place empowering whistle blowers that creates a
The courage to confront our own and others’ imperfections
comfortable environment for employees to
anonymously report any suspicious behavior. is crucial to solving the apparent contradiction of wanting
neither to discourage the reporting of problems nor to
Y Risk managers also need to share some responsibility create an environment in which anything goes. This means
for corporate collapses. “People in the profession can that managers must ask employees to be brave and speak
be more intent on putting processes in place for people up—and must not respond by expressing anger or strong
to follow than looking at whether the underlying disapproval of what may at first appear to be incompetence.
business is actually at risk,” Brown said. More often than we realize, complex systems are at work

Y Corporate organizations have been advised to establish behind organizational failures, and their lessons and
research and development departments to continuously improvement opportunities are lost when conversation is
monitor their performance and to introduce effective stifled.

The Insurance Times, March 2022 33