The Law of Corporate Finance & Securities Regulation
The Law of Corporate Finance & Securities Regulation
The Law of Corporate Finance & Securities Regulation
Assignment Project
Subject- The Law of Corporate Finance &
Securities Regulation
Code – LLM/CL/202
Submitted to:
Dr. Manu Singh
Faculty of Law
Noida International University
Submitted by:
Umakant Singh
LLM (1 year course) 2023
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INDEX
S.no Date Topic Teacher’s Page No.
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1. UNIT I: Public Issue of Shares 3-9
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UNIT-I Public Issue of Shares
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Creates the buzz
The buzz is created for the grand Initial Public Offering (IPO) and excitement is spread all over the
investor circles. After the approval of the IPO, the investment bankers and underwriters get into
action. They have the responsibility to spread the word about the IPO. Potential investors are
convinced. The company highlights the growth prospects of the business and its target to acquire
market share. Many companies hire business analysts and fund managers to get the job done.
Companies also arrange small group meetings for the investor’s queries a few days before floating.
Pre-launch requirements
The companies ensure that the insiders of the company don’t trade the Initial Public Offering
information and details that are confidential because it prevents the corrupt executives from pawning
off overpriced shares at the expense of general buyers. It helps the market from getting flooded with
too many shares that may disturb the natural demand-supply balance.
Initial Public Offering (IPO) floats
Finally, the issues are floated in the primary market and money is raised from the investors. The
bidding period is usually 5 days (business working days).
The IPO shares are allotted within 10 days of the last day of bidding. In case of oversubscription, the
shares are allotted in proportion.
All of this is a months-long process and the company is required to do all the paperwork and endless
legal work to comply with the provisions in order to issue an Initial Public Offering ( IPO).
Share Capital
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What is Stock?
Stock is set of same category of shares put together which have same value. It is an aggregate of fully
paid up shares.
• Payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which
may either be free of or subject to income-tax; and
• Repayment, in the case of a winding up or repayment of capital, of the amount of the share
capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to
the payment of any fixed premium or premium on any fixed scale, specified in the
memorandum or articles of the company.
Kinds of Raising Capital
There are shares which are used to raise the capital of the company. Those shares are:
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It is issued for the purpose of:
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Free reserves: The accounts in which the dividend is saved.
Capital Reserve Redemption Accounts (CRRA): When the money of redeemable preference shares is
to be redeemed, it can be redeemed through CRRA (the amount which is invested).
Securities Premium Account (SPA): it is an account in which the premium amount of shares is
deposited. (Premium amount- it is the higher amount at which the shares are issued)
Restriction on Issuing Bonus Share:
As mentioned in sweat equity share there is a class of shares. A company can’t issue bonus shares if
they have outstanding fully or partly convertible debt instrument at the time of issuing bonus share.
Unless there is reservation made of equity shares of the same class in favor of such holders of
convertible debt instrument on the same terms and proportion to the convertible part.
The equity shares reserved for the holder of the fully or partly convertible debt instrument shall be
issued at the time of conversion of such convertible debt instrument on the same term or proportion on
which the bonus shares were issued.
Rights Issue: Section 62(1)
When the company thinks of increasing the capital it issues these shares which are first offered to
existing shareholders on priority. The existing shareholders have right of pre-emption. Although it
helps in raising the capital it is not mandatory to issue rights issue.
Compliance of Rights Issue:
It has to be mentioned in the articles of association of the company.
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Buy-Back: Sections 67, 69 & 70
When a company who issued the shares decides to take back its share from the market and buys its
own share (i.e. the company buys its own shares) by paying the shareholders the market value per
share it is known as/refers to buy-back. A stock buy-back is a way for a company to re-invest in itself.
Liability of a company decreases when they do the buy-back process. Companies usually buy-back its
share when they have extra surplus cash; a company either invests the surplus cash in its new venture
or by buying back its own share.
Objectives of Buy-Back
Surplus cash accountability: Directors are accountable for what they are doing with the surplus cash to
shareholders. The idea behind it is that money should keep on flowing, excess of surplus cash on
balance sheet is not a good sign. Money should be invested and the flow of money should keep on
rotating.
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Raising of Capital
Private Placement: Company doesn’t offer the share to everyone or to public. They offer it to
particular group or particular people. The limit is 200 shares only. Private company can do the private
placement. They have prohibited public issue. They can only invite 200 people in a financial year for
private placement. Share has to be allotted within 60 days of payment. When a company wants to
make private placement they are prohibited to advertise it in newspaper. They directly contact the
people they want to make shareholders.
Offer for Sale: It is a method for raising capital. Here, the company appoints an issuing house that
issues the share on behalf of the company. Here, the capital provided to issuing house is allotted by
the company and not by issuing house (i.e. capital belongs to company).
Rights Issue: (Same as discussed above).
Inviting Public through Prospectus: it can be done only by a public company. There are two
ways/mechanisms by which company invite public through prospectus. The 2 ways are:
Fixed Price: Here, the price of the share is already fixed from the beginning.
Book Building/Price discovery: Here, Red Herring Prospectus is used.
A Red Herring Prospectus contains most of the information pertaining to the company’s operations
and prospects but does not include key details of the security issue, such as its price and the number of
shares offered. In this type of IPO, the company involves a financial institution which decides the
price range of the shares.
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UNIT III
Shareholders’ Rights (Various rights of shareholders and variation of shareholders rights.)
Shareholders’ Rights
There are various rights available to a shareholder. Different type of rights has been discussed below:
Appointment of directors
Shareholders play an important role in the appointment of directors. An ordinary resolution is required
to be passed by the shareholders for the appointment. Apart from this, shareholders can also appoint
various types of directors. They are:
• An additional director who will hold the office until the next general body meeting;
• An alternate director who will act as an alternate director for a period of 3 months;
• A nominee director;
Director appointed in the case of a casual vacancy in the office of any director appointed in a general
meeting in a public company.
Apart from this shareholder also can challenge any resolution passed for the appointment of a director
in the general body meeting.
Legal action against directors
Shareholders also can bring legal action against director by the rules laid down in the Companies Act
2013. They are:
• Any act done by the director in any manner which is prejudicial against the affairs of the
company.
• Any act done which is beyond the law or against the constitution.
Fraud.
• When the assets of the company are being transferred at an undervalued rate.
• When there is a diversion of funds of the company.
• Any act done in a mala fide manner.
• Appointment of company auditors
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Shareholders also have a right to appoint the company auditors. Under Companies Act 2013, the first
auditor of the company is to be appointed by the board of directors. Further the shareholders at the
annual general body meeting at the recommendation of directors and audit committee. The
appointment is generally done for five years and further can be ratified by passing a resolution in the
annual general body meeting.
Voting rights
Shareholders also have the right to attend and vote at the annual general body meeting. Every
company registered in India should comply with the provisions of the Companies Act 2013. It is
mandatory for every Indian company to hold an annual general meeting once in every year. The
meeting can be held anywhere at the head office of the company or any other place as given by the
company. At the meeting, there are various mandatory agendas which are to be discussed. These
include the adoption of financial statements, appointment or ratification of directors and auditors etc.
When a resolution is brought by members of a company then according to companies act 2013 it can
be passed only by the means of voting by the shareholders. Companies Act 2013 recognizes following
types of voting:
Voting by the showing of hands – Every member present in the meeting has one vote. So, in this type
of voting shareholders vote just by showing of hands.
Voting done by polling – In this type of voting the chairman or the shareholders’ demand for a poll.
However, in case of differential rights as to voting, a particular class of equity shares may also have
weighted voting rights.
Voting done by electronic means– every company who has more than 1000 shareholders has to put up
a facility of voting through online means. Every member should be provided with the means of voting
of online.
Voting by means of postal ballot– any resolution in the meeting can also be passed by means of a
postal ballot.
A shareholder also has a right to appoint proxy on his behalf when he is unable to attend the meeting.
Though the proxy is not allowed to be included in the quorum of the meeting in case of voting, it is
allowed by following a procedure mentioned in the Companies Act 2013.
Right to call for general meetings
Shareholders have the right to call a general meeting. They have a right to direct the director of a
company to can all extraordinary general meeting. They also can approach the Company Law Board
for the conduction of general body meeting, if it is not done according to the statutory requirements.
Right to inspect registers and books
As shareholders are the main stakeholders in a company, they have the right to inspect the accounts
register and also the books of the firm and can ask questions about the same if they feel so.
Right to get copies of financial statements
Shareholders have the right to get copies of financial statements. It is the duty of the company to send
the financial statements of the company to all its shareholders either in a quarterly or annual
statement.
Winding up of the company
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Before the company is wound up the company has to inform all the shareholders about the same and
also all the credit has to be given to all the shareholders.
Other Shareholders’ Rights
When the sale of any material of any company is done then the shareholders should get the amount
which they are entitled to receive;
When a company is converted into another company then it requires prior approval of shareholders.
Also, all the appointment has to be done according to all the procedures and also auditors and
directors have to be done;
Right to approach the court in case of insolvency.
Shareholders’ Duties
There are also responsibilities and duties of shareholders which they should perform. Besides several
rights which they have, there exists several duties. They are:
• Shareholders should participate in the general body meetings so that they can see and also can
advise on the matters which they feel is not going good.
• Shareholders should consult on the matters of finance and other topics.
• Shareholders should be in touch with other members of the company so that they can see the
work progress of the company.
Debentures
Meaning of debentures according to Companies Act, 2013
A debenture is a type of debt instrument which is issued by a company to raise capital. Debenture is a
long-term debt instrument which may be in the form of a bond or a loan which is secured by the
charge upon the assets which have been provided as securities. Debentures have a fixed rate of
interest and other characteristics which are described in detail later in the article.
Types of debentures
Debentures are several types and each has its own features and characteristics. The different types of
debentures are listed below.
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debenture has the right to recover the principal amount and the interest from the assets which have
been given as securities.
Unsecured debentures
In this type of debenture, the companies are not required to pledge any of their properties or assets as
collateral for the debt amount. Since the unsecured debentures do not require any assets to be used as
a security, the lender usually is at high risk of losing his principal amount in case the company
defaults. This type of debenture has a high rate of interest.
Debentures based on tenure
Redemption of the debenture occurs when on the maturity date, the company pays back the principal
amount along with the interest and releases its properties or assets from the charge given to the
debenture-holder. It is divided into two types – redeemable and irredeemable debentures.
Redeemable debentures
Most of the debentures are redeemable, meaning on the expiry of the maturity date, the debenture is
redeemed by the company by paying back the principal amount with interest to the debenture-holder
and releasing its assets from charge.
Perpetual or Irredeemable debentures
If a debenture does not contain any clause as to the payment of the principal amount by the company
and redeeming the debenture, then it is known as a perpetual or irredeemable debenture. This type of
debentures, unlike redeemable debentures, does not cease on the maturity date.
Debentures based on conversion
The company has the right to convert the debentures into equity shares. There are two types of
conversion of debentures – convertible and non-convertible debentures.
Convertible debentures
The company issuing debentures has the right to convert these types of debentures into equity shares.
So the debenture-holder who was just a creditor to the company becomes a member of the company
and enjoys ownership of the company to the extent to which he has the equity shares of the company.
Non-convertible debentures
This type of debenture cannot be converted into equity shares of the company. So the debentures will
always be redeemed and will never have the characteristics of equity shares of the company.
Debentures based on registration
As most of the important deeds and instruments of a company are usually registered in the company,
debentures are no exception. There are two types – registered and unregistered debentures.
Registered debentures
If debentures are issued by the company, the company is required to maintain a register of its
debenture-holders as Section 88 of the Companies Act, 2013 provides that every company shall
register the holders of its debentures. Both, the debenture certificate and the company’s register, shall
have the name of the debenture holder.
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Unregistered or Bearer debentures
The company can avoid the registration of the debenture-holders if it issues the debentures to the
bearer. Such types of debentures are transferable, like negotiable instruments, by way of simple
delivery and are also called debentures payable to the bearer.
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UNIT III:
Insider Trading; SEBI’s Guidelines on Insider Trading
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recognised as an “undesirable practice” for the first time. However, there was still no adequate
enforcement provision under the Companies Act, 1956. The recommendations to formulate separate
legislation in this regard were proposed by the Sachar Committee in 1979, the Patel Committee in
1986, and the Abid Hussain Committee in 1989.
SEBI Regulations
Insider trading in India is prohibited by the Companies Act, 2013 and the SEBI Act, 1992. SEBI has
formed the SEBI (Prohibition of Insider Trading) Regulations, 2015 which prescribe the rules of
prohibition and restriction of Insider Trading in India.
The Regulations passed by the Securities Exchange Board of India i.e., SEBI (Prohibition of Insider
Trading) (Amendments) Regulations, 2018, are applicable mainly to “dealing in securities” which
involves “buying, selling or agreeing to buy, sell or deal in any securities by any person either as
principal or agent, by insiders on the basis of any private confidential information.” The Regulations
are only applicable to the exchange of listed securities.
The Regulations provide that the communication or dissemination of any confidential information, by
an insider, is prohibited. The information communicated or disseminated must be unauthorized. The
information can be used by the person himself or any other person on his behalf. If any person
contravenes with any provision of the SEBI Regulations, it amounts to an offence under the Act and is
punishable with imprisonment up to 10 years or a fine up to 25 crores, whichever is higher. Under the
SEBI Regulations, the adjudicating officer may impose a penalty on any person who contravenes with
the provisions of the regulations except for the offence committed under section 24 of the Act. SEBI
also has the power to investigate the case of Insider Trading and related matters.
Securities and Exchange Board of India (SEBI): Constitution, Powers and Functions
SEBI
SEBI or the Security and Exchange Board of India is a regulatory body controlled by the Government
of India to regulate the capital and security market. Before the Security and Exchange Board of India,
the Controller of Capital Issues was the regulating body to regulate the market which was controlled
by the Capital Issues (Control) Act, 1947.
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Reasons for the Establishment of SEBI
During the fall of the 1970s and the rise of the 1980s, the people of India were preferring to work in
the Capital Market as the market was trending. Without any authority, problems like unofficial private
placements, the rigging of prices, unofficial self-styled merchant bankers started violating the rules
and regulations of the stock exchange which caused delays in the delivery of shares.
The Government felt an immediate need to establish a regulatory body to regulate its working and to
find solutions for all the problems the market was going through, as the people were losing interest in
the market. This led to the establishment of the Security and Exchange Board of India.
Functions of SEBI
SEBI basically protects the interest of the investors in the security market, promotes the development
of the security market and regulates the business. The functions of the Security and Exchange Board
of India can primarily be categorized into three parts:
Protective Function
Protective functions are used to protect the interest of investors and other financial participants. These
functions are:
Prevent Insider Trading: When the people working in the market like director, promoters or
employees working in the company starts to buy or sell the securities because they have access to the
confidential price which results in affecting the price of the security is known as insider trading. SEBI
restricted companies to buy their own shares from the secondary market and SEBI also regulates
regular check-ups to prevent insider trading and avoid malpractices.
Checks price rigging: The malpractices which create unreasonable fluctuations in the price of the
securities with the help of increasing or decreasing the market price of stocks which results in an
immense loss for the investors or traders are known as price rigging. To prevent price rigging, SEBI
keeps active surveillance on the factors which can promote price rigging.
Promotes fair trade practices: SEBI established rules and regulations and a certain code of conduct in
the securities market to restrict fraudulent and unfair trade practices.
Providing awareness/financial education for investors: SEBI conducts seminars both online and
offline to educate the investors about insights into the financial market and money management.
Regulatory Function
Regulatory functions are generally used to check the functioning of the financial business in the
market. They establish rules to regulate the financial intermediaries and corporates for the efficiency
of the market. These functions are:
SEBI designed guidelines and code of conduct for efficient working of financial intermediaries and
corporate.
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• Restrictions on private placement.
Development Function
The development functions are the steps taken by SEBI to improve the security of the market through
technology. The functions are:
Objectives of SEBI
The objectives of SEBI are:
Protection of investors: The primary objective of SEBI is to protect the rights and interests of the
people in the stock market by guiding them to a healthy environment and protecting the money
involved in the market.
Prevention of malpractices: The main objective for the formation of SEBI was to prevent fraud and
malpractices related to trading and to regulate the activities of the stock exchange.
Promoting fair and proper functioning: SEBI was established to maintain the functioning of the
capital market and to promote functioning of the stock exchange. They are ordered to keep eyes on
the activities of the financial intermediaries and regulate the securities industry efficiently.
Establishing Balance: SEBI has to maintain a balance between the statutory regulation and self-
regulation of the securities industry.
Establishing a code of conduct: SEBI is required to develop and regulate a code of conduct to avoid
frauds and malpractices caused by intermediaries such as brokers, underwriters and other people.
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UNIT IV:
• The auditor of the company has the power to have all time access to the books of accounts
and vouchers of the company, irrespective of the place where they are kept.
• He can inquire into the matter of loans and advances made by the company.
• He can check whether transactions of company is in coordination with the interest of the
company
• If personal loans are charged to company accounts or company loans are shown as deposits,
he will keep an eye on such transactions.
• He will comment on the transactions if shares or debentures for other securities are sold at a
price less than that at which they were purchased by the company.
• He will check if the accounting books are maintained in coordination with the balance sheet.
• Even the auditor of a holding company has right to access accounts of its subsidiary company
• It is a mandatory duty (or obligation) of the auditor to make a report to the members of the
company upon examination of accounts.
The auditor’s report also must state:
• The extent to which you obtained and received information to complete his audit.
• His opinion on maintenance of records kept by the company.
• His comments indicate that the company’s balance sheet and profit and loss accounts are in
coordination with books of account and that financial statements comply with accounting
standards. If any financial matter has an adverse effect on operation of company
administration.
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• His observations as to the internal financial control system of the company.
In the case of a government company or any other company owned by the Central or state
government, the Comptroller and Auditor General (CAG) has the power to appoint an auditor to look
into the financial matters of the company and upon receiving the audit report, he has the power to
conduct a supplementary audit and to comment on such an audit report.
During the conduct of such an audit, if the auditor finds out any fraud committed by officers of the
company, it is his obligation to report such fraud to the central government within the prescribed time
limit.
Section 144 of Companies Act, 2013
Section 144 talks about the roles that must not be played by the auditor, along with his official role as
an auditor of the company.
As per Section 144 of the Act, it is the duty of the auditor not to provide the below services directly or
indirectly to the company or to the subsidiary company:
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auditor appointed will enjoy the same kinds of powers and duties as the auditor appointed as per
Chapter X of the Act.
Unit V: Corporate Governance Codes and Practices
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Code of Conduct for Board of Directors & Senior Management • Subsidiary Companies
1. Objectives
This Code has been drawn up in accordance with the Corporate Governance requirements as per
Regulation 17 (5) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
(‘Listing Regulations’).
Jubilant’s subsidiaries will also be made aware of this Code and encouraged to introduce a Code on
these lines in due course.
• train and develop the people to be creative and empower them to take decisions.
• treat individual in all aspects of employment on the basis of ability irrespective of
nationality, race, caste, creed, religion or gender.
• neither initiate nor tolerate racial, sexual or any other kind of discrimination or harassment.
4. Honest and Ethical Conduct
i. Compliance with the Law
The Directors and Senior Management must exhibit their total submission to the limits of law in
drawing up the business policies, including strict adherence to and monitoring of legal compliances
at all levels.
Business must be done by lawful, ethical and fair means and must bring about a reputation of ethical
business dealings by the Company. There shall be no room for discrimination, harassment,
retaliation or any form of corruption and/or conduct that is likely to bring discredit to the Company.
5. Conflict of Interest
If an individual’s personal interest interferes with the interests of the Company, a ‘conflict of
interest’ arises. A conflict of interest has the effect of influencing or distorting business decisions by
reason of individual, family, financial or other interests. In such a situation the Directors/ Senior
Management must promptly disclose the details to the Board of Directors.
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Monetary transactions between the Company and a Director and/or their related parties shall be
brought to the knowledge of the Board.
The Directors / Senior Management should not appropriate corporate business opportunities for
themselves or use Company information for personal gain.
Senior Management shall disclose to the Board all material, financial and commercial transactions,
where they have personal interest that may have a potential conflict with the interest of the
Company.
6. Concurrent Employment
Senior Management shall not, without the prior approval of the Chairman & Managing Director / Co-
Chairman & Managing Director, accept employment or a position of responsibility (such as a
consultant or a director) with any other company, nor provide “freelance” services to anyone. The
Directors shall avoid joining the Boards of competitors or taking up advisory or consultative
assignments, whether for remuneration or otherwise, in competing organizations other than their
existing directorships.
7. Confidential Information
The confidential and proprietary information of the Company is its valuable asset. It is the duty of
the Directors and Senior Management to protect confidentiality and to introduce effective checks
for this purpose.
The Directors/Senior Management are expected to handle confidential information discreetly. Such
information should be used only for the purpose of business of the Company. This obligation
continues even after leaving the directorship/employment of Jubilant.
They are also expected to keep similar confidential information received from third parties under
conditions of confidentiality. The Directors and Senior Management shall execute an Oath of Secrecy
in the prescribed format.
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use of the Company’s funds, reducing waste/emissions, providing a safe environment for the
employees and safeguarding the intellectual property assets.
(b) Transparency For good corporate governance ensure (i) Compliances with law (ii) Strict
adherence to Accounting policies, (iii) Integrity in communication (timely, accurate reporting) and
(iv) Providing the internal and statutory Auditors and the Audit Committee, full access to all
information and records of the Company.
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Risk Management and Risk Mitigation
The role of risk management in corporate governance
Risk management is central to corporate governance. Over the years, the corporate world has taken
note of risk failures. The financial crisis of 2008 and following technological advances created
unprecedented opportunities — and massive risks. Corporations responded by adopting new, more
transparent practices to manage risk. These practices encompass what we now know as governance,
risk and compliance.
As such, the role of risk management in corporate governance is to inform how corporations and their
board operate concerning risk. It’s about considering the risk exposure of every business activity, then
implementing practices like due diligence, internal controls, and more to manage risk proactively.
The role of corporate governance in risk management practices
As risk management influences corporate governance, modern governance has also introduced new
risk management practices. Many boards now prioritize smarter risk-taking — risks backed by the
assurances that corporate governance provides.
Governance codifies risk management practices. It solidifies how the corporation will conduct
different activities — mergers and acquisitions, third-party and vendor relationships and corporate
strategy — to introduce the least amount of risk possible.
Why is risk management important in corporate governance?
Risk management is important in corporate governance because it protects the organization from
losses. When good corporate governance is in place, corporations can proactively identify and
mitigate risk, reducing their risk exposure and ultimately limiting reputational and financial damage.
That’s why risk management has evolved from being an operational imperative to a critical
governance issue. Reducing risk should be at the heart of all governance practices. Without that risk
focus, governance can fail to safeguard the company and its assets and lead to floundering
performance neither the board nor shareholders will be satisfied with.
The board’s responsibility in risk management and corporate governance
The board doesn’t necessarily manage risk in corporate governance — they oversee it. The board is
responsible for identifying the business's risks and how to maximize returns while minimizing loss.
Executive leadership and management teams will ultimately look to the board for guidance on where
to focus their risk management activities. Those leaders will then implement a risk management
strategy and internal controls system that aligns with the board’s priorities.
In addition to overseeing the organization’s risk landscape, the board will also want visibility into risk
management reporting. Most boards delegate oversight to the audit and/or risk committee, which need
accurate risk insights to help the board make more informed decisions.
4 key principles for risk management in corporate governance
Corporate governance principles for risk management could take on many different forms. Changes
will likely be fluid and evolving for the foreseeable future. Despite vast changes, corporate
governance principles must be structured, integrated and balanced. Recent risk failures have taught us
that all corporations are vulnerable and that they need to prepare just as stringently for low chances of
catastrophic risk as for higher chances of significant risks.
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Governance principles that will help boards stay head of risks big and small are:
Updating reward structures: Existing reward structures for corporate executives tend to correspond to
how well they manage financial risk as it relates to internal controls and audit functions. The new
standard for reward structures may include not only rewarding the success of businesses but also
rewarding managers for having a keen awareness of risk management. This means that corporations
may begin reducing financial incentives, such as stock options, for managers who regularly engage in
excessive risk-taking. Companies may also factor in how well managers pay attention to reputational
risk, financial risk, and how strategic risks manifest as operational risks.
Standardize risk language: Corporate executives are considering forming guidelines as basic steps to
new approaches to managing risk. Many executives are encouraging their companies to establish
some common risk language they can use throughout the company. Using commonly accepted terms
for risk management will aid them as they set new standards for risk management. In turn, new risk
management standards will help them balance qualitative and quantitative perspectives as they devise
standards for measuring risk.
Expand the scope of risk management: The future of corporate governance may move toward a
broader perspective of standards that are more practical and useful for all types of businesses,
including banks and other financial institutions. Such issues as outsourcing and supplier-related risks
are examples of risks that apply to most businesses that haven't been addressed very much in
governance in the past.
Managing broader risk profiles: Additionally, future corporate governance may place a heavier
emphasis on catastrophic risk even when the risk is low. Just because the probability of a catastrophic
loss is low doesn’t mean a catastrophe won’t happen. Good corporate governance principles may
account for standing ready to manage any potential catastrophe at any given time.
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