A business in the financial services industry has been fined by the regulator for numerous infringements of the applicable regulations which have resulted in a loss of reputation and a loss of credibility with consumers and the public. There is a risk that certain directors and officers will be penalized and may be sued by the owners over damages incurred and wrongs done. The Board and the top management of the company became very upset about this tum of activities as a breach of corporate governance. You have been named as the next Chief Risk Officer to review and ensure best practices in Corporate Governance, especially in the areas of compliance, transparency, customer safety, fraud and financial crime management and ethical actions within the company. It is well known that in the financial services industry, regulators are involved and regulatory risk is one of the main threats facing businesses in this sector. You are also aware that there have been a lot of controversies. Bearing in mind that reports are information intended for customers, buyers who have purchased goods from the firm and other stakeholders, such as staff, contractors, other intermediaries and others in the company's environment, you are asked to reshape the company's transparency policies in accordance with the legislation and best practises.

Consumer security is constantly being targeted by regulators. Consumer Forums, Courts and other organisations raise their voices against customs .Fraud and financial fraud are on the rise, and this can happen with or completely with staff and also at senior management level. Cyber-crimes, theft and losses are becoming frequent and there is a need to ensure that the devices are checked for protection and that workers are made aware of the risks. This can be further demonstrated by the rise in ethical requirements and the development of the appropriate safeguards to ensure that the actions of all within the organisation is ethical and upriated..

Multiple Choice Questions

Choose the most appropriate answer from the following

(4.1) Corporate Governance risk is intended to identify deficiencies that can damage the following important existential aspects of the company.

Point out the wrong answer.

1. Reputation.
2. Existence
3. Sales growth.
4. Continuity.

(4.2) A holistic risk management framework would empower the Board to Point out the wrong answer.

1. Identify top threats to the entity and asset protection measures.
2. Link risks to more efficient capital allocations and business strategy.
3. Develop a common language intheorganisation for problem solving.
4. Look back strategy made to ensure that best practices are continued.

(4.3) Stress Tests are important for Banks and are an important aspect for Board/Corporate Governance oversight. Choose the right reason for conducting Stress Tests from the options given below:

1. To deal with natural and manmade asset and disaster risks.
2. To manage optimally business and portfolio downside movement.
3. To manage political and country risks.
4. To prevent fraud risks, malpractices and financial crimes.

(4.4) Credit risk mitigation in Banks is a key concern of the Board. It can include the following except one. Point out which answer is inappropriate.

1. Norms of lending are tightened.
2. Credit insurance.
3. Making Covenants with the borrowers.
4. Verification of assets.

(4.5) Normally every Board of a company should have a Risk Committee. Among other thingsthe following are the duties of this Committee except one, which?

1. Risk Committee discusses every matter in the agenda of the Board prior to the Board Meeting.
2. Is required to review and approve the company's risk policies at least annually.
3. Discusses all the risk strategies on both aggregate basis and by risk type.

Oversees that management puts in place robust processes toensure adherence to the risk policies approved by the Board. (5 x 2 Marks =

Descriptive Questions

(4.6) Explain corporate governance by comparison to OECD guidance and explain how the Board should defend against corporate governance threats?

(4.7) What form of risk control is to be initiated by the Board/Management in order to deter bribery and financial crimes? (5 Marks)

(4.8) How can Credit Risk Management be upgraded to ensure that risk of default is kept to the minimum. (5 Marks)