In this paper, the management of risks and the application of the different tenets of a governance of any company has been discussed. Corporate governance principles and risk assessment are two of the most pivotal areas of any organisation in today’s world. Following of the laid standards of corporate governance by top companies worldwide and the maintenance of risk assessment by the internal management of these companies have gained much more important in today’s uncertain business environment. Risk assessment, plays an important role in today’s world. It helps in creating awareness about impending risks, efficacy of the company’s internal control, and the risks of material misstatement. Correct valuation of different risks by the company’s auditor helps in locating the financial crimes prevalent in the company. Similarly, when a company effectively follows all the corporate governance principles, an efficacy in the working of the company is achieved. When a company fails to follow these laid standards, it leads to a damaging effect upon the working of the company as a result of which the interests of the different stakeholders comes at a risk.
Corporate Governance: An overview
Corporate Governance is concerned with the way an organisation is governed. It shows how companies are guided and directed. It is steered by the board of Directors and the other concerned groups for the stakeholder’s interests and is concerned with the task of creating a proper balance between the company’s and the individual’s goals.
Corporate Governance involves continuous interaction between the management and the individuals of the company in order to avoid any conflicts between the two. The primary goal of conducting and initiating a policy of corporate governance in any company is creating a proper synergy between the goals of the management and the stakeholders of the company. (Asx.com.au, 2018). Corporate governance basically offers the framework for achieving the company’s objectives, therefore, it embraces every segment of the company’s working procedures.
A precise view of the principles:
The Australian Securities Exchange is the watchdog of the security related issues in Australia and it is under the control of ASX Limited. It deals with the issues of securities trade in the island continent of Australia. There are eight principles laid down by ASX, which are expected to be followed by the companies registered in ASX 300 for their smooth functioning.
Application of ASX principles by Commonwealth bank of Australia:
Being, the largest banking company in the island nation, the bank is committed to maintaining the high standards of corporate governance as has been advocated by the ASX. By following these principles, the company believes in attaining success in its long run performance and in ensuring sustainability of the company as well. Therefore, it periodically reviews all its corporate governance arrangements and practices in order to improvise on them for better performance of the company. The implementation of these principles are as follows:
Defining the roles of board members:The board of directors is primarily responsible for managing all the business and be accountable to the stakeholders of the company. It has delegated all the daily management tasks to the CEO, apart from matters which are board’s intervention. Current board membership are as follows:
|
Director |
Role |
|
Catherine Livingstone AO |
Chairman |
|
Matt Comyn |
Executive Director |
|
Shirish Apte |
Independent Non-Executive Director |
|
Sir David Higgins |
Independent Non-Executive Director |
|
Brian Long |
Independent Non-Executive Director |
|
Andrew Mohl |
Independent Non-Executive Director |
Key focus areas:
Evaluation of board’s performance:
All the performances of the board and its committees are reviewed annually and in every third year, all these reviews are verified by an external consultant. The external consultant’s job includes:
Nature of business:
The Commonwealth bank of Australia is a multinational Australian bank, which spans across New Zealand, United States, Asia and the United Kingdom. It was founded by the Australian government in 1911 and is headquartered in Sydney, Australia Commbank.com.au. (2018). Commonwealth engages in retail banking services, premium business services and wealth management ventures. It offers a wide range of products and services including loans, savings and other kind of bank accounts, credit and debit cards and it boasts of the largest ATM network in Australia.
Market overview:
Commonwealth bank of Australia is one of the largest banks in the world and is the largest player in the Australian banking market. It has an aggregate of 1100 branches in Australia and worldwide and employs over 51,800 people Commbank.com.au. (2018). It provides a wide range of services such as finance and insurance, consumer banking, corporate banking, private equity, investment management and many others. It has clocked a net revenue of $26.005 billion in the year 2017 and is well placed in the banking market of Australia. It controls most of the financial banking market in the Australian sub-continent and its aim is to consistently remain the leader in this sector.
Business strategy:
Commonwealth has been at the helm of the banking affairs of the Australian sub continent because of its innovative business strategies. These strategies have helped it to sustain in the banking industry for a long period of time. It focuses its strategies into four basic mediums which are: (Fig 1: components of business strategy)
The company creates its strategies surrounding all these four components and these four components play an important in the overall business strategy. Customer focus forms the central theme of the business strategy followed at Commonwealth bank. It is based on the mission of securing and enhancing and securing the overall financial well-being of the customers (Brasel et al., 2016). For this purpose, the bank makes use of world class technology and recruitment of experts who provide sound guidance and help in the formation of a robust business strategy.
Common size income statement of Commonwealth bank of Australia for the year ended 31st March 2017 is as follows:
The auditor of the company especially banking companies like Commonwealth must ensure that areas such as interest income and net income could be fabricated with careful scrutiny in order to present a beautiful picture in front of the investors. The auditor must use his resources and conduct meetings with the company officials in order to conduct a true and fair audit of these statements.
Common size balance sheet as 31st March 2017 has been provided below
In the same way, in case of the preparation of the balance sheet of the company, the company’s internal auditor may overlook the financial insecurities and may assist the management in presenting a deliberate and beautiful financial statement which might be very harmful for the various stakeholders of the company. Commonwealth follows stringent measures in such cases and empowers the external auditor to receive any kind of resource, information and notes at any time of their audit operation in order to conduct a true and fair audit of the company’s financial statements.
Management of risks is one of the most important tasks of the company and it plays a very important role in the financial functioning of any company (Bhattacharjee et al., 2015). As it operates in the financial market, the chances of risks are quiet high and thus it becomes the responsible of the company and its management to ensure these risks are managed properly. Australian Auditing Standards. (2018).The roles of the members of the risk management group is well defined. The risk framework is based on the below mentioned three components:
Risks are an integral part of any business venture, therefore their removal becomes all the more important from the company’s perspective as it leaves a deep impact over the company’s overall operations (Czerney, Schmidt & Thompson 2014). Timely management of risks becomes very important for any organisation as this helps the company to prevent any unforeseen happenings in the future. All the components of the risk management framework such as risk management appetite of the board, business plan and the risk management strategy are closely checked by both the internal as well as the external auditors of the bank Corporate Governance Council. (2018).This in turn leads to double layered protection against these risks, which is the need of the hour, in this uncertain business world.
Conclusion:
This project report looks into the different measures and principles of ASX’s corporate principles standards and their correct application as per Commonwealth’s management have been mentioned and subsequently discussed. After an in depth analysis it could be concluded that Commonwealth bank of Australia is a leading Australian banking company and it has been dutifully following all the relevant standards and principles of ASX as well as of ASUSB
References:
Australian Auditing Standards. (2018). Auasb.gov.au. Retrieved 18 April 2018, from https://www.auasb.gov.au/Pronouncements/Australian-Auditing-Standards.aspx
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Commbank.com.au. (2018) Retrieved 18 April 2018, from https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/corporate-profile/corporate-governance/risk-committee-charter.pdf
Corporate Governance Council. (2018). Asx.com.au. Retrieved 14 April 2018, from https://www.asx.com.au/regulation/corporate-governance-council.htm
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