Corporate Governance And Risk Management In An Organization

Corporate Governance and the Role of Managers and Directors in Creating Socially Responsible Organization

The research paper is primarily concerned with the corporate governance of the organization. BHP Billiton which is one of the biggest and well known mining companies has been taken in the task. In order to attain long term mission and vision and to sustain the growth in the international market, it is essential for the company to maintain strong and unique corporate governance. Furthermore, the paper outlines the role of corporate governance and CSR activities for fulfilling the needs of various stakeholders like customers, suppliers, employees and management. The report highlights how managers and leaders play a major role in creating socially responsible organization. The paper also provides brief information about the risk management, leadership and management process that are needed to conduct business at international level. At the end, the paper outlines the organizational approaches to risk management and corporate governance that further helps in achieving objectives and goals. More detail of the task has been discussed below.

BHP Billion was incorporated in 1885 with its headquarter is situated in Melbourne, Australia. It is a largest mining company measured by market capitalization (BHP, 2018). It is a leading resources company which primarily focuses on the mining and petroleum products. The corporate objective of organization is to create a shareholder value and worth through acquisition, development, detection and advertising of natural resources. The corporation deals in multiple products like metallurgical coal, iron ore and copper. Along with this, BHP Billiton has substantial interests in gas, oil and energy coal (BHP, 2018). A disciplined approach is followed by the company to maintain diversity at the workplace. The company’s code sets a standard of action, behaviors and keeps people responsible towards the achievement of goals and objectives. The firm also protects the rights, interests and values of the stakeholders. The environmental management policy is based on the vigorous identification, control, evaluation of material risks in all over the business phases. Along with this, it focuses on minimizing the greenhouse gas emissions and energy use at operations and activities (BHP, 2018).

Corporate governance is an effective and unique system of practices, rules, standards and processes by which a company is managed and controlled. It is investigated that corporate governance is significant and essential that includes the balancing the interests of a organization’s various stakeholders like management, customers, suppliers, financiers, community and government (Farrar, 2008). There are various pillars of corporate governance such as stakeholder management, assurance, moral integrity, participation, efficiency and effectiveness. It has been found that directors and managers play an imperial role in maintaining sustainability and CSR activities. The role of managers in creating socially responsible organization is discussed below.

• First, directors can support the interests of organizational stakeholders, and secondary, they direct and guide in protecting the interests and rights of their organization as stakeholder in community. Their contribution could be conceptualized as the director’s roles in CSR. At BHP Billiton, social responsibility of organizational management is the responsibility of each and every manager and director (Tricker and Tricker, 2015).
• The primary responsibility of directors at BHP Billiton is to oversee the implementation and creation of an organization’s social responsibility objectives, guiding the firm in developing, handling and altering social responsibility approaches and policies.
• The directors understand the idea and significance of corporate social responsibility and focus and identify the best practices for the governance of CSR at BHP Billiton. They also monitor and focus on the organization’s progress in relation to CSR. Since 1999, BHP Billiton forum on corporate responsibility has been pivotal and dynamic to helping people to make informed and unique decisions and build suitable sustainability standards (Collier and Esteban, 2007).
• Ken has been a director of BHP Billiton limited therefore, director provide right guidance to the managers and leaders in the workplace (BHP, 2018).

• CSR managers are accountable for developing and explaining the strategies and approaches which underpin a BHP Billiton goals and objectives.
• The managers conduct research, build policies, come up with ideas, develop relationships with partner companies, create detailed plans and coordinate and initiate wide range of initiatives and activities that are designed to have a favorable impact on the local communities and environmental (Cacioppe, Forster and Fox, 2008).
• Apart from this, managers are responsible for managing, recruiting and training junior employees for creating socially responsible organization. They align worker goals and objectives with CSR goals for creating a favorable and dynamic culture at the workplace.
• Manager’s act as a role model and they provide right and appropriate direction to the employees for performing tasks and duties. They grant reward and recognition to the workers for CSR contributions (Boardworksconsulting, 2018).

The importance and function of corporate governance in today’s aggressive and progressive business environment are increasing day by day. It is also significant for gaining competitive benefits in the international market. At BHP Billiton, the board of directors believes that they can impel cultural change in terms of minimizing officialdom and enhancing outcomes and efficiency. The viewpoint of governance goes beyond rules and observance. The people believe high quality governance supports long term and dynamic value creation (BHP, 2018). In this way, it helps in fulfilling the desires, needs and expectations of the stakeholders to a large extent.

Role of Corporate Governance and Risk Management in Fulfilling the Needs of Stakeholders

(Source: BHP, 2018)

The above diagram highlights the supremacy structure at BHP, it reveals the communication and integration between the board and shareholders and relationship between the CEO and the board. It also explains the flow of allocation from various shareholders in the organization. Robust processes and approaches are in place to ensure the delegation flows through the board and its committee to the chief executive officer, the executive leaders team (ELT) and into the firm. In this way, the corporate governance helps in protecting the needs and requirements of shareholders in the competitive market. The charter at BHP Billiton is central and core to the governance tool and structure of BHP. It entails corporate strategy, values, approaches and strategy and explains when shareholders are successful and effective. The company fosters a culture that helps in supporting the high ethical principles, values, rewards, corporate honesty and self esteem for others (BHP, 2018). On the other hand, risk management system is also implemented by BHP Billiton at the workplace to provide protection to the various stakeholders. It has adopted principles and standards of openness, responsibility, accessibility and fairness which guide stakeholder approach to revenue and outcome transparency. BHP uses various risk management techniques, strategies and tools in order to handle and manage its disclosure to market price volatility. Price risk management sessions and programs are undertaken and authorized from time to time, according to the strategies, goals and objectives of the responsible management and under the company’s market risk policy. The risk management at BHP Billiton is to enable the project to proceed without issues and concerns. It also helps the stakeholders to make unique and dynamic decisions within the organization. The other benefits of risk management include the increased and improved likelihood of delivery of desired results, facilitation of decision making and allocation of roles and responsibility to risks owners (Bonn and Fisher, 2011).

It has been studied that leadership and management processes play a crucial role in maintaining good and strong corporate governance and following compliance and standards in the organization. It is examined that leadership and management process are unique and dynamic considerations for the growth, progress and sustainability of any organization. As the same way, leadership and management are fundamental part of BHP Billiton for conducting business functions and operations in a hassle free manner. In today’s era, BHP Billiton has announced multiple changes in the company’s management. A 4-step leadership program or seminar for the employees in the company has played a major role in minimizing events with the potential to cause a fatality by 30 percent and enhancing its total recordable injury frequency (TRIF) rate (SIA, 2018). Along with this, the field leadership program offers a standard platform and route to help enhance and recover the safety outputs through observable and engaged managers or leaders. Recognizing that noticeable leadership is a unique and dynamic key driver of safe and secure productivity along with this, the field leadership program is created to drive a cultural change and support the people achieve goal and targets (Thedebatingnews, 2018).

Leadership and Management Processes in the Organization with Respect to Governance and Policy Compliance

The leaders engage with contractors and employees on how they can improve and enhance safety approaches and monitoring at risk activities. The sessions and programs also monitors on the improving and enhancing in field confirmation of fatal and material risks and challenges. To develop the success of leadership program, the company has introduced an effective and dynamic set of processes, approaches and systems to fully embed the sessions and programs across all assets (Epstein, 2018). Leadership and management is critical and unique ingredient of good governance and dynamic policies. It is examined that without effective and dynamic leadership and good governance, it is quite impossible to attain and sustain effective and efficient administration at the workplace. Without an effective and efficient leadership, the company may not ensure good and strong governance in its totality. The characteristics of effective leadership include participation, simplicity, rule of law, receptiveness, impartiality and inclusiveness, accountability and efficiency (Shahin and Zairi, 2007). All these characteristics help in achieving the objectives and goals of good governance. If the leaders and management team are abide to follow all rules, standards and policies that have been made by the company. Thus, the leaders and management would be the pillar that the whole company can depend on. The management and leaders further ensure whether the company is maintaining diversity at the workplace or not, aiming to compete with rivals in the global market (Thedebatingnews, 2018).

It has been analyzed from the various studies that current challenges of BHP Billiton are commonly mineral projects, ethical and petroleum projects. These issues may put direct impact on the corporate governance, sustainability and decision making process of top management. The other current challenges are worsley growth and efficiency in Australia is budget and schedule. The other issues were raised and occurred about the design of a BHP Billiton dam in Brazil more than two years before it calamitously failed, killing as many as 28 people (Saunders, Timson and Deslories, 2015). It is further worth noted that mining has an unarguable and ineffectively environment impact. Along with this, there are health, safety, standards and social responsibility issues and challenges to throw in. Standards and compliance in today’s globalization world are costly and complex business as compared to the more related policies, approaches and related standards of yesterday. The nature and trends of the industries in which BHP Billiton in which the company operates means that majority of activities are extremely operated and managed by health, environmental and safety issues. As operated and controlled standards, needs and expectations are frequently developing, the company might be exposed to increase the litigation, environmental rehabilitation and compliance costs (de Villiers and Alexander, 2014). The conceptual, contextual and ethical issues affect the risk management and corporate governance to a large extent. Some of the conceptual issues like disability of older people are ongoing in the organization. Along with this, contextual issues such as sustainability, climate change and ecology issues are being entertained by BHP Billiton while functioning at international level (Hogan and Lodhia, 2011). All these contextual, conceptual and ethical issues may impact on the progress and targets of BHP Billiton. These issues also put direct impact on the corporate governance, risk management and decision making process. Fraud and misconduct done by the workers while working is affected the risk management of BHP Billiton in multiple ways. There is a close relationship between ethics, risk management and corporate governance. Therefore, the company needs to focus on the ethical, conceptual and contextual issues to maintain a dynamic working environment and to run the business operations in a hassle free manner. Effective code of conducts is exercised by BHP Billiton to prevent the fraud and misconduct at the workplace which can affect the corporate governance and risk management (Rezaee, 2009).

The organizational approach is known as top down approach and is used to explain an organizational approach to management that offers plans, directives, initiatives and goals from higher level to lower level (Mallin, 2011). Some organizational approaches might be explained as creative, or loose and highly directive. There are various approaches of organizations including human resource approach, contingency approach, system approach and productivity approach. All these approaches are interconnected with risk management and corporate governance. Human resource approach in an organization is the central force. Their development and progress will contribute to the progress and success of the company. It requires that managers or leaders instead of controlling the workers must provide active support to them by treating them as part of the group. This approach can be implemented in BHP Billiton to improve and enhance the corporate governance and risk management. The second approach that can be applied in BHP Billiton is contingency approach, it states that there is no single way to handle and manage efficiently under all the situations (Wheelen et al, 2017).

The tools and techniques of behavior which work efficiently and effectively in one circumstances may fail in another one. The process and organizational at BHP Billiton are governed by good corporate governance, external environment and risk management. Thirdly, productive approach is used by BHP Billiton to increase and enhance the production and outcomes in the international market (Haque and Deegan, 2010). BHP Billiton is mining company therefore this approach can provide ample of benefits to employees at the workplace. Productivity is an effective part of organizational behavior decisions, is identified and discussed extensively. These decisions relate to the economic, social and human issues. Thus, the company focuses on these approaches to determine strong and dynamic corporate governance and risk management. System theory can further be applicable in the organization which is closely and highly interconnected. This approach gives the managers and leaders a way of looking at the organization as whole group, whole and whole social system (Visser, 2008).

Conclusion 

From the above discussion, it is concluded that this research paper is primarily concerned with the corporate governance and risk management of BHP Billiton. It is worth noted the above limelight event that corporate governance and CSR activities are essential to grow and flourish the business activities and to protect the shareholder value and worth globally. Furthermore, the leadership and effective management process are also needed in formulating the policies and plans in BHP Billiton. It is recommended that BHP Billiton should focus on the CSR activities, sustainability and corporate governance to be a leader in mining industry.

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