Corporate Governance And Risk Management Of TAB Bank

Actions taken by senior management

Discuss about the Corporate Governance and Risk Management of TAB Bank.

Fraud is dangerous and can be the cause of regrets in the lives of the victims. When dealing with money, people need to be responsible, keen, conscious and serious on what they are doing. They should also respect other people’s savings and make sure that they use open ways to make profits. Though money is tempting, it is the reason behind the increasing number of people in jails today. So people who deal with money in banks should be sensitive and careful. The following questions relate to an article which contains the story of men who were charged and convicted as a result of fraud. Their mistakes include forging customers’’ signatures and cheating them as a way of convincing them to entrust their money with them.

Describe the actions taken and behavior displayed by senior management throughout this

saga in terms of enterprise risk management. Discuss if these actions and behavior were not Only inappropriate but potentially high risk and whether they aggravate the situation. If you Were in the position of Sam Venus, what would you have done differently during the crisis to Address the risk involved, and what might you put in place to mitigate similar future risk?

First, the senior managers convinced the people that they would take care of their finances, after which they took the money and maximized their commissions, without realizing that some of the profit –making processes was risky

(Kerzner & Kerzner, 2017, NP). Some of the risks incurred include lose of money and forging of signatures. The account owners would be upset if they find out that their money was invested in risk projects to work for the benefit of the bank. On the other hand, the managers forged signatures and withdrew money from the accounts of the bank members and then convinced them that their money was lost in misfortunes. The bank managers involved themselves in a highly risky game, which caused losses to both the bank and the customers. At the same time they made the rest of the members who had entrusted funds with them, and their branches withdraw completely. If placed in the place of Sam Venus, the CEO of TABS, I would suggest that heavy fines be imposed on the irresponsible people who had indirectly stole people’s money, but directly tarnished the name of the bank.

TAB’s Remuneration Plan

Behave” – Jack Welch, Former CEO of General Electric

Examine the key areas of concern in TAB’s remuneration plan. To what extent do you think these influenced the corporate culture and employee behavior in TAB? What changes, if any, wouldyou make to the remuneration plan to minimize agency conflicts?

The culture of a company must be maintained despite the challenges incurred by the company. Therefore, the expensive measure taken by TAB greatly favored the culture of that company. This is the disadvantage of working with workers who are not straightforward (Francoeur, Labelle, & Sinclair-Desgagné, 2008, pg 90). They take the advantage of the word “limited” to manipulate their bosses. They are sure that the company will be accountable for any loses incurred and that is the basis of their arrogance. However, as stated, the companies with such people should pass a strict law that will allow the suspects to be heavily fined in a court o law. They must also get tough punishments which will discourage other workers in the future, who might be tempted to commit such crimes.

To minimize agency conflicts, I would recommend that the word ‘LIMITTED” be removed and be replaced by the word “unlimited.

In the Senate Inquiry Final Report, ASIC was described as “waiting for complaints,

Investigating a minute proportion of them, and prosecuting even fewer.” Critically evaluate the actions taken by ASIC throughout the course of the financial planning scandal, while highlighting difficulties ASIC might have faced during its investigations.

ASIC, being an investigation group, frequently got complains from the customers of TAB. However, as a result of inadequate information, it took time before responding to the issue. ASIC had a lot of other issues to attend, and that is why it did not go to TAB bank immediately. It had to first finish its original filled duties, so as to create space to move to TAB bank. In the case whereby ASIC meets the whistle blowers, it was the time when its course was taking effect. This whistleblowers team had no fixed rules and principles which governed them they therefore had to make sure that they were the only investigators who were investigating the matter. Somehow, in the same case, the ASIC felt that there were other investigation branches which were send to investigate the TAB case. Jones complains that the ASIC took too long to respond to her case (John, Litov, & Yeung, 2008, pg 1700). Though her case was urgent, she should have known that her case was not the only case that was in the hands of ASIC. There were couples of other cases which waited to be handled by ASIC. Though I understand that she had lost millions of money, which could lead somebody astray incase of lose, I think Jones should have been patient enough to allow ASIC to collect enough information which would assist in investigating the TAB case. After Jones faced the matter on the facebook page on social media, the senate concluded that ASIC was one of the poor performing group in as much as investigation is concerned (Humphreys, 2008 pg 250). It was accused of taking too long to investigate the case in TAB, was contributed to prolonged mistakes by the workers.

Role of ASIC

The media played an important role in exposing the fraud in TAFP. Discuss the role of the Media in promoting good governance. Are there factors which limit its effectiveness? Can social

media also play a role in enterprise risk management? If so, how?

The media is usually effective in playing its role in maintaining good governance. For instance, nothing that reaches the social media can be hidden (Bebbington, Larrinaga, & Moneva, 2008, pg 350). Once a case is exposed to social media, it is directly viewed and seen by many people, who include the heads of investigation departments. (Kirkpatrick, 2009 pg 70). The social media has been of great help to the society and has helped many people. It has become the watchdog of the society, since nothing that was posted on social media failed to meet the maximum attendance it needed. Issues posted on social media act a warning or encouragement to other potential people outside and inside the society. For instance, when social media was involved in the case of TAFP, the issue was addressed in the media and the branches concerned with the issue were also included..

(Kolk, 2008 pg 11). Social media an also take part in enterprise risk management, by ensuring that some enterprises do not take advantage of the risks, to satisfy their increased demands.

Policy sufficiently protected Bloe and his fellow whistleblowers? What further improvements can be made to encourage those who are aware of wrongdoings in an organization to come forward, Instead of remaining silent?

A good whistle blower protection policy is important since it covers the rest of the whistleblowers. A long as one is a member of the whistle blower, he or she is covered and protected incase of anything, concerning crime or fraud. Whistleblowers often recognize their fellow whistleblowers, and protect them whenever possible (Godfrey, Merrill, & Hansen, 2009, pg 440). However, it is advisable to have whistleblowers that are prone to crime. Whistleblower policies should have rules and regulations which are referred to as the ethic-drivers of the branch. They should make sure that there is a rule that limits the whistleblowers from committing crimes such as theft, fraud, any form of crime which will cause the rest of the people to feel unsatisfied with the decision and the policy applied. (Bhimani, 2009). Other ways which can be used to encourage wrong-doers to come forward include signed agreement, and punishing those who keep quiet. Heavy fines should also be imposed on these people so as to encourage others who might be tempted to commit crimes. Other ways include exposing them to public, and laying them off their jobs.

Role of Media

TAB had an excellent reputation amongst its customers but TAFP severely damaged it.

What are the challenges faced by an organization like TAB in promoting ethical behavior,

Compliance and good governance throughout the group

TAB did not have their own ways of managing issues so in the bank, but depended on the instructions given by the senior bank, (TAFP Van Greuning & Brajovic-Bratanovic, 200, NP). If TAB could have been independent, it could have made its own rules and regulations, which would be less complicated. They could also have had solved their problems independently, without affecting TAFP. However, they had to be merged since TAFP is the senior bank. Therefore, being independent makes an organization accountable for all profits, gained through either transparent or hidden ways. It is also accountable for all losses accounted by either the organization or the customers entrusting the organization with their funds.

TAB is not free to choose who they want and what they want to do, since their freedom of choice is limited. In this case, DON could have been stopped early in advance before the matter got to its roots. However, when a fellow worker tried to report the matter to the manager, the manager did not put it into consideration, since DON was the highest paid trustee in the company (Aebi, Sabato, & Schmid, M., 2012 pg 3220). He was also the highest profit earner of the organization, and taking a negative action towards him meant that the organization would see a drop performance. However, if the manager had listened to the trustee’s complain, and then the bank could have been saved before getting to social media.

References

Aebi, V., Sabato, G. and Schmid, M., 2012. Risk management, corporate governance, and bank performance in the financial crisis. Journal of Banking & Finance, 36(12), pp.3213-3226.

Bebbington, J., Larrinaga, C. and Moneva, J.M., 2008. Corporate social reporting and reputation risk management. Accounting, Auditing & Accountability Journal, 21(3), pp.337-361.

Bhimani, A., 2009. Risk management, corporate governance and management accounting: Emerging interdependencies.

Francoeur, C., Labelle, R. and Sinclair-Desgagné, B., 2008. Gender diversity in corporate governance and top management. Journal of business ethics, 81(1), pp.83-95.

Godfrey, P.C., Merrill, C.B. and Hansen, J.M., 2009. The relationship between corporate social responsibility and shareholder value: An empirical test of the risk management hypothesis. Strategic management journal, 30(4), pp.425-445.

Humphreys, E., 2008. Information security management standards: Compliance, governance and risk management. information security technical report, 13(4), pp.247-255.

John, K., Litov, L. and Yeung, B., 2008. Corporate governance and risk?taking. The Journal of Finance, 63(4), pp.1679-1728.

Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.

Kirkpatrick, G., 2009. The corporate governance lessons from the financial crisis. OECD Journal: Financial Market Trends, 2009(1), pp.61-87.

Kolk, A., 2008. Sustainability, accountability and corporate governance: exploring multinationals’ reporting practices. Business Strategy and the Environment, 17(1), pp.1-15.

Van Greuning, H. and Brajovic-Bratanovic, S., 2009. Analyzing banking risk: a framework for assessing corporate governance and risk management. World Bank Publications.