Question

Students are required to select an international successful company which was impaired specifically by risk management issues including corporate misconduct/ corporate financial issues and fraudulent accounting practices.

You are required to:

 Develop a comprehensive description of company and its operations and identify the practices which would have contributed to company’s corporate failure.

 Discuss the consequences of those risk events making reference to its impact on stakeholders including employees and shareholders, other financial institutions such as banks and the auditors of the company.

Select another similar company which is compliant and uses appropriate corporate

 Risk management practices; providing recommendations on best practices for the affected company.

Write a report a format that covers all the requirements above and in a format that is presentable not exceeding 4,500 words.

Answer 1

Volkswagen V/S Tesla

To answer the question, we have chosen Volkswagen and Tesla as two competitor firms which operate in the Automobile sector as the companies of choice. Volkswagen is a well-known household name which operates across the globe and has a German Origin whereas Tesla operates from the United States and is a well-known brand in the electric car segment.

The compliance issue and corporate misconduct which we will be discussing to answer this question are the emissions scandal which were done by Volkswagen which led to huge cry and the company ultimately had to admit its mistakes which led to big problems for the same.

Volkswagen group was heavily penalized by the US Environment Protection Agency in the Year 2015 for violation of emission norms. These norms represent the permissible levels of fuel pollution which a vehicle can cause and are tested using detection devices.

The company had shown that diesel models ranging from 2009 to 2014 had zero level of Nitrous oxide emission whereas when tested by the above cited agency by procuring the data from various countries as well as in the US it was found to be 40% more.

The company was held guilty for causing grievous mischief and pleaded guilty to manipulating the system in which their vehicles would give a reading which was lesser when the test machine was attached to it, while in reality some of its models were the highest polluting in Europe.

This lead to the company paying about 18.32 Billion US Dollars in environmental fines on one hand and on the other it lost a lot of customers to other players in the market. Its brand value collapsed and the company lost great financial confidence of its prospective and existing shareholders respectively.

Tesla and Its Business Practices:-

Now, we know of a company in the automotive sector which has caused serious problems for the industry and has set bad name for industry standards. We look at one positive example in the form of a company like Tesla.

Tesla is one of the renowned brands, when it comes to electric vehicles across the United States and beyond. The company has adhered to all building and safety norms and has revolutionized how the automobile sector functions.

Its innovativeness in terms of developing a distinct technology of electronic vehicles has been greatly appreciated by enthusiasts and industry experts alike. People now know that there are alternative sources of energy which can be used to operate vehicles which are pollution friendly also.

This leads to people believing in the brand and all stake holders are aware that their money is safe in the hands of a company that adheres to social conduct and corporate best practice management.

It has created vehicles which are both durable and environmental friendly while ensuring that consumers are happy with the features also.

Conclusion

The key which we may draw from such discussion is the fact that two companies operating in the same industry can yet be different in their approach towards business.

While one has engaged in a strategy which aims at using short cuts for getting work done, the other has used a different approach in which it complies and even innovates so that industry standards are set according to consumer and environmental expectations.

The end result is that in the long run those companies which connect with people more and use ethical modes of conducting their business activities will ultimately win.