Question

Company: The A2 Milk Company Limited (A2M)

Research Based Report – Corporate Governance & Risk Management

As a new accounting graduate, you have just joined the financial reporting unit of a company. Your company is listed in Australian Securities Exchange (ASX). The Chief Financial Officer (CFO) approaches you with your first task.

In the latest Board meeting, directors of your company expressed concerns about issues related to corporate governance and particularly risk management. New and emerging disruptions to the global economy, such as the Covid-19 pandemic, global trade tensions, technological advances and cybersecurity, add to the growing risks that companies have to deal with. The Board stressed that in times of crises, good corporate governance and risk management are more important than ever. It is also noted that the Corporate Governance Council’s Corporate Governance Principles and Recommendations (the Fourth Edition) was released on 27 February 2019 and takes effect for a listed entity's first full financial year commencing on or after 1 January 2020. Therefore, the Board has decided to conduct a review of relevant issues.

Required:

Based on the Board's decision, the CFO asks you to prepare a business research report focusing on the following three aspects:

(1) Identify and explain TWO key issues related to risk management in the Corporate Governance Principles and Recommendations (the Fourth Edition). The Fourth Edition can be found on the Corporate Governance Council’s website.  

(2) Critically analyse to what extent corporate governance reporting of your company can be enhanced in relation to the TWO key issues that you have identified in part (1). In your analyses, you should refer to your company’s most recent Corporate Governance Statement.

(3) Your company is consider expanding its operations to a foreign country. You are required to nominate a specific foreign country and critically analyse TWO major environmental and/or social risks that the company should consider when operating in this foreign country .

Answer 1

Corporate governance is carried out in accordance with the Company's Corporate Governance Code and is based on the following principles:

• Accountability. ...
• Fairness. ...
• Transparency. ...
• Responsibility

The boards of some listed entities may decide that they are able to deal efficiently and effectively with board composition and succession issues without establishing a separate nomination committee. If they do, the entity should disclose in its annual report or on its website the fact that it does not have a nomination committee and explain the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively.Risk-taking drives corporations to push ahead and make steep gains. When risks pay off, profitability makes shareholders and stakeholders happy. ... Banks and other financial institutions have long set the standards for good corporate governance principles

Common Issues That Arise in Corporate Governance

• 1) Conflicts of interest. Avoiding conflicts of interest is vital. ...
• 2) Oversight issues. ...
• 3) Accountability issues. ...
• 4) Transparency. ...
• 5) Ethics violations.