Roles of Corporate Governance in Bank Failures †MyAssignmenthelp

Question: Discuss about the Roles of Corporate Governance in Bank Failures. Answer: Introduction: In the current scenario, corporate scandals and degrading confidence in financial reporting among the creditors and investors have renewed the corporate governance practices in an organization. Corporate governance is the system through which companies are controlled and directed (Berger, Imbierowicz and Rauch 2016). It is the duty of upper management and board of directors for proper governance of the companies. The main responsibility of the upper management includes establishing the strategic aims of the company. The shareholder is the one, who governs the organization by appointing the auditors and directors. It is the duty of shareholders to satisfy the management that adequate structures were in the place. I think the corporate governance is mostly about what the top level management practices to achieve the desired mission. They are the ones setting the values and standards of the company to maximize profitability and productivity. It is to be distinguished according to them from the daily operational management of the organization with the help of full-time executives. The primary purpose of corporate leadership is to generate profit both ethically and legally. This therefore creates high level of satisfaction to the important five constituencies. This includes employees, customers, vendors, investors and society at large (Soltanizadeh et al. 2016). The main aim of every organization is to ensure high profitability and sustainability year after year. An organization is generally a congregation of different stakeholders. It is important for the company to be transparent and fair to both the internal and external stakeholders while dealing with all the transactions. The major essence of the corporate world is completely dependent upon promoting compliance of law adequately. It should be practiced with transparency, high spirit and accountability. With the advent of globalization and changes in the economy, our corporate world needs a high-class governance system. It is vital for our firm to demonstrate and embrace ethical conduct for effective management. The only tool that can help the management to achieve the desired goals is via corporate governance (Iliev et al. 2015). It is a combination of strong commitment for the management that safeguards shareholders interest, corporate ethics and openness in ideas. Therefore, this helps in providing parameters of control, accountability, and reporting system by the management. This also helps in encompassing the interactive relationship among various constituents that is required for determining the performance and direction of the corporation. In the recent times, scandals and scams are undermining our lives to a large extent. The challenges and issues have been never so unpredictable and turbulent as they are currently. Therefore proper corporate governance is highly significant to foster the world economy. Good corporate governance mainly comprises of effective board that governs the organization with high integrity (Lebedeva et al. 2016). It is the board of our company that is responsible for achieving the objectives of the company. Moreover, the other factors like, business environment and ethics creates an impact on our legitimate shareholders and societal interests. This further influences the long-term interest and reputation of our business enterprise. Corporate governance is not just about promoting transparency, accountability and fairness of corporate (Calomiris and Carlson 2016). In fact it is about finding a balance between social and economic goals to work ethically. There have been various cases of excessive debt financing that is laced with frauds and executives unequal rise in payments. The largest scam involving ones the largest IT firm, Satyam Company has discredited the corporate governance concept virtually. The Satyam fraud case is the reflection of the economic scenario of our organization that we live in. corporate governance is highly important for the entire firm to properly managed the risks within the organization. All the successful organization throughout the world lays down framework for creating long-trust trust between the external providers of the capital and companies (Elshandidy and Neri 2015). Since the beginning, the business faces immense risk in a day-to-day basis. Large organization is gaining success in the recent times only due to efficient risk management practices. Risk management is the approach that aims to assist the firm by understanding, evaluating and implementing action on its risk. The main idea is to increase the rate of firms success and also reduce any chances of failure (Eling and Marek 2014). Effective risk management provides benefits to the employees, customers, shareholders, and also the society at large. Adequate risk management ensures that our companys compliance with the requirements for corporate governance. Risk management is important for all companies, whether, large or small. Proper risk management practices include performance management, risk and accountability approach. Reward is also included in our firm, which ensures higher rate of efficiency throughout all the levels of the organization. Risk management practices also require a clear understanding and knowledge of the firms as well as the various processes that is involved within the business (Eling and Marek 2014). It is the responsibility of board to maintain proper internal control system and sound risk management. I think it is important for the boards to conduct review for ascertaining the risk management system within the organization. Proper review of the internal control system should be done at least annually and report should be given to all the shareholders. The review should adequately contain all the material controls, which includes financial, compliance and operational control (Jizi et al. 2014). Generally it is the main responsible for the boards to determine the extent and nature of vital risks so hat strategic objectives of our company can easily be attained. Certain risks are exploited so that advantage for strategic opportunities can be made. Corporate governance and risk management issues in the recent times are increasing at rapid rates. The management and organizational practices that includes all the operational activities are also extensively affected. Disciplined and structured governance helps the corporations to manage all the business uncertainties through holistic and integrated approach. Therefore it can be concluded that effective governance in the company is only possible if the organizational risks are managed carefully. This includes risk identification, management and proper monitoring and reporting. Moreover, reliable and relevant upward communication from risk owners to top-level management is imperative for effective governance and risk management. References: Berger, A.N., Imbierowicz, B. and Rauch, C., 2016. The roles of corporate governance in bank failures during the recent financial crisis.Journal of Money, Credit and Banking,48(4), pp.729-770. Calomiris, C.W. and Carlson, M., 2016. Corporate governance and risk management at unprotected banks: National banks in the 1890s.Journal of Financial Economics,119(3), pp.512-532. Eling, M. and Marek, S.D., 2014. Corporate governance and risk taking: Evidence from the UK and German insurance markets.Journal of Risk and Insurance,81(3), pp.653-682. Elshandidy, T. and Neri, L., 2015. Corporate governance, risk disclosure practices, and market liquidity: comparative evidence from the UK and Italy.Corporate Governance: An International Review,23(4), pp.331-356. Iliev, P., Lins, K.V., Miller, D.P. and Roth, L., 2015. Shareholder voting and corporate governance around the world.The Review of Financial Studies,28(8), pp.2167-2202. Jizi, M.I., Salama, A., Dixon, R. and Stratling, R., 2014. Corporate governance and corporate social responsibility disclosure: Evidence from the US banking sector.Journal of Business Ethics,125(4), pp.601-615. Lebedeva, T.E., Akhmetshin, E.M., Dzagoyeva, M.R., Kobersy, I.S. and Ikoev, S.K., 2016. Corporate governance issues and control in conditions of unstable capital risk.International Journal of Economics and Financial Issues,6(1S). Soltanizadeh, S., Abdul Rasid, S.Z., Mottaghi Golshan, N. and Wan Ismail, W.K., 2016. Business strategy, enterprise risk management and organizational performance.Management Research Review,39(9), pp.1016-1033.