Bernard Szlachta at 01:32, 17 November 2012

2012-11-17T01:32:12Z

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{{Cat|OCEB B200.5 - Quality and GRC}}
{{OCEB Links}}

Source: Anthony Tarantino, Governance, Risk, and Compliance Handbook, Wiley, 2008.

<slideshow style="nobleprog" headingmark="⌘" incmark="…" scaled="false" font="Trebuchet MS" >
;title: GRC
;author: Bernard Szlachta (NobleProg Ltd)
</slideshow>

== GRC ⌘==
* '''Governance'''
* '''Risk'''
* '''Compliance'''
* Distinction is sometimes blurred

= Governance ⌘=
* Governance - Latin: ''steering''
* "Addresses the processes systems and control by which organizations operate"
* Applies to all organizations: '''public''' and '''private'''
* "Includes the exercise of legal and regulatory authority and the user of institutional resources to manage organizations"
* Area of Economics: separation of ownership and control (board directors, owners, managers, employees, suppliers, customers, regulators and communities"

== Corporate governance ⌘==
* "Processes by which an organization defends the interests of the stakeholders"
* Refers to the relationship between those who govern and those who are governed.
* In politics: relationship between the government and citizens
* GAP: Present State, Desired State, Plan to get there

== Short Chronology ⌘==
* 500 BC 孔子, Analects
* 31 BC Rome (shareholding)
* 1600 East India Company (Court of Directors, separation of ownership and control)
* 1844 UK, Joint Stock Company Act
* 1930 Bank of International Settlement
* 1933 US, The Securities Act (regulation over securities markets, registration disclosure, SEC)
* 1984 G10, BIS creates the Basel Committee
* 1977 US, Foreign Currupt Practices Act (FCPA, prevation of bribery of foreign officials)
* 1985 US, EU, COSO
* 1988 G10, Basel accord (minimal requirements)
* 1990 UK, Polly Peck, CCI, Maxwell
* 1992 UK, Cadbury Committee published first code on corporate governance
* 1999 G10, Basel II
* 2001 US, Encrom
* 2002 US, SOX
* 2004 US, COSO II (ERM)
* 2011 Global banks are required to be live under Basel II

== Commonly Accepted Principles of Corporate Governance ⌘==
* Rights and Fair Treatment of Shareholders
* Rules and Responsibilities of the Board of Directors
* Ethical and Professional Behaviour
* Financial Transparency and Disclosure
* Internal Controls

== Models of Corporate Governance ⌘==
Anglo-American Model
* priority to shareholder interests
* powerful CEO
* board provides overachieving stewardship
The coordinated Model
* prevalent in Europe and Japan
* "gives priority to the interest of managers employees, customers, suppliers and the community in general"
* slower growth in profits, more control over ethics and morality
Family-Owned Company Model
* Asia, Latin America, also (Span, France, Italy)
* Transparency is not welcomed
== Agency vs Stewardship ⌘==
Agency theory
* separation of Board Chair (Chairman) and CEO
* Greater monitoring and sanctioning of management
Stewardship
* Shared incumbency of the roles
* More independence in decision making, faster reaction to changes
= Risk ⌘=
; Risk
: "Possibility of loss or injury created by an activity or by a person"
* doesn't have to be bad
* opportunies can come from a risk

; Risk Management
: "seeks to identify, assess and measure risk and then develop countermeasers to mitigate and minimize its impact"

== Basel II major areas of operational risk ⌘==
# Internal fraud
# External fraud
# Employment practices
# Clients, products and business processes
# Damage to physical assets
# Business disruptions and system failures
# Execution, delivery, and process management

== COSO and ERM ⌘==
; COSO
: Committee of Sponsoring Organizations

* In 2004, COSO published update to 1992 risk management framwork, AKA '''Enterprise Risk Management (ERM)''

= Compliance and Internal Controls =
; Compliance
: acting in accordance with established laws, regulations, protocols, standards and specifications.
; Internal Controls
* terms used in finacial reporting
* COSO specified internal controls approach
* SOX section 404

== Globalization ⌘==
* GDP
* GDP PPP

== IFRS vs GAAP ⌘==
; GAAP
: Generally Accepted Accounting Principles
: Mostly in the US
; IFRS
: International Financial Reporting Standard

== Harmonization ⌘==
* Equivalnce (standards)
** GAAP, IFRS
* Reciprocity
* Transparency

== Basel II ⌘==
Aplies to ''Large Banks''
* over 250 billion in consolidated assets or
* 10 billion in foreign exposure

Smaller companies can be "punished" for non compliance by rating agencies

== World Bank six categories of governance ⌘==
# Voice and accountability
# Political stability and absence of violence
# Government effectiveness
# Regulatory quality
# Rule of law
# Control of corruption
http://en.wikipedia.org/wiki/Worldwide_Governance_Indicators

GRC - Revision history

Bernard Szlachta at 01:32, 17 November 2012