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Governance and ethics - Coggle Diagram
Governance and ethics
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The financial crisis of 2008 along with numerous corporate scandals at the turn of the millennium triggered a variety of countries to improve their corporate governance systems
Regulation generally and the extent of potential fines and penalties for non-compliance is increasing
Organisations have to formulate and implement their strategies within an external regulatory environment that is increasingly costly and complex
The requirement for regulatory compliance stretches across regional boundaries such as for data privacy and tax transparency
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Organisations also need to consider adapting to modern day social concerns and operate ethically and sustainable to maintain their reputations and brand image
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It includes the processes through which corporate objectives are set and pursued in the context of the social, regulatory and market environment
Refers to an organisations decision making structure and processes at the highest level by which its directors are responsible to its owners and other stakeholders
Was defined by the Cadbury Committee as the systems through which companies are directed and controlled
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Corporate governance principles and codes have been developed in different coutnriesand issued by stock exchanges and other entities with the support of governments and international organisations
Primary governance originates from these, company law, regulations and codes of practie
Compliance with laws such as company law or AML regulations is mandatory but adherence to codes of practice can often be voluntary or open to interpretation
Secondary governance originates from within the organisation itself but often in response to primary governance, such as stock exchange requirements for the standards of corporate governance required for listed companies
General principles around which businesses are expected to operate to assume proper governance include
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Fulfilling legal, contractual, social and market driven obligations
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The responsibilities of the board may include reviewing and guiding corporate strategy, objective setting, major plans of actions, risk policy, capital plans and annual budgets
The board is required to ensure that appropriate systems of internal control are established and to monitor the significant risks faced by the organisation
A System of Internal Control encompasses the policies, processes, tasks behaviours and other aspects of the organisation that taken together facilitate its effective and efficient operation - this enables it to respond appropriately to significant business, operational, financial, compliance and other risks to achieve the organisation's objectives
The control system includes the safeguarding of assets and ensuring that liabilities are identified and managed, thus helping ensure the quality of internal and external reporting - this in turn requires the maintenance of proper records and processes that generate a flow of timely, relevant and reliable information from within and outside the organisation
These records ensure compliance with applicable laws and regulations and also internal policies with respect to the conduct of business