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The significant Governance issues (in general terms) cover the following:

  • Accountability
  • Authorizations
  • Audit trails
  • Controls
  • Compensation
  • Independence(board, Non-Executive directors, Auditors etc).
  • Conflict of Interests
  • Monitoring
  • Segregation of duties
  • Transparency

Step by step approach for conducting Assessments:

  • Create an overview of the design and operation of the internal control structure (through an investigation of processes, risks, and controls)
  • Create a control risk matrix that links your entity’s financial, operational, and disclosure risks to the internal controls that will be established.
  • Based on the above an assessment of all control risks must be organized. This assessment will determine the extent of process documentation and internal and external audit work that must be performed to test internal controls.
  • The assessment of control risk is typically conducted by detailed control objective for each major type of transaction identified in the Control Risk Matrix.
  • While making assessments, it is critical that you monitor issues from management and staff (e.g. whistleblowers). Periodically conduct a survey for concerns or concerned stakeholders. to obtain their opinion on the adequacy of internal controls.
  • Monitor and adjust regularly or when additional or new internal controls are introduced.

The Corporate Governance Risk Framework

Corporate Governance is often defined as how we assign responsibility for managing risk, by making use of contemporary prudent management and conventional wisdom. But conventional management only provides a fragmented view on the issues involving Risk and Governance.

The Governance Model provides us with a framework for considering the type of decisions that are made including the consequences of those decisions in a cause and effect feedback way.

The Governance Model provided us with that framework whereby we could anticipate and understand and take action around the intended and unintended consequences of our choices and decisions. The Governance Model became a systems model and provided us with a structure dealing with decision-making under varying degrees of uncertainty.

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An effective Corporate Governance program has to be consistent with the size, complexity, range of operation and organization of a company. A one-size-fits-all or a top-down check list approach, that treats all Governance, Risks or Compliance (GRC) issues as being equal, is not a solution. The checklists are designed only to provide indications that a "canaries in a coal mine" does. If your organisation's program for monitoring GRC issues is weak, it generally speaks to the overall control culture and risk management. Therefore weak GRC is a canary that's stopped singing — an indication of potential trouble.
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"Checklist for Governance"

Shareholders' rights and internal controls
A principle-based approach to Compliance adopted by the EU, will provide the basis to give Member States and companies the flexibility they need in running their operations efficiently.
The 'comply-or-explain' principle obliges companies to justify deviations from corporate governance codes they apply to them.

Shareholders' rights: the important role of the shareholder in the context of good corporate governance has to be emphasised. An appropriate balance has to be found between managerial entrepreneurship and shareholder control. This implies that a broad analysis be carried out on possible key powers of shareholders (such as their role in the nomination and dismissal of directors), the specific effects of large blocks of shareholders in one company and on the limits of the one share one vote concept. It considered the facilitation of the cross-border exercise of shareholders' voting rights as a crucial condition for rendering control by shareholders effective. For further information review the EU Commissions consultation paper on the enhancement of shareholders' rights. (IP/05/561).

Risk management in the EU: The aim is to ensure that companies manage their risks efficiently and safeguard shareholders' investments. The increase in disclosure requirements and the requirement to establish audit committees are introduced by the modifications of the 4th , 7th and the 8th Company Law Directives. The absence of major financial scandals in the coming years will enable the legislative bodies to capture careful examination of the lessons learnt from experience and how to strike the balance between the benefits of additional requirements and the costs and burdens that would result from these for EU companies.

Source: European Corporate Governance Forum