Unit 8 - Corporate Governance, creating a Compliance culture & benefits of Compliance

Unit 8 - Corporate Governance, creating a Compliance culture & benefits of Compliance

1. CG & effective compliance - Common themes

   • TOR for committees & levels of responsibilities
   • Effective systems & controls
   • Clearly documented policies and procedures
   • Senior mgmt responsibility
   • Effective flow of MI

2. The credit crisis exposed short comings in the Governance and risk mgmt of firms

   • The link between Compliance, corporate Governance , ethics and corporate social responsibility is clear in light of the recent economic crisis and fundermental loses of consumer confidence. The aim for a financial services firm must be to go beyond purely cosmetic compliant exercises
   • Problems were one of ethics, culture, greed, morality

3. KEY COMPONENTS OF GOOD CORP GOVN STRUCTURE

   • RESPONSIBILITY & ACCOUNTABILITY
     • Clearly defined for decision making
       • adhoc system for urgent decisions
     • BOARD accountable
   • TRANSPARENCY
     • CG structure and TORs of committees should be communicated and minutes taken and made available as required
       • First agenda item to review previous actions
   • RELATIONSHIPS
     • How each committee within the framework interacts and how interested stakeholders are represented within this
   • STAKEHOLDERS
     • clearly identified and their interested represented
   • PROCESSES
     • All processes within the Corp Govn framework must be clearly documented , version controlled and kept up to dat
   • STRUCTURE
     • Access to appropriate committees and the Board dependent upon the needs of the stakeholder
   • Education & training
     • Everyone is responsible for Compliance

4. DEFINITION: CORPORATE GOVERNANCE IS THE SYSTEM BY WHICH FIRMS ARE DIRECTED AND CONTROLLED

5. Probably the most important system within a firm to achieve long term success . Getting it right can give sustainable competitive advantage.

   • Good sound corporate governance leads to a better and well run company
     • effective compliance envirnoment= the introduction and maintenance of systems and procedures * nurturing of a healthy internal attitude towards the benefits of compliance throughout the firm as a whole
       • Demonstrating the benefits is hard as they can be intangible.It is therefore necessary for compliance professionals to be able to promote to benefits of compliance at all levels within a business
         • For example, where the regulator decides not to take further action following the notification of a breach (as a result of the good relationship and high degree of confidence that the firm will put things right) - or negative ones, such as highlighting where other firms have fallen foul of the regulations and the consequences of this
     • CMP dept is now often given the role of managing corp govn framework
       • CMP can demonstrate how it can add value, as it will have greater access to decision making process. CMP function has a very significant role
     • Corp Governance is fundamentally 'DECISION MAKING'
       • 4R's - RIGHT INFO - RIGHT PEOPLE - RIGHT TIME _ RIGHT DECISION
         • All of these will improve the probability of making the right decision
           • Decisions made in committees/board should aid in achievement of firms stratgic ojectives and corp values.
       • RISK MGMT

6. Key sources reference/regulation

   • UK
     • UK Corporate Governance codes published by Financial reporting council (FRC) 2003 updated 2012
     • Walker Review 2009 - credit crunch
       • Has influenced UK corp govern of financial services industry
         • NEDs (now approved persons) to challenge board which had not been happening. Banks were running themselves.
     • Principle on Corp Governance 2004 being reviewed by OECD
     • FCA & PRA SYSC section of handbook. applicable to all regulated firms.
     • cadbury report 1992
   • Europe/US
     • Sabines Oxley ACT 2002 - Enron