Corp Governance Flashcards
(31 cards)
What is included in articles of incorporation?
- Proposed name of corporation and initial address
- Purpose of the corporation
- The powers of the corporation
- The name of the registered agent of the corporation
- Name and address of each incorporator
- Number of authorized shares of stock and types of stock
What is the role if the board of directors?
- Safeguard the company’s assets
- Maximize shareholder return
Examples include:
a. Determining the mission of the corporation
b. Selection and removal of CEO
c. Amending the bylaws, unless this is a responsibility of the shareholders
d. Determining management compensation
e. Decisions regarding declaration and payment of dividends
f. Decisions regarding major acquisitions and capital structure
g. Advising management
h. Providing governance oversight, with the assistance of interns and external auditors
i. Ensuring accurate financial reporting by the corporation
j. Risk management
What is included in the by laws?
- How the directors and/or officers are elected/selected
- How meetings are conducted
- The types and duties of officers
- The required meetings
What is the definition of enterprise risk management (ERM)?
ERM is a process, effected by an entity’s board of directors, and other personnel, applied in strategy setting and across enterprise, designed to identify potential events that may affect the entity, and manage risk to be ditching its risk appetite, to provide reasonable assurance regarding the achievement if risk objectives.
What are the four themes of enterprise risk management?
- Aligning risk appetite and strategy
- Enhancing risk response decisions
- Reducing operational surprises and losses
- Identifying and managing multiple and cross-enterprise risks
- Seizing opportunities
- Improving deployment of capital
What are the four objectives of enterprise objectives defined by ERM?
SORC
- Strategic - high-level goals to achieve the mission
- Operations-achievement of objectives through the effective and efficient use of resources
- Reporting -achievement of reliable and consistent reporting
- Compliance-ensuring compliance with laws and regulations
What are the components of enterprise risk management?
IS EAR AIM Internal environment (CRIME) Setting objectives (SORC) Event identification (CRIME) Assessment of risk (CRIME) Risk response (CRIME) control Activities (CRIME) Information & communication (CRIME) Monitoring (CRIME)
What are the eight key elements of the internal environment component of WEM?
EBOCA + HR
- commitment to Ethical values and integrity
- Board oversight
- Organizational structure
- Commitment to Competence
- Accountability
- Risk management philosophy (HR)
- Human Resource standards (HR)
- Risk appetite (HR)
What are the key elements of objective setting?
SORC
Strategic objectives
Operations objectives
Reporting objectives
Compliance objectives
What are the key elements of risk assessment?
- Inherent and residual risk
- Establishing likelihood and impact
- Data sources
- Assessment techniques
- Event relationships
What is inherent risk?
The risk to am organization that exists if management takes NO action to change the likelihood or impact of an adverse event
What is residual risk?
The risk to an organization that exists AFTER management takes action to mitigate the adverse impact of the event
What are the assessment techniques available?
- Benchmarking
- Probabilistic models
- Non-probabilistic models
What are the four possible responses to risk for management?
- Avoidance
- Reduction
- Sharing
- Acceptance
What is avoidance to risk?
Management may elect to avoid or terminate risk.
Example would be to discontinue a product that is not performing well instead of taking steps to improve performance.
What is reduction of risk?
Management may elect to reduce or mitigate risk.
Example is investing in additional inventory to prevent stockouts.
What us sharing of risk?
Management may reduce risk by sharing risk.
Example: insurance
What is acceptance of risk?
The company may take no action.
Example: a company with a product in high demand does not increase production.
What are two event categories and components of each?
- External
a. Economic
b. Natural environment
c. Political
d. Social
e. Technological - Internal
a. Infrastructure
b. Personnel
c. Process
d. Technology
What are the principles within the component if Control environment?
- Commitment to ethical values and integrity
- Board independence and oversight
- Organizational structure
- Commitment to competence
- Accountability
What are the principles contained in the component of Risk assessment?
- Specify objectives
- Identify and analyze risks
- Consider the potential for fraud
- Identify and assess changes
What are the principles contained the component if Information and communication?
- Obtain and use information
- Internally communicate information
- Communicate with external parties
What are the principles contained in the component of Monitoring activities?
- Ongoing and/or separate evaluations
2. Communication of deficiencies
What are the principles within the component of Existing control activities?
- Select and develop control activities
- Select and develop technology controls
- Deploy through policies and procedures
