Corporate Governance

Corporate Governance and Global Financial Crises

Corporate Governance and Global Financial Crises

Introduction

Failure of corporate governance was recognized as one of the key factors for the financial meltdown after. An excess of credit along with poor corporate governance the banking industry can generate failures carry a risk systemic. The recent turbulence in financial markets occurred since summer 2007 has their roots in the behavior strongly speculative second-tier banks, in a context of liberalized finance. The crisis has spread to financial markets world and is a feared economic recession. Despite a strong regulation of financial markets, the mortgage crisis to risk revealed abusive practices of some institutions and opacity of financial engineering operations which, by a strong dispersion of risk and a contagion effect, the financial sphere.

Discussion

Although the economically advanced world had developed mechanisms to attempt to assess risk properly and to constrain excessive reliance upon high-risk business strategies, those mechanisms mostly failed because of poor implementation of systems that had been inadequately designed in the ?rst place. Since the initiation of proper approaches to risk management, as well as oversight of the process, are usually perceived as the responsibility of boards of directors.

Among the many market weaknesses highlighted by the global financial crisis, the widespread failures of corporate governance and risk management were identified by official inquiries as being critical. As a result, Companies have responded, proposing long overdue principles of good corporate governance, in particular tightening up on the roles and responsibilities of boards of directors. Strategic risk is arguably, because of the most especially systemically important banks.

Risk

The term risk is generally used for situations involving uncertainty, the sense that the range of possible results for a particular action is somewhat significant extent. Experts say it is an event or action that affects the ability of the company to achieve its objectives or to ensure its sustainability.

Strategic risks

They are associated with deploying a bad strategy, lack of competitive intelligence. Frequently, business difficulties stem from a lack of anticipation of changes in their market.

Operational risks

Operational risk means any failure or deficiency future, within the activities operating the firm, which may impede the achievement of strategic objectives, operational and / or financial organization, or which may potentially generate losses potential.

Operational risk is a more recent, non-financial, which belongs to the sphere of management and management control. It was formalized in banking regulations, each institution to seek to measure and reduce its operational risks, or to assure them, which is theoretically the same, to put equity in the face. There is therefore a strong incentive to control and minimize these risks. This formalization of risk management now extends to non-financial firms, although not specifically regulated. It is the role of risk managers, a feature that is gaining importance within companies, to manage such risks in connection with the operation.

Human risks

Human capital is one component of the business assets. The loss of expertise and knowledge loss are major risks of concern to leaders. Management skills in-house are one of the challenges ...