Tighter corporate governance standards

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Description:

Procedures driven to push firms to implement more robust risk management systems, like Sarbanes-Oxley Act of 2002 or BASEL II, and moving further along in the implementation of corporate governance risk management are required.Enablers: Sarbanes Oxley is driving companies to more closely define how they run their organizations.

Enablers:

-2009 Global recession caused by crises and scandals like the “credit crush” and Societe Generale trade fraud that cost the Bank 5 bn Euros. -Need for both governmental and regulatory control mechanisms to prevent cases fraudulent and greedy behaviors. -Need for effective internal controls and segregation of decision rights. -Auditing firms that can earn billable hours -Provides information that helps markets to evaluate the company’s performance and management actions.

Inhibitors:

Laws like Sarbanes-Oxley Act of 2002 impacts the operation of IT systems, and particularly how companies use the Internet. To make it worst some parts of Sarbanes Oxley – such as the phrase requiring companies to immediately report to investors any material events – are vague. (Material event has not been defined). -Cost of mechanisms to put these regulatory laws working transparently and trustfully. -If not carefully adapted regulations can reduce the productivity and innovation of enterprises

Paradigms:

-Reduce risk driven behaviours driven by high bonus but that business and even the total financial system in risk - Recognition that ‘rogue-traders’ are a global phenomenon which can only be prevented by a balanced organizational architecture with strong control mechanisms and transparent and controlled decision rights. -Laws like Sarbanes Oxley are driving companies to more closely define how they run their organizations -Increased debate regarding the relative merits of self-regulation versus government regulation as mechanisms to control unethical conduct. The solution will pass by ways of building and increasing trust, based on ethics and by adopting clear and simple rules for the sector (policies and standards must be unmistakably clear). Strengthen external checks-and-balances by consumers, competition authorities, courts and parliaments.

Experts:

tax auditors, finance experts, and management consultants.

Timing:

September 2009 Lehman Brother bankruptcy and consequence collapse of the world financial system
Oxley Act Act implemented in 2002
Basel II June 2004

Web resources:

Sarbanes Oxley Official Site, Gartner, IBM Business Consulting Services Institute for Business Value, Deloitte