Action may not always bring happiness...but there is no happiness without action. (Benjamin Disraeli)
Pic 01: Digging for black gold. What risks shareholders face and how you appease them?
Pic 02 : Boys will be boys, forever like to play with toys
Pic 03: Ultimate risk of Oil & Gas? (Picture of USA T-82 tanks in Kuwait)Dear P1 IPS,
A very good question of reporting and communicating Board's risk management's actions. This is a 'virgin' topic, as it neither appeared in Pilot paper or was tested previous sittings. On this, becomes a high risk topic.
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Please attempt it as this is a practical case study involving Oil & Gas insdustry. As usual answers will be given in our next class.
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Please don't work hard but WORK HARDER!
Always worried for you lecturer, Marcus Ong
Practice Question : Information, Communication And Monitoring
A family owned company, Hasnan Berhad, recently had successfully listed their business on the London Stock Exchange. The Board consists of 6 members of which 4 are iNEDs with the father chairing while 2 Executive Directors are capable and talented daughters who have deep experience in business of fashion magazines. The 2 EDs were essentially given powers to operate their respective subsidiaries and their performance were reported by Archie, Chief Accountant, who is the adopted son of one of the EDs, Madonna.
At the next Board meeting, a first since the listing in LSE had voiced the following:
i. “Every firm is concerned with risk management. We trust the 2 EDs but we must be in the loop as we have to be accountable to shareholders. They need to know what we are doing with their money,” said the Managing Director, Miss Anna.
ii. “We are unsure on what to report contents should be in the shareholders’ Annual Report pertaining to risk management,” said the Chief Accountant
Required:
a) In view of point (i) above, explain what should be done that should primarily involve the NEDs on Board? (10 marks)
A family owned company, Hasnan Berhad, recently had successfully listed their business on the London Stock Exchange. The Board consists of 6 members of which 4 are iNEDs with the father chairing while 2 Executive Directors are capable and talented daughters who have deep experience in business of fashion magazines. The 2 EDs were essentially given powers to operate their respective subsidiaries and their performance were reported by Archie, Chief Accountant, who is the adopted son of one of the EDs, Madonna.
At the next Board meeting, a first since the listing in LSE had voiced the following:
i. “Every firm is concerned with risk management. We trust the 2 EDs but we must be in the loop as we have to be accountable to shareholders. They need to know what we are doing with their money,” said the Managing Director, Miss Anna.
ii. “We are unsure on what to report contents should be in the shareholders’ Annual Report pertaining to risk management,” said the Chief Accountant
Required:
a) In view of point (i) above, explain what should be done that should primarily involve the NEDs on Board? (10 marks)
b) In view of point (ii) above, state how it could set up appropriate monitoring risk systems giving emphasis on control environment & procedures, communication systems and evaluation risks systems. (10 marks)
c) Based on Turnbull’s report, advise the Board on reporting principles that should contain in the annual report. Hansan Bhd principal business is a major supplier to Exxon Mobil Limited, oil and gas industry. [5 marks]
1 comment:
Dear candidates,
A 'virgin' topic, as it neither appeared in Pilot paper or was tested previous sittings. On this, it becomes a high risk topic.
Marcus
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