Corporate Compliance Report

Corporate Compliance Report

Nancy Caldwell

January 15, 2007

MBA 560 Enterprise Risk

When a company is facing issues dealing with corporate compliance, implementing a system to deal with the compliance and corporate governance issues is the best opportunity for the company. The company should develop a process to analyze alternatives and integrate the appropriate opportunity into the company's system. The company will begin by developing an internal control and corporate governance system. This process includes defining and implementing compliance steps and process. Next, the company will recommend a preventative solution that incorporates risk mitigation. This part of the process includes utilizing systems and organizations for compliance techniques. Finally, the company will utilize a problem solving approach to determine which solutions to implement into the compliance effort. The company will begin to implement its enterprise risk management system by developing an appropriate internal control and corporate governance system.

Develop Internal Control and Corporate Governance System

For a company to ensure complete corporate compliance, it is imperative that there is a developed internal control and corporate governance system. To develop a functioning internal control and corporate governance system, strategic planning and development is required. This strategic planning includes developing preventive, detective, and corrective controls to cover all of the aspects of the corporate compliance.

The initial step a company must take while developing an internal control and corporate governance system is developing preventive controls to avert a possible compliance violation. Preventive controls include developing guidelines and responsibilities to conduct reviews of ethics policies, conflict-of-interest procedures, and updates in corporate compliance procedures that will protect and position the company to prevent a possible compliance violation. An associate of the company's preventative control measures include comparing the organization's current conflict-of-interest policy with industry regulations regularly, reviewing recent government filings, and evaluating the company's current compliance program. If these control steps are proactively taken regularly in the organization, the company will have taken preventative steps to avoid a potential future compliance violation. (Maltz, 2003)

The second control procedure that a company must take to ensure corporate compliance is a detective control. This control will enable the company to detect if a possible compliance violation occurred or is in future risk to occur. The company will assign an associate or group of associates the responsibilities of taking detective control measures in regards to compliance regulations. These control responsibilities include reporting promptly and addressing objectively any compliance violations, ensuring that a prescribed observation program is in place to make certain the organization adheres to its code of ethics and compliance regulations, and formally reviewing and aligning company compliances with government regulatory compliances. By having detective compliance controls in place, companies can ensure that their corporate governance systems are aligned with government regulatory standards and recognize potential risks for violations. (Maltz, 2003)

The final control in a company's corporate governance system is applying corrective compliance methods. Corrective controls will allow the company to repair any possible compliance violations or risks that occur. The company will be responsible for taking the necessary controls to correct compliance risk within the corporate governance system. The corrective controls that should be applied in include understanding all of the provisions of government compliance acts and regulations, scheduling the corrective measures in a timely manner to alleviate the risks, recognizing the implementation of the corrective measures, and reporting the risk and corrective implementations to the appropriate parties. Through applying corrective controls, companies will maintain compliance and have an effective corporate governance system. (Martin, 2004)

Developing and implementing internal controls through a corporate governance system will allow a company to reduce compliance risks and adhere to government regulations. Through strategic planning and development a working corporate governance system will occur. Developing preventive, detective, and corrective controls are the essential aspects of the corporate governance system. By using these controls, companies will develop preventative solutions that incorporate risk mitigation.

Preventative Solutions that Incorporate Risk Mitigation

To have an effective corporate governance system, companies must develop preventative solutions that will incorporate risk mitigation. These solutions include incorporating enterprise risk management (ERM) and governance framework, a Committee of Sponsoring Organizations' (COSO) new ERM framework, and aligning governance with ERM. Developing and applying these preventative solutions that incorporate risk management will ensure successful corporate governance and risk mitigation.

Enterprise Risk Management and Governance Framework

ERM is a structured and disciplined approach to help management understand and manage uncertainties. It encompasses all business risks using an integrated and holistic approach. The objective of ERM is to create, protect, and enhance shareholder value by managing the uncertainties surrounding the achievement of the organization's objectives. Corporate governance is a process designed to provide direction, authority, and oversight of management for the company's stakeholders. (Sobel & Reding, 2004)

ERM and governance framework consists of four components: corporate stakeholders, the governance safeguard provided by the board of directors, risk management, and assurance. The responsibilities of these corporate components are an essential aspect of the governance. The boards of directors, senior management, internal and external auditors are the basis of the foundation on which corporate governance must be defined in a company. There are also members of the company referred to as "risk owners", the people responsible and accountable for managing specific risks. "Risk owner" positions include the