The document discusses managing governance, risk, and compliance (GRC) in an integrated way to avoid redundant efforts or gaps in oversight. It notes that managing risks in isolation across different groups can result in duplicate work monitoring the same risks or failures to monitor some risks. The document advocates coordinating GRC disciplines to improve efficiency and reduce risks. It also discusses recent initiatives by the Securities and Exchange Board of India to improve corporate governance practices in listed companies.

1. Governance, Risk Management &
Compliance (GRC)
G.P. Madaan
G.P. Madaan
Founder
Founder
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2. Managing Governance, Risk
Management and Compliance (GRC)
Managing risks in isolation as opposed to doing so through
Managing risks in isolation as opposed to doing so through
coordination of the various GRC disciplines often results in
coordination of the various GRC disciplines often results in
redundant efforts, in which the same risk is being managed by
redundant efforts, in which the same risk is being managed by
multiple groups, or in gaps in risk coverage because no group
multiple groups, or in gaps in risk coverage because no group
is monitoring certain areas.
is monitoring certain areas.
Through the lack of coordination, there may be risks that no
Through the lack of coordination, there may be risks that no
one is monitoring. That lack of coordination increases the cost
one is monitoring. That lack of coordination increases the cost
of risk management while also increasing the company's risk
of risk management while also increasing the company's risk
exposure.
exposure.
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3. Factors Influencing Governance
in PSUs
 Autonomy and Accountability
 Autonomy and Accountability
 Management and Control
 Management and Control
 Monitoring Ministry and Act
 Monitoring Ministry and Act
 Ethics, Morality and Qualifications of Political Decision
 Ethics, Morality and Qualifications of Political Decision
Makers
Makers
 Nexus between Politicians, Bureaucrats and Top
 Nexus between Politicians, Bureaucrats and Top
Management
Management
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4. Recent Cases evidencing
Recent Cases evidencing
the Need of Corporate
the Need of Corporate
Governance Framework
Governance Framework
in Companies
in Companies
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5. •• The case of PSU oil Companies not being allowed to increase the
The case of PSU oil Companies not being allowed to increase the
price of Oil Products in line with the changes in International Crude
price of Oil Products in line with the changes in International Crude
prices is an example of how the dominant shareholder, uses its
prices is an example of how the dominant shareholder, uses its
dominance to force decisions that are not always linked to business
dominance to force decisions that are not always linked to business
interests.
interests.
••The Ongoing Problem in Air India.
The Ongoing Problem in Air India.
••Case of Reebok India’s MD-alleged fraud of several Crores.
Case of Reebok India’s MD-alleged fraud of several Crores.
•• The unholy alliances of health care providers and Pharma
The unholy alliances of health care providers and Pharma
companies were recently highlighted by the popular TV Program
companies were recently highlighted by the popular TV Program
Satyameva Jayate. It got brickbats from doctors and bouquets from
Satyameva Jayate. It got brickbats from doctors and bouquets from
consumers, although pharma companies kept mum.
consumers, although pharma companies kept mum.
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6. Key Issues in Corporate
Governance Reforms in India
••Managing the Dominant Shareholder(s) and Promoter(s).
Managing the Dominant Shareholder(s) and Promoter(s).
•• Lack of Incentives for Companies to implement Corporate
Lack of Incentives for Companies to implement Corporate
Governance reform measures.
Governance reform measures.
••Underdeveloped external Monitoring Systems.
Underdeveloped external Monitoring Systems.
••Shortage of real Independent Directors.
Shortage of real Independent Directors.
•• Weak regulatory oversight including multiplicity of regulators
Weak regulatory oversight including multiplicity of regulators
(MCA, SEBI, RBI, ICAI, CAG etc. etc….)
(MCA, SEBI, RBI, ICAI, CAG etc. etc….)
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7. How Effectiveness of Corporate
How Effectiveness of Corporate
Governance Framework Can be
Governance Framework Can be
checked?
checked?
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8. Good Corporate Governance
Entails
•• Proper Succession planning to Identify People internally to fill key
Proper Succession planning to Identify People internally to fill key
business leadership positions in the Company.
business leadership positions in the Company.
••Effective Board that adds value to the TOP management.
Effective Board that adds value to the TOP management.
•• Roles for the Board and the Top Management should be clearly
Roles for the Board and the Top Management should be clearly
defined.
defined.
••Constructive Board and Audit Committee Meetings.
Constructive Board and Audit Committee Meetings.
••Robust Strategic Planning to Meet the challenges posed by dynamic
Robust Strategic Planning to Meet the challenges posed by dynamic
Business environment.
Business environment.
••Focus on Risk Management.
Focus on Risk Management.
••Continuous monitoring of Business Performance.
Continuous monitoring of Business Performance.
•• Management assurance –– management controls, internal audit and
Management assurance management controls, internal audit and
external audit.
external audit.
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9. Need for Good Governance
in future
•• Growing public pressure by a young middle class.
Growing public pressure by a young middle class.
•• Improved access to information.
Improved access to information.
•• Splendid court actions.
Splendid court actions.
•• Sensational audit exposes and enforcement is
Sensational audit exposes and enforcement is
leading to greater accountability of market players
leading to greater accountability of market players
and the administration.
and the administration.
•• It is quite unlikely that cases involving delinquent
It is quite unlikely that cases involving delinquent
firms would escape attention anymore.
firms would escape attention anymore.
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10. Companies Bill, 2011 and
Corporate Governance
The Bill Proposes structural and fundamental changes in the way
The Bill Proposes structural and fundamental changes in the way
companies would be Governed in India and highlights the role and
companies would be Governed in India and highlights the role and
importance of good governance in organizations.
importance of good governance in organizations.
For Instance for the First time in Company Law, the Concept of
For Instance for the First time in Company Law, the Concept of
Independent Director is introduced. Further, it also expressly
Independent Director is introduced. Further, it also expressly
disallows Independent Directors from obtaining Stock Options to
disallows Independent Directors from obtaining Stock Options to
protect their Independence.
protect their Independence.
The Bill also prescribes for Enhanced accountability on the part of
The Bill also prescribes for Enhanced accountability on the part of
Companies like Additional Disclosure Norms, Audit Accountability,
Companies like Additional Disclosure Norms, Audit Accountability,
Protection of Minority Shareholders, Investor Protection.
Protection of Minority Shareholders, Investor Protection.
Relaxed Govt. Approvals, wider powers to the BOD.
Relaxed Govt. Approvals, wider powers to the BOD.
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11. NVGs on Social, Environmental and
Economic Responsibilities of Business
Voluntary Guidelines on:
Voluntary Guidelines on:
••CorporateGovernance
Corporate Governance
••CSR
CSR
••BusinessResponsibilities
Business Responsibilities
••Philanthropyand/or CSR- Giving to Society
Philanthropy and/or CSR- Giving to Society
Business Responsibility- Methods of doing Business, to discharge Social,
Business Responsibility- Methods of doing Business, to discharge Social,
Economic and Environmental Responsibilities of Business. The Commitment
Economic and Environmental Responsibilities of Business. The Commitment
to come from the Top Management.
to come from the Top Management.
NVGs need to be incorporated in Business strategies of firms, and the
NVGs need to be incorporated in Business strategies of firms, and the
government should ensure that the concepts are well understood and
government should ensure that the concepts are well understood and
applied. Only then can business responsibility norms lead to better Corporate
applied. Only then can business responsibility norms lead to better Corporate
Governance, and Corporate Citizenship in our country.
Governance, and Corporate Citizenship in our country.
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12. Recent Governance
Initiatives by SEBI
(26 th June,2012)
th
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13. Platform for E-Voting by Shareholders
of Listed Entities
••ItIt has been decided to make electronic voting mandatory for
has been decided to make electronic voting mandatory for
all listed companies in respect of those businesses to be
all listed companies in respect of those businesses to be
transacted through postal ballot.
transacted through postal ballot.
••The same would be implemented in aaphased manner.
The same would be implemented in phased manner.
••To begin with, ititwould be mandated for top 500 listed
To begin with, would be mandated for top 500 listed
companies at BSE and NSE based on market capitalization.
companies at BSE and NSE based on market capitalization.
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14. Manner of dealing with Audit Reports
filed by listed entities
Mechanism to process qualified annual audit reports filed by the listed entities with
Mechanism to process qualified annual audit reports filed by the listed entities with
stock exchanges and Annual Audit Reports where accounting irregularities have been
stock exchanges and Annual Audit Reports where accounting irregularities have been
pointed out by Financial Reporting Review Board of the ICAI. ItIt has been, inter-alia,
pointed out by Financial Reporting Review Board of the ICAI. has been, inter-alia,
decided that:
decided that:
SEBI would create Qualified Audit Report review Committee (QARC) represented by
SEBI would create Qualified Audit Report review Committee (QARC) represented by
ICAI, Stock Exchanges, etc. to guide SEBI in processing audit reports where auditors
ICAI, Stock Exchanges, etc. to guide SEBI in processing audit reports where auditors
have given qualified audit reports.
have given qualified audit reports.
After preliminary scrutiny and based on materiality, exchanges would refer these
After preliminary scrutiny and based on materiality, exchanges would refer these
reports to SEBI/QARC.
reports to SEBI/QARC.
Cases wherein the qualifications are significant and explanation given by Company is
Cases wherein the qualifications are significant and explanation given by Company is
unsatisfactory would be referred to the ICAI-FRRB. IfIf ICAI-FRRB opines that the
unsatisfactory would be referred to the ICAI-FRRB. ICAI-FRRB opines that the
qualification is justified, SEBI may mandate aarestatement of the accounts of the entity
qualification is justified, SEBI may mandate restatement of the accounts of the entity
and require the entity to inform the same to the shareholders by making the
and require the entity to inform the same to the shareholders by making the
announcement to stock exchanges.
announcement to stock exchanges.
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15. THANK YOU
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