Corporate Governance,Risk Management and Internal Audit: A Case Study

To begin with, it would be appropriate to note definitions of the two terms, ‘Corporate governance’ and ‘Risk management’. Organization for Economic Cooperation & Development defines ‘Corporate Governance’ as a ‘set of relationship between company's management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interest of the company and its shareholders/stakeholders and should facilitate effective monitoring, thereby encouraging firms to use resources more effectively. ‘Risk management’, on the other hand, is defined as the identification, analysis and economic control of all such risks that may threaten assets, resources, or earning capacity of a firm/company.

Risk management is in reality ‘an all business activities embracing’ tool and with a high standard of risk management, it would naturally be possible to ensure high standard of corporate governance. The close relationship between corporate governance and risk management can thus be easily understood.