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BEC Corporate Governance > Corp Governance > Flashcards

Corp Governance Flashcards

0
Q

What is included in articles of incorporation?

A
  1. Proposed name of corporation and initial address
  2. Purpose of the corporation
  3. The powers of the corporation
  4. The name of the registered agent of the corporation
  5. Name and address of each incorporator
  6. Number of authorized shares of stock and types of stock
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1
Q

What is the role if the board of directors?

A
  1. Safeguard the company’s assets
  2. Maximize shareholder return
    Examples include:
    a. Determining the mission of the corporation
    b. Selection and removal of CEO
    c. Amending the bylaws, unless this is a responsibility of the shareholders
    d. Determining management compensation
    e. Decisions regarding declaration and payment of dividends
    f. Decisions regarding major acquisitions and capital structure
    g. Advising management
    h. Providing governance oversight, with the assistance of interns and external auditors
    i. Ensuring accurate financial reporting by the corporation
    j. Risk management
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2
Q

What is included in the by laws?

A
  1. How the directors and/or officers are elected/selected
  2. How meetings are conducted
  3. The types and duties of officers
  4. The required meetings
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3
Q

What is the definition of enterprise risk management (ERM)?

A

ERM is a process, effected by an entity’s board of directors, and other personnel, applied in strategy setting and across enterprise, designed to identify potential events that may affect the entity, and manage risk to be ditching its risk appetite, to provide reasonable assurance regarding the achievement if risk objectives.

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4
Q

What are the four themes of enterprise risk management?

A
  1. Aligning risk appetite and strategy
  2. Enhancing risk response decisions
  3. Reducing operational surprises and losses
  4. Identifying and managing multiple and cross-enterprise risks
  5. Seizing opportunities
  6. Improving deployment of capital
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5
Q

What are the four objectives of enterprise objectives defined by ERM?

A

SORC

  1. Strategic - high-level goals to achieve the mission
  2. Operations-achievement of objectives through the effective and efficient use of resources
  3. Reporting -achievement of reliable and consistent reporting
  4. Compliance-ensuring compliance with laws and regulations
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6
Q

What are the components of enterprise risk management?

A 
IS EAR AIM
Internal environment (CRIME)
Setting objectives (SORC)
Event identification (CRIME)
Assessment of risk (CRIME)
Risk response (CRIME)
control Activities (CRIME)
Information & communication (CRIME)
Monitoring (CRIME)
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7
Q

What are the eight key elements of the internal environment component of WEM?

A

EBOCA + HR

  1. commitment to Ethical values and integrity
  2. Board oversight
  3. Organizational structure
  4. Commitment to Competence
  5. Accountability
  6. Risk management philosophy (HR)
  7. Human Resource standards (HR)
  8. Risk appetite (HR)
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8
Q

What are the key elements of objective setting?

A

SORC

Strategic objectives
Operations objectives
Reporting objectives
Compliance objectives

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9
Q

What are the key elements of risk assessment?

A
  1. Inherent and residual risk
  2. Establishing likelihood and impact
  3. Data sources
  4. Assessment techniques
  5. Event relationships
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10
Q

What is inherent risk?

A

The risk to am organization that exists if management takes NO action to change the likelihood or impact of an adverse event

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11
Q

What is residual risk?

A

The risk to an organization that exists AFTER management takes action to mitigate the adverse impact of the event

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12
Q

What are the assessment techniques available?

A
  1. Benchmarking
  2. Probabilistic models
  3. Non-probabilistic models
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13
Q

What are the four possible responses to risk for management?

A
  1. Avoidance
  2. Reduction
  3. Sharing
  4. Acceptance
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14
Q

What is avoidance to risk?

A

Management may elect to avoid or terminate risk.

Example would be to discontinue a product that is not performing well instead of taking steps to improve performance.

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15
Q

What is reduction of risk?

A

Management may elect to reduce or mitigate risk.

Example is investing in additional inventory to prevent stockouts.

16
Q

What us sharing of risk?

A

Management may reduce risk by sharing risk.

Example: insurance

17
Q

What is acceptance of risk?

A

The company may take no action.

Example: a company with a product in high demand does not increase production.

18
Q

What are two event categories and components of each?

A
  1. External
    a. Economic
    b. Natural environment
    c. Political
    d. Social
    e. Technological
  2. Internal
    a. Infrastructure
    b. Personnel
    c. Process
    d. Technology
19
Q

What are the principles within the component if Control environment?

A
  1. Commitment to ethical values and integrity
  2. Board independence and oversight
  3. Organizational structure
  4. Commitment to competence
  5. Accountability
20
Q

What are the principles contained in the component of Risk assessment?

A
  1. Specify objectives
  2. Identify and analyze risks
  3. Consider the potential for fraud
  4. Identify and assess changes
21
Q

What are the principles contained the component if Information and communication?

A
  1. Obtain and use information
  2. Internally communicate information
  3. Communicate with external parties
22
Q

What are the principles contained in the component of Monitoring activities?

A
  1. Ongoing and/or separate evaluations

2. Communication of deficiencies

23
Q

What are the principles within the component of Existing control activities?

A
  1. Select and develop control activities
  2. Select and develop technology controls
  3. Deploy through policies and procedures
24
Q

List the control activities used to effect management’s response to risk.

A
  1. Integration with risk response
  2. Types of control activities
  3. Controls over information systems
  4. Entity specific controls
25
Q

What are the types of control activities?

A
  1. Top-level reviews
  2. Direct function or activity management
  3. Information processing
  4. Physical controls
  5. Performance indicators
  6. Segregation of duties
26
Q

What are the sequential steps of change control process?

A
  1. Risk assessment is performed.
  2. Application controls are considered.
  3. Security requirements are considered.
  4. Data conversion requirements are developed.
  5. Testing is performed.
  6. Implementation is completed.
  7. Post implementation reviews are performed.
27
Q

What is the formula for Total factor productivity ratios (TFP)?

A

Output/total costs

Quantity of output / material and labor costs

28
Q

What is the formula for Partial productivity ratios (PPRs)?

A

Output/specific quantity

Quantity of output/material or labor quantity

29
Q

What are three techniques to find and analyze problems?

A
  1. Control charts - used in statistical quality control; determine zero defects
    Goal post performance
  2. Pareto diagram -histogram; frequency diagram
  3. Cause-and-effect (fishbone) diagram - trace source if problems
30
Q

What are the characteristics of effective performance measures?

A
  1. Relate to the goals of the organization
  2. Balance long- and short-term issues
  3. Reflect management of key activities, sometimes referred to as critical success factors in the balanced scorecard
  4. Are under the control or influence of the employee
  5. Are understood by the employee
  6. Are used to both evaluate and reward the employee or otherwise constructively influence behavior
  7. Are objectively and easily measured
  8. Are used consistently

BEC Corporate Governance (6 decks)

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