Corporate Governance, Business Ethics, Risk Management and Internal Control

Vocabulary flashcards for key terms about corporate governance, business ethics, risk management and internal control.

Governance

A process whereby elements in society wield power, authority, and influence and enact policies and decisions concerning public life and social upliftment.

Transparency

Decisions taken and their enforcement are done in a manner that follows rules and regulations. Information is freely available and directly accessible.

Responsiveness

Institutions and processes try to serve the needs of all stakeholders within a reasonable timeframe.

Effectiveness & Efficiency

Processes and Institutions produce results that meet the needs of society while making the best use of resources at their disposal.

Accountability

A key requirement of good governance. Not only governmental institutions but also the private sector and civil society organizations must be accountable to the public.

Corporate Governance

The system of rules, practices and processes by which business corporations are directed and controlled.

Fair and Equitable Treatment of Shareholders

A governance structure that ensures equitable and fair treatment of all shareholders of the company.

Self-Assessment

A governance structure that enables firms to assess their behavior and actions before they are scrutinized by regulatory agencies.

Increase Shareholders' Wealth

A governance structure's main objective is to protect the long-term interests of the shareholders.

Transparency and Full Disclosure

Ensuring a higher degree of transparency in an organization by encouraging full disclosure of transactions in the company accounts.

Rule of Law

Fair legal frameworks that are enforced impartially.

Board of Directors

The governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and controls its properties.

Management

A group of executives given the authority by the Board of Directors to implement the policies it has laid down in the conduct of the business of the corporation.

Independent director

A person who is independent of management and the controlling shareholder, and is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director.

Corporate Governance

The system of stewardship and control to guide organizations in fulfilling their long-term economic, moral, legal, and social obligations toward their stakeholders.

Overall Operations

Comprises setting the corporation's vision, mission, values and ethical standards; delegating an appropriate level of authority to management; demonstrating leadership; assuming responsibility for the business relationship with CEO.

Performance

Ensuring the organization's long term viability and enhancing the financial position; formulating and overseeing implementation of corporate strategy; approving the plan, budget and corporate policies.

Compliance/Legal Conformance

Understanding and protecting the organization's financial position; requiring and monitoring legal and regulatory compliance including compliance with accounting standards; approving annual financial reports, annual reports and other public documents / sensitive reports.

Compliance Officer

A member of the company's management team in charge of the' compliance function. He/she is primarily liable to the corporation and its shareholders, and not to the Chairman or President of the company.

Related Party

Related to the company's subsidiaries, as well as affiliates and any party, that the company exerts direct or indirect control over or that exerts direct or indirect control over the company; the company's directors; officers; shareholders and related interests.

Related Party Transactions

A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Ethics

Principles or values that govern the actions and decisions of an individual or group.

Integrity

Being principled, honorable, upright, courageous and acting on convictions.

Honesty

Being truthful, sincere, forthright, straightforward, frank, candid.

Trustworthiness and Promise Keeping

Being worthy of trust, keeping promises, and fulfilling commitments.

Loyalty (Fidelity) and Confidentiality

Being faithful and loyal to family, friends, employers, client and country.

Fairness and Openness

Being fair and open-minded, be willing to admit error.

Caring for Others

Being caring, kind, and compassionate.

Respect for Others

Demonstrating respect for human dignity, privacy, and the right to self-determination of all people

Responsible Citizenship

Obeying just laws; if all law unjust, openly protest it; exercise all democratic rights and privileged responsibly by participation.

Pursuit of Excellence

Pursuing excellence in all matters.

Accountability

Being accountable, accept responsibility for decisions

Business Ethics

Standards of moral conduct, behavior and judgment in business.

Ethical Dilemma

When a person faces in which a decision must be made about the appropriate behavior.

Corruption

The abuse of private and public office for personal gain. It includes acts of bribery, embezzlement, nepotism, kickbacks and state capture.

Direct Misrepresentation

Actively misrepresenting something about the product or customers including: deceptive packaging, misbranding or mislabeling, false or misleading advertising, adulteration, weight understatement measurement understatement or short numbering.

Indirect Misrepresentation

Omitting adverse or unfavorable information about the product or service including: caveat emptor; deliberate withholding of information; or passive deception.

Persuasion

The process of appealing to the emotions of a prospective customer and urging him to buy an item of merchandise he needs.

Plain Graft

Help themselves to company earnings or voting for themselves huge per diems, large salaries, big bonuses that do not commensurate to the value of their services.

Interlocking Directorship

Practiced by a person who holds directorial positions in two or more corporations that do business with each other. This practice may involve conflict of interest and can result to disloyal selling.

Insider trading

Occurs when a broker or another person with access to confidential information uses that information to trade in shares and securities of a corporation, thus giving him an unfair advantage over the other purchasers of these securities.

Corruption

An improbity or decay in the decision-making process in which a decision-maker consents to deviate or demands deviation from the criterion which should rule his or her decision-making, in exchange for a reward or for the promise or expectation of a reward.

Integrity Initiative Campaign

A movement that seeks to institutionalize integrity standards among various sectors of society to diminish, if not fully eradicating, the vicious cycle of corruption.

Code of Conduct

A formal expression of the organization's values and ethics.

Risk management

A systematic approach in identifying, analyzing and controlling areas or events with a potential for causing unwanted change.

Business risk

The uncertainty about the rate of return caused by the nature of the business.

Default risk

Related to the probability that some or all of the initial investment will not be returned.

Risk Management

A company's corporate governance framework.

Financial risk

The firm's capital structure or sources of financing determine this.

Interest rate risk

Fluctuations in interest rates will cause the value of an investment to fluctuate also.

Liquidity risk

Associated with the uncertainty created by the inability to sell the investment quickly for cash.

Management risk

Decisions made by a firm's management and board of directors materially affect the risk faced by investors.

Internal control

The process designed and effected by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of the entity's objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations.

Control Environment

The overall attitude, awareness and actions of directors and management regarding the internal control system and its importance in the entity.

Risk Assessment

The identification, analysis, and management of risks pertaining to the preparation of financial statements.

Information System

The procedures and records designed and established to initiate, record, process, and report entity transactions.

Control activities

The policies and procedures that help ensure that management directives are carried out

Monitoring

The process that an entity uses to assess the quality of internal control over time.

Fraud

Intentional act involving the use of deception that results in a material misstatement of the financial statements.

Asset misappropriation

Occurs when a perpetrator steals or misuses an organization's assets.

Fraudulent Financial Reporting

The intentional manipulation of reported financial results to misstate the economic condition of the organization.

Fraud Triangle

Characterizes incentives, opportunities and rationalizations that enable fraud to exist.

Skimming

Withholding cash receipts without recording them.

Lapping

Used to conceal the fact that cash has been abstracted; the shortage in one customer's account is covered with a subsequent payment made by another customer.

Kiting

Counting the cash twice by using the float in the banking system.