Financial Risk Manager Part 1

Explanation

Corporate governance is indeed a system of rules, regulations, and processes that guide a company's board of directors in managing the affairs of the company. It is designed to balance the interests of the company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government, and the community.

Why Choice C is correct:

• The board of directors is responsible for looking after the needs of various stakeholders within the broader agenda of meeting business objectives
• This involves making decisions that affect the direction of the company, setting strategic goals, and ensuring they are met
• The board oversees the company's operations to ensure they are in line with the company's strategic goals
• This includes monitoring the performance of the management and taking corrective actions when necessary
• The board also ensures that the company complies with all relevant laws and regulations and maintains high standards of ethics and corporate behavior

Why Choice A is incorrect: While the board of directors does delegate duties to professionals for the day-to-day running of the company, this is only a small part of corporate governance. Corporate governance encompasses much more than just delegation, including setting company objectives, establishing policies and procedures, and ensuring accountability and transparency.

Why Choice B is incorrect: This choice incorrectly narrows down corporate governance to only risk management aspects. Although risk management is an important part of corporate governance, it also includes other elements such as strategic direction, performance monitoring and stakeholder communication.

Why Choice D is incorrect: Tools used by the board to drive business strategy or streamline shareholder interests are components of corporate governance but they do not define it entirely. Corporate Governance involves a broader set of rules and processes that ensure effective management control over corporations in order to protect all stakeholders' interests.