Financial Risk Manager Part 1

Good corporate governance can significantly enhance a company's reputation and trust among its stakeholders, including suppliers and customers. When a company practices good corporate governance, it demonstrates transparency, accountability, and fairness in its business operations. This can lead to increased confidence among suppliers and customers, encouraging them to actively do business with the company in favorable terms. They may offer better payment terms, discounts, or other benefits, recognizing the reduced risk and increased reliability associated with doing business with a well-governed company. This choice correctly identifies how suppliers and customers can reward a company for good corporate governance.

Choice A is incorrect. Purchasing from a competitor offering lower prices does not express appreciation for good corporate governance. Instead, it indicates a preference for lower prices over the quality of governance.

Choice B is incorrect. Demanding a higher rate of return on their investment does not show appreciation for good corporate governance. It rather suggests dissatisfaction with the current returns and may put undue pressure on the company, potentially leading to poor decision-making.

Choice D is incorrect. Giving extra benefits to company executives can be seen as an attempt to influence decisions rather than an appreciation of good corporate governance. Good corporate governance promotes transparency and fairness, which could be compromised by such actions.