Allgood Ltd, a listed company, announced the appointment of Sumer, as the Company's executive director. Despite opposition by few shareholders, the management offered justifications for the new structure to be more indep

CS Professional · Environmental, Social and Governance (ESG) Principles and Practice · PYQS · December 2024
Allgood Ltd, a listed company, announced the appointment of Sumer, as the Company's executive director. Despite opposition by few shareholders, the management offered justifications for the new structure to be more independent and investor friendly. It indicated that foreign investors were optimistic about the future of the Company and expected better financial results. The Company has been actually witnessing and struggling to address certain corporate governance challenges. A small shareholder filed a law suit against the Board of Directors' misuse of corporate funds. Rishi, the present Chairman and CEO, was working with the Company since last sixteen years and was a close family friend of Promoters. His leadership style being democratic, he was liked and praised by everyone. He was often found meeting people at all levels within the organisation and called for trying new things. His philosophy diminished conflicts and tensions in pursuit of goal setting and achieving. He believes that as long as dividend is paid to shareholders and earnings per share increases, the market values the stock. To address the changing business situations and the perception of the various stakeholders, Rishi had a detailed discussion with Sumer, to identify the further course of action, as Sumer had experience in managing crisis. Both of them evaluated various aspects threadbare and concluded that they should appoint some professional firm, who would do a detailed review and suggest the way forward to address these issues. In consultation with other directors and senior management, they appointed Mangal & Co., a consulting firm, to evaluate the present situation and suggest the best practices to mitigate these issues. The consultants were provided with the following shareholding pattern as on March, 31, 2024: Type of Shareholder Holding % Promoters 51.60 Mutual funds 7.25 Domestic financial institutions and Banks 24.75 Foreign institutional investors 10.40 Corporate bodies 4.60 Individuals 1.40 Total 100.00 Mangal & Co., performed a detailed evaluation of the Company's process and procedures, including its corporate governance practices and suggested that the Company should strengthen the role and position of a Company Secretary, who would not only be a focal point for the governance aspects, but also assist in the risk management process. Develop a robust system of internal controls and internal audit, which would support the management and also have a crisis management plan, which would help the Company to prepare a strategy in identifying and responding to threats. In the background of the above facts, answer the following: Outline the role of Company Secretary in risk management

Answer & Explanation:

The Company Secretaries are governance professionals whose role is to enforce a compliance framework to safeguard the integrity of the organization and to promote high standards of ethical behaviour. He has a significant role in assisting the board of the organization to achieve its vision anu strategy. The activities of the governance professional encompass legal and regulatory duties and obligations and additional responsibilities assigned by the employer. However, in essence, the functions of a Governance Professional include: Advising on best practice in governance, risk management and compliance. Championing the compliance framework to safeguard organizational integrity. Promoting and acting as a 'sounding board' on standards of ethical and corporate behaviour. Balancing the interests of the Board or governing body, management and other stakeholders. The listing agreement also provides for the establishment of the Risk Management Committee as per SEBI (LODR) Regulations. Since it is the part of the Corporate Governance norms and non-compliance of the same is to be reported by the Company Secretary. In terms of Section 203(1)(ii) of the Companies Act, 2013, a Company Secretary is a Key Managerial Person. Hence being a top-level officer and board confidante, a Company Secretary can pay a role in ensuring that a sound Enterprise-wide Risk Management [ERM] which is effective throughout the company is in place. The board of directors may have a risk management sub-committee assisted by a Risk Management Officer. As an advisor to the board in ensuring good governance, a Company Secretary shall ensure that there is an Integrated Framework on which a strong system of internal control is built. Such a Framework will become a model for discussing and evaluating risk management efforts in the organization. Risk and control consciousness should spread throughout the organization. A Company Secretary can ensure that this happens so that the risk factor will come into consideration at every stage of formulation of a strategy. It will also create awareness about inter-relationships of risks across business units and at every level of the organization.

Topics: Company Secretary, Risk Management

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