Reawaken The Risk Governance in The Malaysian Corporate

Habibun Nisa Mohamed Ajmal,Hariati Binti Mansor,Mohd Bahrin Bin Othman

doi:10.47405/mjssh.v6i10.1094

Habibun Nisa Mohamed Ajmal, Hariati Binti Mansor + Show 1 more

Open Access

https://doi.org/10.47405/mjssh.v6i10.1094

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Abstract

Risk governance is about balancing the company’s business interests and the interests of stakeholders who might suffer loss or harm from the company’s commercial activities. It is mainly concerned with preventing mistakes or wrongdoings than correcting them. This paper aim is to study the state of risk governance in the Malaysian corporate sector. It specifically studies the way risk governance is regulated and its relation to stakeholders’ interests. This study is based on the existing laws in Malaysia. The laws in the United Kingdom and the United States are studied for a comparative analysis and lessons to be learned. The paper suggests that the role of regulators is crucial to initiate and compel companies to establish and maintain a risk governance system and incorporate it as a corporate culture. It also suggests that co-regulation between the regulatory authorities and the industry is needed to successfully push efforts and participation by companies to establish and maintain an effective risk governance system. The paper is significant as it contributes to the improvement of risk governance in Malaysian businesses in general and in the corporate sector specifically and adds to the body of knowledge on law and governance.

Highlights

Failure of risk management (RM) and internal control system (ICS) has been identified in many instances as some of the most pivotal causes of corporate abuse (Abidin, Nawawi & Salin, 2019)
A similar incident occurred in the cross-selling scandal in Wells Fargo which again raised the issue of poor risk governance that resulted in monetary and reputational damage to a company (Tayan, 2019)
The backlash generated by these mishaps had attracted criticism of gatekeepers like directors and auditors and demands on companies be more responsible in their business activities (Coffee, 2005)

Summary

Introduction

Failure of risk management (RM) and internal control system (ICS) has been identified in many instances as some of the most pivotal causes of corporate abuse (Abidin, Nawawi & Salin, 2019). Corporate scandals like Baring Brothers, Enron and the Société Générale Bank in France highlighted the devastating impact companies face when risks were poorly managed and controls inadequately set up. Other tragedies took place that had some connection to corporate activities but had not directly impacted the company’s business and shareholders. Incidents such as mining and workplace accidents, environmental disasters, supply of defective and dangerous products and misuse of customers’ personal information grabbed media attention and had caused outrage among the public (Yockey, 2016). The backlash generated by these mishaps had attracted criticism of gatekeepers like directors and auditors and demands on companies be more responsible in their business activities (Coffee, 2005).

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