The Maldives National University

FINAL EXAMINATION (ONLINE) – TERM 1 – 2021

Faculty: MNU Business School

Subject Code: ACC309

Subject Name: Corporate Governance and Professional Ethics

Exam Duration: 3 hours and 30 minutes of technical time

Name of Instructor: Abdulla Nisam

Instructions

• Read ALL the instructions carefully before answering.

• When answering on the answer booklet, write the question numbers clearly.
• If you have used the answer booklet, convert it into PDF format before submitting.
• The exam duration given above is the total time you will get for answering the exam questions
AND submitting your answers. The system will automatically disable accepting answers after the
allocated time. Therefore, you are required to submit the answers while there is adequate time.
DO NOT wait to submit your answers at the last minute.
• Only ONE attempt is allowed for submitting the answers or answer script in the exam. Therefore,
if the answer script needs to be uploaded to Moodle, ensure that you upload the correct file.
• Answer scripts will NOT be accepted after the exam time ends.

Declaration by the Candidate

• By attempting this exam, I agree to abide by the following principles:

o I assure that the answers given in the exam will be my own work.
o I declare that I will do this exam honestly, without cheating. Hence, I will not receive
assistance from other individuals, and I will not consult unauthorized materials or resources.
o I agree to maintain confidentiality and not to disclose the contents of the exam paper to
anyone during or after the exam.
• I understand that severe disciplinary action will be taken against students who violate the above
principles.
• I understand that the authenticity of my answers will be checked using Moodle log reports and
TurnItIn or other plagiarism detecting methods.

Special Instructions

• This paper comprises of 6 questions. Answer 5 questions including question No. 1 and 2.
• Use a fresh page to answer every new main question.
• Use the answer booklet provided to answer the questions. Please submit answer booklet in
PDF format through TurnItIn.

MNU Final Examination (Online) – Term 1 - 2021 Page 1

Case: Road Development Corporation (RDC)

Road Development Corporation Ltd (RDC) was incorporated as a wholly owned state-owned
enterprise, responsible for building roads and other necessary infrastructure development
projects in the Maldives. The RDC currently engages in a wide range of building projects
designed to facilitate the achievement of the government’s manifesto of building roads and
housing units in Hulhumale. In recent months the RDC has faced huge challenges as a result
of budget cuts arising from spending reviews by the government following Covid-19. This
has led the company to seek for potential sources of funds required for its building projects.

However, there is some encouraging news for RDC, the Finance Minister’s latest spending
announcement aimed at providing relief funds for all construction companies which were
hit hard due to Covid-19. However, there have recently been some expressions of concern
from a number of pressure groups, which some opposition politicians have been quick to
capitalize on. These include two main areas of concern:

• Firstly, some groups are concerned that the proposed affordable housing will
inevitably evolve into projects that are more economically attractive for developers
and less affordable for sectors of the population who currently suffer most from
housing shortages.
• Secondly, environmental campaigners are becoming more vocal in raising their
concerns regarding all proposed developments, but particularly those linked to new
industrial development, which they claim has the biggest impact on the environment
such as Gulhifalhu.

The RDC’s Chief Executive Officer realizes that his company will need to focus not only on
their part in delivering the government’s promises, but also on the management of the
company in line with stakeholders’ expectations. He is particularly conscious that, while the
RDC has a well-established risk management process, the procedure does not always
operate effectively and the use of risk management in decision making and the allocation of
resources linked to risk mitigations are limited.

The CEO realizes that in order to safely develop the company further, there is a real need to
establish clear management structures, policies and company processes in order to provide
the stability and consistency required to support growth to RDC.

QUESTION ONE

a. Describe the stages necessary for the implementation of an effective risk

management framework across HBP. (12 marks)

b. Discuss how risk management could be used at HBP to support strategic planning
and mitigate strategic risks. (8 marks)

[20 marks]

MNU Final Examination (Online) – Term 1 - 2021 Page 2

QUESTION TWO

ABC Plc is a company listed in the Maldives’ Stock Exchange in 2010. Public controls 55% of
shares and the rest are controlled by the state. The company’s board comprises of seven
members. Public appoints four directors, whereas, the Ministry of Finance on behalf of the
state appoints three directors.

According to the Company’s Article of Association, Chairman’s position and CEO’s position
and an additional one director will be appointed based on names suggested by the
government. Board members to represent the public are decided by the public in the
Annual General Meeting. Prior to the AGM2020 the following meeting is to be held:

Nomination Committee:

Names suggested by the Privatization and Corporatization Board (PCB), The Board
responsible for monitoring all state-owned enterprises.

• Candidate A (Chairman): He was the CEO of ABC Plc from 2015 to 2017.
• Candidate B (CEO): The proposed candidate for the CEO position seems to be a person
who had previously delivered a project to ABC Plc as Managing Director of Plaza
Construction Pvt Ltd in 2019 and is considered as someone who is very familiar with the
current business practices at ABC Plc. The company secretary noticed that there is an
ongoing litigation case against Plaza Construction Pvt Ltd.
• Candidate C: He has previously worked as a financial consultant in Marriot Hotel in
Singapore and is a member of Chartered Institute of Management Accountants (CIMA).
There is no history of him having involved with ABC Plc in the past.

The company secretary presented five candidates who have shown interest to become
board members to represent the public.

• Candidate D: He has achieved an MBA recently. He did not work in any senior
management position in the past.
• Candidate E: He worked as a managing director in a large private company and just
recently he retired from MD position. However, he does not have any business history in
relation to ABC Plc however; he has relevant industry experience.
• Candidate F: He is currently employed at ABC Plc as the Chief Operating Officer.
• Candidate G: He is a lawyer by profession and has never involved with the company in
the past.
• Candidate H: He has been in a management position in a large private company. He
believes since his company is in the same industry as ABC Plc, his contribution can be
significant to ABC Plc’s growth.

Following your observation of the above candidates in light of corporate governance

principles, assess the suitability of the above candidates:

[20 marks]

MNU Final Examination (Online) – Term 1 - 2021 Page 3

QUESTION THREE

Your audit committee chair is concerned about the growing number of news items relating
to unethical corporate behaviour and intends to discuss the issue at the next audit
committee meeting.

Prepare a briefing note for the discussion in which you:

a. Describe six risks that an organisation could face if it does not act in an appropriately
ethical manner. (10
marks )
b. Explain how management should embed and promote an appropriate ‘tone at the
top’ in support of good business ethics and effective corporate governance.
(10 marks)

[20 marks]

QUESTION FOUR

a. Discuss the statement that, ‘given the many limitations of internal controls, an
organisation can maintain its performance and reduce its costs by adopting a
minimal system of internal control’.
[20 marks]

QUESTION FIVE

Given the recent failures at MNO Plc, one of the policies that the Managing Director
wishes to introduce is a corporate social responsibility (CSR) policy at MNO Plc. Under
this policy you have been appointed to the position of CSR Manager. Prepare a
memorandum in which you are required to:

a. Assess potential challenges that may be encountered in enhancing CSR practices at

MNO Plc. (10 marks)

a. Discuss how management at MNO should embed corporate social responsibility

across the organisation. (10 marks)
[20 marks]

MNU Final Examination (Online) – Term 1 - 2021 Page 4

QUESTION SIX

You have been asked to provide some coaching to managers on risk management.

As part of this task, you need to develop some reference material for the managers to take
away after the coaching session. Produce a paper in which you:

a. Interpret what is meant by ‘risk response’ and identify four main categories of risk
responses, giving a brief description of each. (12 marks)
b. Advise how senior managers should analyse the risks that they identify. (8 marks)

[20 marks]

MNU Final Examination (Online) – Term 1 - 2021 Page 5