S1.2 Topics Allocation [SG6] https://goo.

gl/eVdmMM
Q1(a)&(b): T3

Q1(c)&(d): T4

Q1(e)&(f): T5

Q1(g)&(h): T6

Q1(i)&(j): T7

Q2: T8

Q3: “Culture & Governance”: T1

Q3: “Control Activities”: T2

Q1(a) & (b) T3
(a) Principle 3: Defines Desired Culture
● The culture and desired behaviour of a oil company should be more averse due to the
cyclical nature of the industry. (Jia Jie) [risk appetite]
● However, the options purchased were rather aggressive as they were exposed to
unlimited downside losses. (Wenfong)

Solution

● The BOD should clearly define the risks and opportunities that the company should
adopt and provide oversight to align behaviours and decision to the core values. (Bao
Xuan) [focus on its core business of physical trading with some hedging but no
speculation]
● Instead of purchasing exotic options, they may want to trade derivatives that has limited
losses. (Bryan)
Q1(a) & (b) T3
(b) Principle 5: Attracts, Develops and Retains Capable Individuals

Weakness: Attracting, Developing & Retaining Employees

● Company did not hire and develop employees to fit into the company’s
business model (Suharyo)

Improvement:

● Modify the Short-Term & Long-Term performance reward system to fit the
company’s business model (Wenfong)
● Provide training for existing employees to ensure that their transactions align
with the core values of the company (Bao Xuan)
Q1(c) T4
Principle 1: Exercises Board Risk Oversight

● Lack appropriate skill and expertise to understand and comment on RMM

(Lionel)
● Failure to follow-up with the “test run” basis of the implementation of RMM on
subsequent board meetings (Ke Xin)

Improvements:
● Appoint a director that is experienced in the Risk Management of practices in
oil companies
● Have periodic review of the relevance of the BoD’s skillsets and expertise
● Appoint an auxiliary committee to oversee the progress of the implementation
of RMM and update the Board in subsequent meetings (Benjamin)
Q1 (d) T4
Principle 4: Demonstrates Commitment to Core Values

● Failure to ensure transparency in communication due to fear of retaliation

(from the stakeholders who read the annual report) or loss of reputation as
they did not indicate that the adoption has been done on provisional basis
(Iman) [board set the right tone]

Improvements [no misrep on the provisional adoption of the manual]

● To hold more meetings between shareholders and directors i.e. EGM instead
of just having an AGM annually to improve communication (Yih Pin)
● The Auxiliary committee is held responsible for effective communication and it
is being passed down to the employees appropriately. (Denise)
Q1(e) & (f) T5
e) Principle 2: Establishing Operating Structure

● There were no clear definition of responsibilities and authorities.

● The RMM did not address the riskier options trading; there was no review of
the risks associated with options trading.(P.F)

Improvements

● They should have a procedure to review their guidelines when they wanted to
engage in options trading - form committees to see how risks are associated
with strategy.
● Define guidelines for risk assessment in relationship to options trading.
● Periodically review [new and emerging risks] and incorporate it into the
guidelines. (J.C)
Q1(e) & (f) T5
f) Principle 5: Attracts, Develops and Retains Capable Individuals

● Incapable individuals
○ These were attempts by Ms Cindy Chong (who was the Company’s Head
of Banking Relations and Risk Management) but these limits were not
understood by her and were not in any case correctly set. (P.C)

Improvements

● Evaluate and correct any inconsistent behavior of employees

● To provide training when there is a new change in the business model (e.g
options trading) (J.T)
Q1 (g) T6
Principle 4: Demonstrates Commitment to Core Values
● Key Weakness: Enforcement on accountability not carried out - adherence to overall trading limits; monitoring and
evaluation of traders also not carried out (Barnabas)
● Improvement: Setting in place penalties for non-adherence - Warnings, terminating traders that do not adhere to trading limits

● Key Weakness: Did not embrace a Risk-Aware culture, front office failed to advise others in the Company of the
consequences and ramifications (Pan Zi)
● Improvement: Educate the employees on the various risk and also the importance of sounding out by having an anonymous
hotline as well [Primary]

● Key Weakness: Did not reflect core values throughout the organisation (ie integrity, fairness, transparency) - they were clear
that MTM losses did have to be recorded and any other approach was incorrect (Cheryl)
● Improvement: Constant emphasis by the top management (top-down approach) on the commitment to core values and top
management themselves should exemplify those values
Q1 (h) T6
Principle 5: Attracts, Develops, and Retains Capable Individuals
● Key Weakness: Did not address pressure - Pressure on maintaining/presenting good performance not carefully addressed
which caused staff to avoid reporting losses (Chermin)
● Improvement: Reduce weightage on department and company's performance/ Increase weightage of deliberate mis reportings on
individual's performance evaluation / Increase risk of fraudulent behaviour [Primary] [need to balance between short and long
term financial performance and risk return equation.]

Key Weakness: Did not establish and evaluate competence of staff - Capability of finance staff not evaluated, as there is
incompetence in applying appropriate accounting standards on MTM losses
● Improvement: Send for training to enhance knowledge of current staff, or hire more professional staff. (Pan Zi)
Q1(i) & (j) T7
Principle 1: Exercises Board Risk Oversight
Weakness Improvement

Accountability & Responsibility - Audit Committee did Ensure that the Internal Audit Division submits periodic
not exercise its risk oversight function and ensure that Mr reviews to the Audit Committee and that IA is accountable
Chang made regular reports (Joel) [Primary] for the accuracy of the report (Shi Yong)

Skills, Expertise and Business Knowledge - Audit Hire an audit committee with greater expertise so that they
committee might not have necessary expertise as they can identify any inaccuracies or repetition in the audit
were unaware of inaccuracies (Joel) reports submitted by the IAD (Jerome)

Independence - Conflict of interest Ensure that there are periodic reviews carried by the Audit
Independence affected by financial interests Committee to ensure that such cases do not recur.
Mr Chang (Head of IAD) gave inaccurate reports & Mr (Ensure that sufficient controls are in place) (Jolynn)
Chen (MD & CEO) failed to report the company’s losses in
the financial results
(Shi Yong)
Q1(i) & (j) T7
Principle 4: Demonstrates commitment to core values
Weakness
Enforcing Accountability - CAO did not hold Mr. Chen
responsible for his negligence of not reporting the Company’s
losses and also for cultivating a culture of secrecy (Jerome)
Keeping communication open and free from retribution -
[primary] Evidence to show that Mr Chang was aware of
inaccuracies; possible that others knew of inaccuracies present
but chose not to/there were no proper avenues to report on
inaccuracies (Augustine)
Embracing a risk aware-culture- There is no strong leadership
by Mr Chen as he did not lead by example. (Jolynn)
Improvement
[Primary]
Mr. Chen (MD/CEO) should bear responsibility for
failing to report losses and cultivating a culture of
secrecy, hence should be punished for his action
based on severity of his actions and losses should be
reported to the board (Augustine)
[Primary]
Provide an anonymous whistleblowing platform for
employees to report on such cases of known
negligence (Jerome)
Replace Mr Chen with a more ethical leader who has a
stronger leadership who can lead by example.
(Augustine)
 Q2 T8
Key steps to be implemented to garner chefs support
Principle (elaborate slightly)
Principle 3: Defines Desired Culture - Set out desired
behaviours for chefs and employees to follow
Principle 4: Demonstrates Commitment to Core
Values - Take action against chefs who receive
kickbacks to reflect intolerance of corruption
Principle 5: Attracts, Develops, and Retains Capable
Individuals -(Setting more specific goals to attract and
retain chefs that share the same core values as the
company) (Tian Cheng)
Steps
Communicate clear expectations that chef should not receive
kickbacks from suppliers and the consequences of doing so (eg
deduction of salary) (Belinda)
Create a code of conduct/ rulebook spelling out receiving hampers is
unacceptable. This would define the desired culture(Max)
Terminate chefs who repeatedly receive kickbacks. Set up
communication channels for other employees to report chef corruption
without fear of retribution. (Andre)
Include selection of suppliers (based on quality and costs of
ingredients) into performance measurement of chefs (Raelynn)
Design incentive system to reward honest and excellent performance
e.g. tie bonuses to customer feedback to encourage chefs to use the
best ingredients and do their best [compensate via profit-sharing
scheme](Andre)
Q3 T1
Principles of Governance &
By: Improvements
Culture

Principle 1: Exercises Board Risk Establish an Audit Committee to provide oversight for
Nicholas
Oversight the activities of management and internal controls

Have clear reporting lines and appropriate delegation

Principle 2: Establishes Operating
Pei Hao of responsibilities [Limit cheque amount; higher
Structure [SECOND]
amount need a second signatory]

Principle 3: Defines Desired Cultivate risk awareness culture and conduct training
Kian Tong
Culture for managers to inculcate such a culture

Set up Code of Conduct Manual with clear penalties

Jun Leong Principle 4: Commitment to Core
for violations; Establish a secure whistleblowing
Maegan Values
channel to report such violations

Principle 5: Attract, Develop,

Having a robust, comprehensive recruitment process
Leslie Retain Capable Individuals
(e.g. Background checks)
[FIRST]
Q3 T2 (Control Activities)
By: Improvements

Have multiple levels of approval for invoices (e.g 2 person to sign the cheque
Basil
approval)

Jun Tai Declaration of debt for all employees (especially management)

Test/Verify “vendors” whether they are legal entities and to detect possibility of
Daniel
fraud i.e list of authorised vendors

Proper segregation of duties for cash disbursement, and approval for invoices
Shi Ying
[primary] - tie in with 1st point

Having periodic robust monitoring system (Internal Audit) [direct functional or

Jackson activity mgt: Purchasing dept periodic reconciliation of monthly vendor
statements with actual payments] [primary]

Have a competitive bidding process for each contract - together with segregation
Yu Wei
of duties