Ethics is a moral philosophy that guides individuals to decide what is wrong

or right, good or bad and what comprises desirable behaviour in a particular

set of social circumstances. In other words, it is a formal study of moral
standards and conduct.

Ethics are concerned with setting the moral standards and norms of human
behaviour. In an organisation, employees are expected to possess highly
defined ethics. This is a strong ethical base of employees that ensures high
productivity of both the employees and the organisation.

The 4 main characteristics of ethics are:

- Accuracy: It implies that organisational information should be correct

on ethical grounds and without any mistake. In addition, there should
be transparency in every part of the information This in turn leads to
consistent and quality processes, increased operational efficiency and
high accountability.

- Truthfulness: Ethics are said to be related to the true thoughts and

actions of an individual or organisation. Maintaining authentic
practices is of utmost importance for any organisation. On the
contrary, fraudulent acts done in the present may bring huge losses to
an organisation in the future. Satyam Scandal is an example of
fraudulent practices of a company that misled the market by
misrepresenting its accounts. The profits and cash balances were
inflated wrongly to show the company’s good health.

- Accountability: The ethical values of an organisation prompt

employees to become accountable for their actions. This in turn helps
the organisation to carry out its practices ethically.

- Objectivity: Ethics should be clear and objective in nature. For

example, ethically, an individual’s action should always be seen as
right or wrong regardless of the situation or consequences. If an
organisation has objective ethics in place, it would help employees to
easily adopt the organisation’s ethical values without any hindrance.
Corporate governance refers to a set of techniques that are used to direct, supervise and operate the
corporate machinery. It is essential because it focuses on building a long-term shareholders’ value. It
helps in creating competitive advantage, Preventing fraud and malpractices and increasing
transparency. There are mainly two dimensions of corporate governance, namely, internal corporate
governance and external corporate governance.

Internal corporate governance:

Internal corporate governance is a framework or system of rules, practices and processes designed in
an organisation by the internal human force. This framework is generally developed and managed by
the top management of the organisation. The internal governing framework acts as a roadmap for both
internal and external stakeholders to ensure the ethical functioning of the organisation.
Board of Directors are vested with the responsibility of governing an organisation. The BODs of an
organisation form various committees to divide work among groups.
- Nomination committee
The nomination committee is made up of outside independent directors to oversee and evaluate the
performance of the board and ensure that the company adheres to the prescribed compliance and all
the regulations
- Audit committee
The members of the audit committee members are responsible for reporting financial proceedings of
the organisation to the board. It acts as a useful link between outside auditors and the board. The
committee resolves matters, such as the scope of the audit, issues raised by auditors with regard to
management systems and control or any disagreement or conflict of interest related to the published
financial statements. It also gives recommendations on audit fees or reappointment or replacement of
auditors.

External corporate governance:

This comprises the forces that impact an organisation from outside, such as legal entities, government,
industry norms, regulatory authorities, market, service providers (auditors, consultants and financial
institutions) and media. It plays a key role in ensuring appropriate corporate governance practices and
mechanism in an organisation.
Various external stakeholders include
- Government
The government exercises control by setting regulations related to pricing, supply contracts and tax.
Moreover, it is responsible for preventing malpractices such as formation of monopolies or illegal
supply of utilities such as power, water and energy. Regulations are levied to protect the interests of
stakeholders; thereby attracting more investors and increasing tax revenues in the country.

- SEBI
SEBI is an independent statutory authority. It has set out corporate governance standards for the listed
organisations in India.
- Promoters
Promoters and directors have a principal–agent relationship where the promoters (principals) expect
the agents (directors) to act in their best economic interests and observe a fiduciary duty towards
them.

Strategic Risk Management is a process for identifying, assessing and managing risks and
uncertainties, affected by internal and external events or scenarios, that could inhibit an organisation’s
ability to achieve its strategy and strategic objectives with the ultimate goal of creating and protecting
shareholder and stakeholder value. It is a primary component and necessary foundation of Enterprise
Risk Management.
Strategic risks generally include Competition, social trend, capital availability, etc.

Strategic Risk Management (SRM) is based on the following six principles:

1. It can be defined as a process that is focussed on evaluating and managing internal and external
procedures as well as risks. These are responsible for delaying the success of strategic objectives.
2. The main objective of SRM is to build and protect the shareholder’s value.
3. The organisation’s ERM forms the primary foundation for SRM.
4. As a part of ERM, strategic management is influenced by the board of directors and management.
5. SRM provides a strategic view regarding the impact of risks and the organisation’s capability for
achieving the pre-defined objectives.
6. It is a never-ending and repetitive process that allows strategy setting, strategy execution and
strategic management.

Senior management chooses the risk response strategy for certain risks, which may include the
following:
- Avoidance: Preventing or leaving those activities that are directly related to risks.
- Reduction: Taking measures that help in mitigating the impact of risks.
- Alternative actions: Looking for other opportunities that may be taken as steps for minimising risks.
- Share or insure: Transferring or sharing risks to reduce there effect on business.
- Accept: Exploiting the risk and seeking opportunity or cost-benefit from it.