Executive Summary
Since the day business had started, risk was closely associated with it. From the days of the barter trade, till today’s e-commerce, risk has become an integral part of the business proceedings. Similarly, proper management of the company has always been necessary for its overall success. It is important for protecting the interests of the stakeholder of the company. Through this project, an effort has been made in order to understand the concept of risk assessment and corporate governance in the context of telecom companies. For this report, Vocus Group has been chosen as the company for showcasing the risk assessment proceedings and various financial analysis. How the principles of company governance are implemented have also been extensively shown.
Careful assessment of risks and proper governance of any organisation is of paramount importance to its overall success. Business are always conducted in a risky environment, nevertheless, the aim of the management of the remains to conduct the business in a swift and smooth manner. Be it financial risks, material risks of any nature or risks associated with the environment, safety of employees, the management always aims to find ways to mitigate these sort of risks. In similar fashion, corporate governance is also imperative for any organisation’s overall success. Governance of the organisation in accordance with the established rules and regulations, is necessary for protecting the interests of the various stakeholders of the business organisation. In this report, a risk assessment analysis and governance of corporate laws have been made for Vocus Group, a leading Australian telecommunications.
Vocus Group is an Australian telecommunications company, which is based in Sydney, Australia. It deals in providing high quality wholesale and business telecommunications services across New Zealand and Australia. It is a young company and was founded in the year 2008 by entrepreneur James Spenceley (Vocus Group). Since then, it has become one of the most important telecommunications company in the Australian telecom market. Its implementation of the corporate rules of ASX are as follows:
- Rock solid foundation for better management: The aim of the board of directors remains to implement the strategic aims of Vocus along with the protection of the interest of its stakeholders. It has a board charter which has helped to define the roles and responsibilities of the board. The board is directly responsible and accountable to the CEO of the Vocus. It has delegated the implementation of the daily executive operations of the company to a special executive team of the company. Every member of the board and the executive team is accountable to the CEO of the company. A diagrammatic overview of the composition and tenure of the Vocus team:
(Source: Vocus group)
- Structuring of the board for value addition: The nomination committee of the company is one of the most important committees of the group. It consists of the Chair, the Deputy Chair, both of whom are the independent non-executives of the company. The selection, appointment, re-appointment and removal of the board members forms the working mandate of the nomination committee. Both the board and the nomination committee advocates strong understanding and usage of business skills which are important for Vocus’s retail and wholesale telecommunication. An overview of the nomination committee is as follows:
How Vocus group implements the corporate governance fundamentals of ASC?
(Source: Vocus group)
- Maintenance of ethical conduct: The code of conduct of the group applies to all the employees as well as the executive team members of the company. The code set out the board’s expectation of each employee and member of the group, in accordance with the honesty and integrity as advocated by the code of conduct charter.
- Guarding of company reports’ integrity: The Company in order to protect the integrity and inherent transparency of corporate reporting, has established an elaborate structure for proper presentation of the financial reports. Vocus has established an Audit committee for ensuring this.
- Opportune disclosure: All the employees, members of the executive team, directors have an inherent accountability and obligation under the Communications & Continuous Disclosure Policy, to disclose all the important and sensitive information. Specific responsibilities are entrusted to the Chair, board, CEO, CFO and the Company Secretary for ensuring timely publishing and communication of important information.
- Regarding Shareholder’s rights: The board of Vocus rightly recognises and honours the importance of information, for every shareholder of the group for their timely decision making. (Encyclopaedia Of Corporate Social Responsibility, Vocus Group) This mission is inherent in the Communications & Continuous Disclosure Policy. This policy oversees the overall disclosure procedure of important information.
- Administration of risks: Risk committee has been established in order to administer and manage the risks of the company, be it risk of financial nature, environmental, consumer or any other external risk. A risk committee has been established for this purpose. They have devised a robust risk management policy to counter the various kinds of risks associated with the business.
- Fair remuneration: It has always been the aim of the remuneration committee to ensure fair and just remuneration to the company’s employees. Remuneration for non-executives are different from that of the executives and the members of the executive team. Non executives are not entitled to receive any kind of benefits post retirement. In this way, the company ensures a proper and better remuneration policies in accordance with the company’s policies and plans.
It has always remained the objective of Vocus to properly manage the risks faced by the company by taking prior measures. It involves reporting, reviewing, monitoring and maintenance of a comprehensive risk management policy for addressing the risks of the concern. The business is primarily involved in the telecommunications sector, which is pretty unstable in nature, subject to the constant digital demands and up gradations of the digital media. In addition, there always remains the risk of material misstatement which might occur internally to present a beautified financial picture to the investors (Emmeret al.). For this purpose, the auditor of the company must be able to exercise their impartialness and ethical professional conduct to perform their duties. The analysis of the financial statements of the company has been done below in order to facilitate a better understanding:
Common size income statement of the company for the year ended 3st March, 2017:
Income statement is one of the most important aspects of the financial performance of any company, be it retail, manufacturing, or any other kind of business like telecomm or real estate. It is also one of the most vulnerable areas of financial mishaps, which must be checked and controlled by the external auditors of the company (Bonner et al.). On analysis of the income statement of the Vocus group, it could be seen that in the case of the net income of the company, the telecom company has incurred a huge loss. When compared with the financial performance in 2016, the company has faced a loss of 1464.million dollars. This kind of loss is detrimental to the financial well-being of the company. It could even endanger the existence of the company. The auditor must immediately report this matter to the senior management of the company, as it comes within the purview of the duties of the auditor (Kandasamy et al.). The management must seek to find out the main causes of such a disastrous performance of the company in the telecomm sector and work towards its improvement.
Administration of risks
Common size balance sheet of Vocus group for the year ended 31st March, 2017 is as follows:
On careful scrutiny of the balance sheet of the company, it could be said that the impact of the bad performance of the company in the fiscal year of 2017, is pretty much evident in the balance sheet of the company. The current assets of the company has suffered significantly, for example, the cash of the company has significantly decreased from 129 to 50 million dollars. Lack of liquid funds leads to the failure of honouring the short term obligations of the company (Emmer et al.). This is a distressing cause for the company’s overall performance. The company has also seen a decrease in the total assets of the company, which is again a serious concern for the telecom giant. The loans and liabilities of the company has also increased, this has led to a financial distress for the company. Despite improved and increased investment, the company has seen a dip in its fiscal performance.
Analysis of the most important ratios of the telecom company Vocus Group is as follows:
| Ratios | 2017 | 2016 |
| Current Ratio | 0.063625 | 0.202967 |
| Quick Ratio | 0.275412 | 0.430871 |
The current ratio of the company has decreased to a significant extent as has been evident from the dismal fiscal performance of the company. It has decreased from 0.20 to 0.06 in 2017. This states the fact that the company has failed to honour the short term obligations of the company. The company should have adequate stock of current assets to ensure smooth working of the company. Moreover, the quick ratio has also decreased from 0.43 to 0.27, which is a distressing concern for the telecom company. In today’s uncertain business environment the company must take appropriate measures to decrease the amount of risks.
Conclusion:
In today’s uncertain business world, the advent of risk factors are increasing day by day, which needs to be addressed. On careful analysis, it has been seen that the telecom company mentioned in this project has seen a downfall in its overall financial performance for the year 2017. The management must take all the necessary steps in order to secure the proper working of the company. Through this project, it has been analysed how successfully the implementation of the corporate governance principles have been done for protecting the interests of the shareholders. Along with this, the risk assessment of the company has been overseen and the financial downturns and problems have been duly pointed out.
References:
Bonner, Sarah E., Shana M. Clor-Proell, and Lisa Koonce. “Mental accounting and disaggregation based on the sign and relative magnitude of income statement items.” The Accounting Review 89.6 (2014): 2087-2114.
Emmer, Susanne, Marie Kratz, and Dirk Tasche. “What is the best risk measure in practice? A comparison of standard measures.” (2015).
Encyclopedia Of Corporate Social Responsibility.” N.p., 2018. Web. 4 May 2018.
Francis, Bill, Iftekhar Hasan, and Qiang Wu. “Professors in the boardroom and their impact on corporate governance and firm performance.” Financial management 44.3 (2015): 547-581.
Group, Vocus. “Annual Report | Vocus Group.” Vocusgroup.com.au. N.p., 2018. Web. 4 May 2018.
Group, Vocus. “Corporate Governance | Vocus Group.” Vocusgroup.com.au. N.p., 2018. Web. 4 May 2018.
Jiménez, Gabriel, et al. “Hazardous Times for Monetary Policy: What Do Twenty?Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk?Taking?.” Econometrica 82.2 (2014): 463-505.
Kandasamy, Narayanan, et al. “Cortisol shifts financial risk preferences.” Proceedings of the National Academy of Sciences 111.9 (2014): 3608-3613.
VOCUS GROUP LIMITED RISK MANAGEMENT POLICY.” N.p., 2018. Web. 4 May 2018.
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