Posts for category ‘General’

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The Chinese Wall Theory
Niki Lukviarman | July 7, 2009 | 4:18 am
“The first and rather traditional source of concern regarding the role of central banks in banking supervision refers to the “Chinese wall” theory, according to which the same body cannot be in charge of monetary policy and banking supervision. Such a double function is acceptable if the central bank is not independent. But if the central bank has the ability of fixing interest rates, there are risks of conflicts of interests: so a central bank in charge of banking supervision could be inclined to lower interest rates in consideration of the critical situation of a creditworthy institution, even if inflationary expectations would justify the opposite behaviour”

Source; Patta (p. 3)

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Professional Accountant
Niki Lukviarman | July 7, 2009 | 4:18 am

The domain of the professional accountant in business includes –among other things- the following activities:

1.Providing, analyzing and interpreting information to management for formulation of strategy, planning, decision-making and control

2.Measuring performance, recording financial transactions –tipycally under national or international generally accepted accounting principles- and communicating the results to board and stakeholders

3.Managing risk, and providing internal control and business assurance

4. Generating or creating value through the effective use of resources (financial or otherwise) through (a) understanding the drivers of value to stakeholders (which may include shareholders, customers, employees, suppliers, communities, and government), and (b) organizational innovation

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, p. 5)

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Stakeholder Value
Niki Lukviarman | July 7, 2009 | 4:16 am

Organizational value that is generated for stakeholders by creating, implementing, and managing effective strategies, processes, activities, assets, etc. Sustainable value creation for stakeholders occurs when the benefits to them are greater than the resources that are expended on a consistent and ongoing basis. Value is generally measured in financial terms (as in the case of shareholders), but can also be measured as social or environmental benefit or organizational reputation (as in the case of both shareholders and other stakeholders).

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, p. 7)

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Governance; Performance and Conformance
Niki Lukviarman | July 7, 2009 | 4:16 am
Governance; the set of responsibilities and practices exercised by the board and executive management (the governing body) with the goal of (a) providing strategic direction, (b) ensuring that objectives are achieved, (c) ascertaining that risks are managed appropriately, and (b) verifying that organization’s resources are used responsibly (this definition reflects both the performance and conformance aspects of governance).

Performance; policies and procedures that (a) focus on opportunities and risks, strategy, value creation, and resource utilization, and (b) guide an organization’s decision-making.

Conformance; compliance with laws and regulations, best practice governance codes, accountability, and the provision of assurances to stakeholders in general. The term can refer to (a) internal factors defined by the officers, shareholders, or constitution of an organization, as well as, (b) external forces such as consumer groups, clients and regulators

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, pp. 6-7)

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Governing Body
Niki Lukviarman | July 7, 2009 | 4:15 am
The governing body is the person(s) or organization(s) (e.g., a board of directors) with primary responsibility for overseeing (a) the strategic direction of the entity and (b) the accountability of the entity. This includes overseeing the financial reporting process. Governing bodies can be made up of independent and non-independent directors and can have various sub-committees, such as the audit committee, the renumeration committee, and the ethics committee. In some entities in some jurisdictions, the governing body may include management personnel, for example, executive members of a governance board of a private or public sector entity, or an owner-manager. In some cases the governing body is responsible for approving the entity’s financial statements ( in other cases management has this responsibility). In most large organizations, there can be multiple organizational levels, each with specific authority and responsibility for governance.

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, p. 7)

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