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Essential Corporate Governance Practices for a Large Private Company Aimed at Transiting to ASX Listed Entity

According to Bhagat and Bolton (2019), corporate governance refers to a system put in place to give proper direction on how an organization can be easily managed or controlled. It is more concerned with how the organization’s board of directors can facilitate its skills to ensure that there is long-term success in the organization’s operations. However, for large private organizations like Focus Logistics Pty Ltd to have successful results of corporate governance the following four corporate governance practices must be put in place; Effective board reporting, Organization director training, and board evaluation, development of policies that have applicable regulations and compliance to the law, and need to have subsidiary governance policies (Bhagat & Bolton, 2019).

Effective board reporting

Focus logistics is a large private company that has a good reputation and is more focused on transiting to ASX listed entity. This means that the company will be publicly traded within the Australian at the national level and therefore there is a need to build an environment of public trust. This requires that the company’s board of directors have a reliable reporting procedure on the different objectives of the companies and how the company works to achieve them. In contrast with Jacob’s opinion that embracing corporate governance will slow down the board’s decision-making process on creativity and innovation, different opinions from different stakeholders might shade more light on the best appropriate ways through which the company might effectively innovative for long-term success. Also, the changes within the global corporate governance are more concerned with the convergence of the sustainability reporting standards on different organization aspects like human capital management and the measures put in place to cater for climate change risks. With these national concerns, Focus Logistics Company need embrace effective board reporting so that it can effectively transit into ASX listed entity (Rashid, 2018).

Organization director training and board evaluation

It is of importance for Focus Logistics Company to ensure that the company directors are regularly trained on the current emerging trends in corporate governance. This will ensure that they keep up to date with the current regulations and legislations which can be potential challenges to the organization if they are not put in place. This will relate to the current global regulation to embrace supply chain digitalization and warehouse automation to avoid loss or damage of the client consignment. There is also the requirement to consider other means of transportation like the use of automated trucks which are friendlier to the environment in terms of carbon footprint which is a common case with the company B-double trucks (Rashid, 2018). It is not business as usual as it is Mrs. White’s opinion that one needs to get a truck and a driver for them to be in business. However, there is a need to choose a truck which will not be of environmental harm. There is also the need for the company to evaluate the board of directors to ensure that there is diversity and gender equality as it is an international requirement. As the company CFO David Rose suggests, Focus Logistics Company is no longer a local company but instead an international company that needs to focus more on international matters so that it can be able to comfortably conform to the international requirements (Rashid, 2018).

Development of policies that comply with the law

This is one of the essential practices which Focus logistics Company need to embrace. Focus Logistics Company CFO Jacob Rose believes that the policies made by the organization’s board of directors should be more concerned with the interests of the company stakeholders and the organization overall performance. However, this should not be the case for a large private organization like Focus logistics which aims at transitioning to the ASX platform. There is a need to come up with policies and regulations which will be in line with the current international legislation while at the same time conforming to the company’s strategic goals. This will have a positive reflection on the company culture in the external environment and at the same time streamline the organization’s internal operations (Rashid, 2018).

Need for subsidiary government policies

Unlike when focus logistics was operating locally, the company has grown to a very vast private company that is operating in different jurisdictions. Therefore, there is a need for the company to have subsidiary policies that are easily accommodative in different areas so that the company’s roles can be easily understood. This comes in terms with Mrs. Rose opinion that the bottom line is to ensure that the Focus logistics company is listed in the ASX in the next two years and therefore the company can achieve that if only it develops current subsidiary policies which can help to build the company national trust among different clients and sub- contractors in different localities (Rashid, 2018).

Importance of corporate governance to large private companies like Focus logistics

Corporate governance is an essential tool for most of the large private companies like Focus logistics who are determined to transit into being listed in ASX. This is because corporate reporting makes the pivot for most of the companies listed in the Australian Stock Exchange Entity. Therefore, as a requirement to those private companies who aim at transiting to the ASX listing, those large private companies like Focus Logistics will enjoy the benefits of transparency and accountability in their organization operations. Moreover, there will be a cohesive relationship between different stakeholders within their organization. This provides a friendly working environment where different operations are done in the smoothest way towards achieving the organization’s objectives (Utami & Sutejo, 2018). Also, corporate governance helps in building a strong reputation of different private organizations. Finally, through corporate governance, most of the large private companies remain in compliance with different government and market requirements. This helps these companies to produce those products which are serving the needs of their customers in the best way which is a strategic way for the companies to remain competitive within their market operations. This importance of corporate governance outweighs COO of Focus Logistics Jacob Rose that private companies need to only focus on performance and not so much conformance. On the other hand, Mrs. Rose opinion is that it is time for the company to taste the waters and embrace the need for corporate governance to attract more private investors to the company (Utami & Sutejo, 2018).

Significance benefits and challenges of producing sustainability report for Focus Logistics Company

Significant benefits

The need for a sustainability report has been a major concern for most of the stakeholders and private investors in the current business world. It has been the belief of most people including Focus logistics COO Jacob Rose that most of these compliance reports are not audited and add no value to the organization. However, with the current business environment, sustainability reporting can be very beneficial to Focus Logistics Company. Firstly, the current survey released in 2021 on corporate reputation shows that for a company like Focus logistics to build public trust, it must embrace sustainability reporting (Braam & Peeters, 2018). This will attract more private investors to the company to enable their potential expansion. This concurs with the company CFO David Rose that their company has more responsibilities of looking at the employees and therefore, there is a need to go beyond the mandatory requirements. Secondly, through sustainability reporting, the company will make informed decisions which are the only tool through which the company can be able to effectively run different operations within the different tiers of their supply chain. Thirdly, sustainability reporting will make it possible for Focus Logistics Company to more insight into the connection between the profitable organization operations and those which are not profitable (Braam & Peeters, 2018). This will make it easier for the company to wisely manage its finances. Fourthly, Sustainability reporting is a continuous long-term process, and therefore, it is a tool that the company can use for long-term strategic planning on different organizational policies and also different business plans. Finally, sustainability reporting will provide a potential platform for the company to benchmark itself with the other international organizations while at the same time stressing more compliance to different international performance standards, laws, and norms. Through this benchmarking, the company will be able to adhere to the published environmental and social concerns while at the same time looking at the potential pitfalls for corporate governance in which the company can fall into (Braam & Peeters, 2018).

Significance challenges

Despite the current concerns on the need for sustainability reporting by potential investors, different logistics companies like Focus logistics, are facing significant challenges when it comes to sustainability reporting. In the case of Focus Logistics, COO Jacob Rose argues that such compliances like sustainability reporting will not be audited. This is because there is a lack of global standard procedures to act as guidance to most logistics companies in preparing their sustainability reports (Tsalis et al., 2020). Again, the company will have a challenge in deciding which sector of their operations should be include in their sustainability reporting and which ones not to include. The company will be much concerned with the audience they will be addressing and in what ways will the audience use the information for. Some of the users might be the company competitors who can use the information to tarnish its reputation in the public. It will be a concern for the company on the required expertise with the required knowledge in preparing a sustainability report. This will be a challenge to the company because most logistics companies lack the necessary awareness and education to enable them to prepare sustainability reports with ease (Tsalis et al., 2020). Accordingly, the company will incur extra costs required to prepare the sustainability report. This is an extra cost for the company and might be of major concern not to affect the company profitability margin. Finally, preparing a sustainability report is a time-consuming exercise. S the COO Jacob Rose says the company aims to maximize shareholder’s returns. This calls for the company employees to be more focused on their core duties and responsibilities making it a challenge for the company employees to have enough time required to prepare a sustainability report (Tsalis et al., 2020).

Benefits and challenges of sound risk management for focus logistics

Benefits

It will be essential for Focus Logistics Company to embrace sound risk management practices. Firstly, through risk management, the company will have a chance for better budgeting. This helps to eliminate the risks of losing the company’s money in guesswork operations but instead stay focused on their financial resources and numbers to help in waste elimination (Prasad, 2021). Secondly, it will allow the company to improve on its operations as there is a chance to identify those areas with inefficiency and make a scope for improvement. It will also be of importance for service quality reengineering for the company to ensure that they offer the best to their customers. This will work well for the company CEO Mrs. Rose on making sure that the loyal company customers and employees are taken care of. Thirdly, it will help the company to remain competitive within the logistics industry market. This will be made possible through the company’s ability to minimize its losses, especially during the most financially critical periods. Finally, Focus Logistics Company will be able to avoid catastrophic happening within their daily operations. Risk management helps in proper forecasting to ensure that those cases are avoided in time (Prasad, 2021).

Challenges

The risk management process is not a smooth path for most logistics companies. Most of them constantly face serious challenges which affect the expected results from the process. This will not be an exception for the Focus logistics company as it is prone to failing in monitoring and managing the risks associated with the company. There is also a chance for the risk management managers to fail in using the proper risk metrics in managing the company risks. Accordingly, the company risk management team can make mistakes relating to the extent of the losses associated with the risk which might lead to mismeasurement of the known risk hence poor risk management practices might lead to significant losses in case they happen. Again, it is a common case for most risk managers to fail in communicating the potential risks to the top management. In the case of Focus Logistics, it will imply that there will be fewer or no measures put in place to mitigate the losses which might be a challenge to the company. Finally, as it is a challenge to most of the logistics companies to have a perfect forecast on future happenings, this may lead to most of the companies including Focus logistics failing to take potential known risks into account (Kouvelis et al., 2019).

References

Bhagat, S., & Bolton, B. (2019). Corporate governance and firm performance: The sequel. Journal of Corporate Finance58, 142-168.

Braam, G., & Peeters, R. (2018). Corporate sustainability performance and assurance on sustainability reports: Diffusion of accounting practices in the realm of sustainable development. Corporate Social Responsibility and Environmental Management25(2), 164-181.

Kouvelis, P., Dong, L., Boyabatli, O., & Li, R. (2019). Handbook of integrated risk management in global supply chains (Vol. 1). John Wiley & Sons.

Prasad, C. V. (2021). Benefits of Enterprise Risk Management: A Systematic Review of Literature. GATR Journals, (jfbr181).

Rashid, A. (2018). The influence of corporate governance practices on corporate social responsibility reporting. Social Responsibility Journal.

Tsalis, T. A., Malamateniou, K. E., Koulouriotis, D., & Nikolaou, I. E. (2020). New challenges for corporate sustainability reporting: United Nations’ 2030 Agenda for sustainable development and the sustainable development goals. Corporate Social Responsibility and Environmental Management27(4), 1617-1629.

Utami, M., & Sutejo, B. S. (2018). The importance of corporate governance.

Zrnić, A., Starčević, D. P., & Crnković, B. (2020). Recent trends in sustainability reporting: Literature review and implications for future research. Ekonomski Vjesnik33(1), 271-283.

 

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