Drowning in Glass of Water-Corporate Governance of Financial Firm, mentioned Jerry Cedicci

Aug. 10, 2008 - PRLog -- Corporate Governance of Financial Firms- drowning in Glass of Water

Corporate Governance industry is a growing business that has been present from the last decade. It distinguishes itself from most parts of the financial sectors. The codes of the corporate governance are on a go-go. The World Bank and the international regulatory bodies are actively providing advice for developing countries.

The past corporate governance problems of financial firms have pushed the quality of accounting standards, the professionalism of auditors, and governance practices of major companies into limelight. Besides, there are also some broader long term issues that have affected the corporate governance of financial firms.

Financial Guru, Jerry Cedicci, said The fundamental problem for this is the growth in size and scope and also the innovative financing techniques have made it more difficult for the outside investors to understand a firm’s risk and performance of its various business lines. The traditional accounting standards have also not kept pace with the risk management engaged by sophisticated corporations. It is like drowning in Glass of Water.

There is yet another issue that is how different countries’ financing patterns highlights different stakeholders in the corporate governance process. In Germany and Japan, corporations rely heavily on bank loans for external financing. But in United States funds are raised through public capital sectors. In these three countries adequate accounting is fundamental to efficient governance.

Global Financial expert Robin Trehan, mentioned that "Whenever there is a a financial crisis, it is always the banks that get hit and the hardest". He mentioned the first preliminary point in corporate governance is that the problems faced by regulators are not always the same as problems perceived by financial firms. The second preliminary point is that the corporate governance in the sense of structures of accountability and control in a financial firm is not always the same as management.  

There is not much systematic analysis for the reasons of failure in the corporate governance of financial firms. But there are some helpful resources. Studies conducted by the European Banking supervisors say that there are number of financial problems across the continent. The overall conclusion is that there were underlying management and control weakness that is fundamental and contributory in almost all the cases. The main cause of failure is due to poor underwriting practice and inadequate reserving. This underwriting and asset problems rose because of the fundamental weakness and poorly managed risks that made firms vulnerable to unfavorable external events.

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