Corporate governance refers to the set of systems, principles and processes by which a company is governed.

They provide the guidelines as to how the company can be directed or controlled such that it can fulfil its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all the others. Autocracy is a utopian ideal (meaning that it exists as a theory) referring to a style of government in which all power extends from a single individual. The term also applies to real-world governing structures in which a single individual holds predominant power, such as in the case of a single ruler over a nation, an owner-operated business or a single-parent home structure. Other roles work to support the singular leader, supporting and carrying out their decisions.

Corporate governance
Millions of people throughout the world rely on the performance of listed companies. The government therefore recognises the great importance of corporate governance and corporate supervision. Legislation must ensure good practice and integrity in the way that listed companies are run.

Supervision of listed companies

Corporate governance and the supervision of listed companies are very important to the Dutch economy. The Ministry of Finance has introduced a number of laws to protect the interests of consumers and businesses. It constantly seeks improvements in the laws. In particular, it seeks:

greater transparency in annual reports; better accountability by supervisory boards; more protection for shareholders.

In banking, asset and liability management is the practice of managing risks that arise due to mismatches between the assets and liabilities (debts and assets) of the bank. This can also be seen in insurance. Banks face several risks such as the liquidity risk, interest rate risk, credit risk and operational risk. Asset liability management (ALM) is a strategic management tool to manage interest rate risk and liquidity risk faced by banks, other financial services companies and corporations. Banks manage the risks of asset liability mismatch by matching the assets and liabilities according to the maturity pattern or the matching the duration, by hedging and by securitization. Much of the techniques for hedging stem from the delta hedging concepts introduced in the BlackScholes model. Controls investment policy Govern lending policy Necessary for managing the maturity pattern

Rate variation is a unique thing in an economy. If rate increases value of asset decreases (investment value) If rate decreases decreases vice-versa.

Features in Asset liability management: Define area of policy Flexible policy statement No conflicts with other policies Must comply with the law Policy performance must be measurable Policy must be unique Specific format

Duration concept: Sensitivity analysis: response of a hypothesis to the changing parameter. Duration concept was formulated by Fredrick Macholi in 1938. It was researched upon year after year also called interest rate elasticity concept, modified duration concept. Ex: investors grievances cell. CSR Corp.Governance came from KMBC: Complementary effect of CG to make it robust. Spell dos and donts Must be a fit and proper criteria Requires continuous effort to raise human resources i.e. talented, skillful, healthy.

Any problem raises questions on BOD, Auditors, Lawyers ,Regulators and shareholders. Duration concept is discounted value of money today. HTM is carried at acquisition cost. Sensitivity analysis: when hypothesis changes what its impact on the project. It is carried at a discounted rate. 10 rs 5 yrs before Elasticity+ Duration concept: Modified duration concept. It can be positive or negative. It can be applied on individual instrument or a portfolio. If there is an inherent mismatch in asset and liability duration analysis becomes more valuable when long term liability become an asset. Liquidity: by financial data properly analysed we can get position of

When there is a mismatch of funding between long term assets with the short term non-core liability there are three major analysis: Dependency ratios gives how to match long term assets with short term. Volatile liability dependency ratio: long term asset net short term fund Short term non-core funding dependency ratio: take the asset and short term fund and create the percentage(time deposit, current account deposit, foreign office deposit ) Short term non-core funding depending ratio; these ratios are indicative but not final. It is your judgement finally. Net asset and short term fund taken together to get a percentage leads to short term non-core funding dependency ratio.

Non-core funding dependency ratio: Short term by brokered deposit (very unstable deposit) ALM is concerned with the assets. There are 4 types of assets: 1. Non-performing asset which has past dues or non-accruing and forced loans. Past dues: for 90 days you are not paid your days. Non-accruing: you gave loan of 1lakh less than 3% rate but very doubtful for principle. Forced loan: foreclose the loan and get money back as not sure to get it later. 2. Allowance for loan loss: charged against the loss. It is a provision. 3. Net charge offs: No proper approval procedure if I charge Rs 100 crore this yr and rs 200 crore next yr then adequate approval procedure is must according to basel 2 . 4. Loan loss procedure: out of our total credit portfolio if we find that our anticipated loan loss is more than the provisions made for it then it also affects asset quality.