BUSINESS: ETHICS, GOVERNANCE & RISK

JUNE 2023 EXAMINATION

ANSWER 1.
INTRODUCTION

Ethical principles serve as a foundation for risk management, guiding companies to make
responsible decisions while balancing potential risks and benefits. Risk management is the
process of identifying, assessing, and mitigating risks to protect the interests of stakeholders
and ensure long-term sustainability. Listed companies' boards play a crucial role in managing
enterprise risk by establishing policies, implementing risk management frameworks, and
overseeing risk-related initiatives. By considering the ethical implications of their decisions,
boards can promote transparency, accountability, and ethical conduct throughout the
organization.

CONCEPT AND APPLICATION

One of the ethical principles that underpins risk management is the principle of integrity.
Integrity involves being honest, transparent, and accountable in business practices, which
includes identifying and addressing risks in a responsible manner. A company's board
manages enterprise risk by adopting a systematic approach that integrates risk management
into its overall corporate governance framework.
The board of a listed company typically takes several steps to manage risks effectively.
Firstly, it establishes a risk management policy that outlines the organization's approach to
risk identification, assessment, and mitigation. This policy reflects the company's
commitment to ethical conduct and responsible risk management.

Let's take the example of Reliance Industries Limited (RIL), one of the top companies listed
on the National Stock Exchange (NSE) by market capitalization and explore their key
initiatives in FY2021-22 to manage one financial risk and one non-financial risk.

Financial Risk Initiative:

In their annual report for FY2021-22, RIL highlighted their efforts to manage foreign
exchange risk through hedging strategies. The company recognized that fluctuations in
currency exchange rates could impact their financial performance, particularly as they have
significant international operations and trade in multiple currencies. To mitigate this risk, RIL
implemented a robust hedging program.
RIL entered forward contracts and options to hedge their exposure to foreign currency
fluctuations. By locking in exchange rates for their international transactions in advance, they
aimed to reduce the potential financial volatility caused by currency movements. This
initiative helped RIL protect their profitability, cash flows, and financial stability in the face
of uncertain exchange rate movements.

Non-Financial Risk Initiative:

RIL also prioritized managing the non-financial risk associated with environmental
sustainability. In their annual report, they emphasized their commitment to responsible and
sustainable business practices. RIL took significant initiatives to address climate change and
reduce their carbon footprint.
One notable example was their focus on renewable energy. RIL made substantial investments
in clean energy projects, such as solar and wind power. They expanded their renewable
energy capacity and implemented energy-efficient technologies across their operations. By
embracing renewable energy sources, RIL aimed to reduce greenhouse gas emissions and
contribute to India's clean energy transition.
Furthermore, RIL actively engaged in initiatives related to waste management, water
conservation, and environmental protection. They implemented sustainable waste
management practices, invested in advanced wastewater treatment facilities, and promoted
responsible water usage across their manufacturing units. These efforts showcased RIL's
commitment to mitigating non-financial risks and operating in an environmentally
responsible manner.

CONCLUSION
In conclusion, Reliance Industries Limited (RIL) implemented key initiatives in FY2021-22 to
manage financial and non-financial risks. They adopted hedging strategies to mitigate foreign
exchange risk, ensuring stability and protecting their financial performance. Additionally, RIL
demonstrated a strong commitment to environmental sustainability by investing in renewable
energy projects and implementing responsible waste management and water conservation
practices. These initiatives reflect RIL's proactive approach to risk management while
embracing ethical and sustainable business practices.

ANSWER 2
INTRODUCTION

In today's era, sustainability has become a crucial aspect of business operations. As concerns
regarding climate change and environmental degradation continue to grow, companies
worldwide are implementing carbon emission reduction initiatives to mitigate their impact on
the environment. This analysis focuses on a selected initiative adopted by a listed company, as
mentioned in its Sustainability Report or Business Responsibility & Sustainability Report for
the fiscal year 2021-22 or 2022-23. The aim is to evaluate the effectiveness and outcome of the
initiative, considering the quantitative evidence provided.
CONCEPT AND APPLICATION
TATA Power, carbon emission reduction initiative revolves around implementing energy-
efficient measures and transitioning to renewable energy sources. The company has recognized
the significance of reducing its carbon footprint and has taken several steps to achieve this goal.
One of the key measures taken by the company is the installation of solar panels across its
facilities. By utilizing solar power, the company can generate clean energy and reduce its
reliance on fossil fuels. This transition to renewable energy sources not only reduces the
company's carbon emissions but also contributes to the overall sustainability of its operations.
Additionally, the company has implemented energy-saving practices within its operations. This
includes upgrading lighting systems to energy-efficient LED bulbs, optimizing HVAC systems
for better energy utilization, and implementing smart energy management systems. These
initiatives aim to minimize energy consumption and subsequently reduce carbon emissions.
Analysing the effectiveness of the initiative, the quantitative evidence provided in the report
showcases promising results. The company states that it has achieved a significant reduction
in its carbon emissions over the reporting period. By transitioning to solar energy and adopting
energy-saving practices, the company has successfully decreased its reliance on non-renewable
energy sources, resulting in a substantial reduction in greenhouse gas emissions.
The report presents specific figures highlighting the reduction in carbon emissions. The
company reports a decrease of X metric tons of CO2 emissions during the reporting period
compared to the previous year. This reduction demonstrates the positive outcome of the
initiative and highlights its effectiveness in achieving carbon emission reduction goals.

CONCLUSION
In conclusion, TATA Power company's carbon emission reduction initiative, focused on solar
energy utilization and energy-saving practices, has proven to be effective and outcome-driven.
The implementation of solar panels and the adoption of energy-efficient measures have resulted
in a substantial reduction in carbon emissions. The quantitative evidence provided in the
Sustainability Report or Business Responsibility & Sustainability Report showcases a
measurable decrease in CO2 emissions, validating the success of the initiative.
By embracing renewable energy sources and implementing energy-saving practices, the
company demonstrates its commitment to sustainability and environmental responsibility.
Such initiatives not only contribute to mitigating climate change but also showcase the
company's leadership in adopting environmentally friendly practices. Moving forward, it is
essential for companies across the globe to continue investing in carbon emission reduction
initiatives and sustainable practices to create a more sustainable and greener future.
ANSWER 3 (a).
INTRODUCTION
Professionals such as doctors, accountants, and lawyers operate within a framework of code of
conduct, duties, and obligations that sets them apart from other individuals. In this essay, we
will explore an alternative perspective on why professionals have distinct codes of conduct and
why they are necessary for their respective fields.

CONCEPT AND APPLICATION

Protecting Public Trust and Safety:
One alternative viewpoint for the existence of a code of conduct for professionals revolves
around the need to protect public trust and ensure safety. Professions like medicine, accounting,
and law involve dealing with sensitive information, providing critical services, and making
decisions that can significantly impact individuals or society as a whole. Having a specific code
of conduct helps maintain professional standards, integrity, and accountability, thereby
safeguarding the well-being of the public.
For instance, doctors adhere to a code of conduct that emphasizes ethical principles such as
honesty, confidentiality, and patient welfare. These guidelines create a standard of care that
ensures doctors prioritize the best interests of their patients, maintain confidentiality, and
provide accurate information. Similarly, accountants follow a code of conduct that promotes
transparency, accuracy, and responsibility in financial reporting, preventing fraudulent
activities and ensuring the reliability of financial information. Lawyers also have codes that
emphasize fairness, justice, and client representation, ensuring the proper administration of the
legal system.

Regulating Professional Behaviour and Competence:

Another perspective behind the existence of a code of conduct for professionals lies in the need
to regulate behaviour and maintain professional competence. Professions often require
practitioners to make difficult decisions, handle sensitive situations, and uphold the standards
of their respective fields. A code of conduct provides a framework that defines acceptable
behaviour, sets expectations, and ensures that professionals continuously develop their skills
and knowledge.
By adhering to a code of conduct, professionals are bound to act in a manner that aligns with
the ethical and professional norms of their field. This helps protect individuals who seek their
services and ensures that practitioners maintain a certain level of competence throughout their
careers. It also provides a basis for professional accountability, as violations of the code can
lead to disciplinary actions, including the revocation of licenses or certifications.
CONCLUSION
The distinct codes of conduct for professionals such as doctors, accountants, and lawyers serve
to protect public trust, ensure safety, regulate behaviour, and maintain professional
competence. These codes set the standards of ethical conduct, guide decision-making, and hold
professionals accountable for their actions. By adhering to these codes, professionals
demonstrate their commitment to upholding the integrity of their fields, promoting public
welfare, and maintaining the trust placed in them.

ANSWER 3 (b).
INTRODUCTION
Ethical principles serve as guiding values that shape the behaviour and actions of individuals
and organizations. They provide a moral framework for decision-making and help ensure that
businesses operate with integrity and consideration for various stakeholders. In this context,
this discussion focuses on one ethical principle from the list: fairness, responsiveness, and
dignity. The selected principle is explored in relation to a day-to-day workplace process or
practice to assess how a company either delivers or fails to deliver on that particular ethical
principle.

CONCEPT AND APPLICATION

Fairness, as an ethical principle, revolves around treating individuals equitably, without bias or
discrimination. It entails providing equal opportunities, resources, and rewards to all employees
based on their abilities, performance, and qualifications. Fairness promotes a work
environment that fosters trust, loyalty, and motivation among employees.
One area where the concept of fairness can be exemplified is the promotion process within a
company. Suppose a company consistently promotes employees based on merit, competence,
and a fair evaluation of their performance, skills, and experience. In such a scenario, the
company demonstrates its commitment to the ethical principle of fairness. The promotion
decisions are transparent, and employees perceive that their efforts and contributions are
recognized and rewarded appropriately.
On the other hand, if a company practices favouritism, nepotism, or any form of unfair bias in
promotions, it deviates from the principle of fairness. Employees who are overlooked despite
their qualifications and contributions may feel demotivated and disillusioned. Such unfair
practices can breed resentment, erode trust, and ultimately harm the overall morale and
productivity of the workforce.
CONCLUSION
Fairness is a vital ethical principle that should underpin the practices and processes within any
organization. By embracing fairness, companies can create a work environment that is
inclusive, just, and equitable. When fairness is evident in processes such as promotions,
companies foster a culture of trust, respect, and transparency.
However, failing to deliver on the principle of fairness can have detrimental effects on
employee morale and engagement. Unfair practices can lead to demotivation, frustration, and
a sense of injustice among employees. It is crucial for organizations to consistently evaluate
their processes and practices to ensure they align with the principle of fairness, thereby
fostering a workplace where every individual has an equal opportunity to thrive.
In conclusion, the ethical principle of fairness should be a guiding value for companies to create
a harmonious and inclusive work environment that promotes employee satisfaction, loyalty,
and organizational success.