Impact of Corporate Governance in Curtailing Financial Risks in Organizations in the United Kingdom - Dissertation Example

?Research Proposal on Corporate Governance By [Presented to] of [September 30, Chapter Introduction of the Research 1.1 Introduction Every research is concerned with some specific and relevant information adding some value to the social, business and economic environment. The researcher wanted to come up with a research proposal offering a broader scope along with certain tangible and intangible value. The title of the research is “Impact of Corporate Governance in Curtailing Financial Risks in Organizations in the United Kingdom”. However, the researcher is very keen to use the experience gained from conducting the research in the United Kingdom in his parent country, Saudi Arabia. The primary reason behind choosing the United Kingdom as the preferred country for conducting the research is the scope offered by the country to assess the impact and role of corporate governance. The current News Corp Fiasco affecting the financials of the organization can be considered as a prime example of lack of corporate governance that affected the social, political, business and economic environment of the country. Corporate governance is often considered as a set of rules and policies affecting individuals and societies across the country. There is very little doubt over the role of corporate governance in curtailing financial risks among a number of organizations operating in retail, media and financial industry. The scope of the chosen topic is pretty wide and broad and to make it a bit more impactful; media and financial industry has been targeted to have a close look on their corporate governance policies and rules affecting the social and economic environment. Corporate governance can be an answer to a number of questions but needs to be dealt with utmost honesty and transparency in order to reap desired results and benefits in the present as well as in the future (Sun, William (2009) 1.2 Research Aims and Objectives The research aims at identifying the role of corporate governance in curtailing financial risks in financial institutions in the United Kingdom. The research also aims at analysing the findings in context to the corporate governance prevailing in Saudi Arabia. Corporate governance is a set of rules and regulations affecting the political, social and economic environment of a nation and the research aim at analysing the same in an analytical manner. In order to achieve above mentioned aims, the research focuses on objectives including: To analyse the impact and influence of corporate governance on the social, political and economic environment of the United Kingdom To investigate the reasons of financial risks and role of corporate governance in curtailing it To evaluate the contribution of corporate governance in offering transparency and systematic approach to deal with the social and business environment 1.3 Research Purpose The major purpose of the research is to identify the role of corporate governance in curtailing financial risks in financial institutions in the United Kingdom along with assessing its influence over the business and social environment. This would further help in understanding and analysing the loopholes pertaining to corporate governance. 1.4 Research Gap The researcher accepts the fact that many researchers have followed single and multi cue approach for this particular subject but very few have used conjoint analysis approach that would be used to assess the importance of corporate governance in curtailing financial risks. It would further help in analysing its role in context to Saudi Arabia in the near future Chapter 2: Literature Review 2.1 Introduction The chapter starts with introducing the concept of Corporate Governance along with highlighting its role in curtailing financial risks in the financial institutions. It also highlights reasons behind a number of financial risks along with the need of introducing effective corporate governance measures. 2.2 Corporate Governance Clarke and Thomas (2004) defined corporate governance as a set of processes and policies affecting the way an organisation is directed, controlled and administered in the political, social and business environment. The accountability of individuals and organizations in the society is assessed through corporate governance in an effective and efficient manner. Until very recently, the financial services sector in the United Kingdom has been managed and regulated in a unique self regulated environment where interested bodies stood up when problems arose and offered solutions. This system has several critics but the combination of efficient financial services organizations and cooperative government controlled and administered the industry in an exemplary manner. However, with a number of scandals, the state took the regulatory control of the area in the year 1997 offering very little scope to the self regulated process. It needs to be understood that corporate governance must have played a unique role in offering freedom to independent and government bodies in regulating and administering the industry. The state took the control because of a series of scandals lacking corporate governance. As per Stevenson’s (2004) report published in The Independent, one of the most unfortunate financial scandals include the Lloyd of London; the oldest and most trusted financial institution in the United Kingdom. The bank gambled its fortune along with the fortunes of few hundred investors and went under huge debts. These debts were not disclosed and at one time, the Lloyds of London was facing severe charges of duping hundreds of investors. The financial statements were not transparent enough to guide investors and corporate governance was mocked at will. As per Brummer’s (2008) report published in Mail Online, Northern Rock; one of the most dynamic lenders in the Britain’s mortgage business was under serious troubles. The bank was bailed out by the Bank of England as the liquidity froze. The bank was in a danger of running out of the ready cash and it was not being able to balance its financial books. The shareholders and investors panicked looking for an answer and assumed that there was a serious credibility gap between what the bank said and the reality of the situation. The bank’s website froze and online transfer of money became a distant dream raising questions over the trading of the bank in the financial environment and even bankruptcy and drying of all funds making thousands of investors bankrupt. Corporate governance could have played an important role by being transparent and honest with shareholders along with maintaining a serious code of conduct based on ethics but was mocked and snubbed for illogical reasons. There is no denying that over the years, financial institutions like Royal Bank of Scotland, Lloyds of London, Northern Rocks and News Corp has been a culprit of disrespecting corporate governance along with playing with the emotions of millions. This particular research has great scope of assessing the role of corporate governance in curtailing financial risks in the financial industry of the United Kingdom. The ethical practices and an honest approach embedded with utmost transparency would have made some differences in avoiding scandals and curtailing risks; the research aims at exploring all these possibilities in an analytical manner. Chapter 3: Research Methodology 3.1 Introduction This chapter starts with illustrating the research approach, philosophy and methods used in achieving the research aim and objectives. The later part of the research methodology highlights the data collection methods and mode of samples and measurements scales in an informative manner. 3.2 Research Philosophy Saunders (2003) defined research philosophy as an individual perspective towards knowledge and thinking. The research philosophy can be categorized under two approaches; positivist and phenomenological approach. The positivist approach is driven by statistical analysis, hypothetical tests, experimental analysis and mathematical calculation and analysis while phenomenological approach talks about interpreting and analysing the social world that is perceived as too complex in developing and designing the research. This research paper follows the positivist approach that aims at conducting research by garnering data through surveys along with understanding, analysing and assessing responses through statistical studies. 3.3 Research Approach Research approaches defines the scope of the research and include deductive and inductive research approach. The deductive approach talks about a general idea and discussion by narrowing it down to the point offering concrete conclusions while the inductive approach talks about a specific discussion and idea by narrowing it down to general opinions and conclusions. In this particular research, deductive approach has been favored to understand and analyse the impact of corporate governance in curtailing financial risks by narrowing it down using statistical tools and techniques offering solutions and conclusions. 3.4 Research Design Research design can be categorized under descriptive and explanatory. Descriptive research design includes primary data while explanatory research design includes secondary data Descriptive studies defines demographics and variables along with its impact and influence generated through questionnaires and surveys in an analytical manner. In this particular research, both explanatory and descriptive methods would be favored to collect primary and secondary data. The primary data would include surveys, questionnaires and interviews while secondary data would include data and information garnered from secondary sources like academic journals, books and the internet. 3.5 Data Collection Methods 3.5.1 Primary and Secondary Data Primary data is first hand data often considered as a raw data garnered from first hand sources and resources that are yet to receive meaningful understanding and analysis. The primary data would be garnered through surveys to support and achieve the aim and objectives of the research while secondary data would be collected to support primary data along with comparing the end result in a critical and logical manner. 3.5.2 Questionnaire Design In order to achieve research aims and objectives, questionnaire would be based on Likert Scale and multiple choices. These questionnaires would be distributed to a number of people within the United Kingdom. The questionnaires would be uploaded on www.surveymonkey.com to win the trust of respondents along with offering them freedom of speech and expression. A total of 200 respondents would be targeted out of the sample size of 300 to achieve desired results and objectives of the research. 3.6 Population and Sample Selection In order to analyse the role of corporate governance in curtailing financial risks in the financial institutions in the United Kingdom, it is important to target organizations and common people. The sample size for the research has been fixed to 30 for financial organizations and 200 for common man out of the total sample size of 300. Organizations like HSBC, Barclays, RBS, Lloyds TSB and many more would be questioned on corporate governance and its impact on curtailing financial risks. The managers would be contacted via telephone, emails and personal visits through prior appointment and accordingly information would be garnered. At the same time, common people would be questioned over the internet and accordingly their views and opinions as customers would be analysed and assessed. This would further help in comparing the views of financial institutions and customers on corporate governance as a proposed solution for curtailing financial risks. Variable Items Gender Male Female Age 18 - 29 30 - 45 Over 45 Education High school College/University Postgraduate Monthly income $ 100- $500 $500- $1000 $1000- $5000 Chapter 4: Data Analysis 4.1 Introduction This chapter would highlight how the garnered data would be analysed and assessed using statistical and analytical tools. There is no denying that data analysis offers solutions in the form of facts and figures that play an important role in developing conclusions. In this particular research a number of statistical tests were though of but only three statistical tests would be used to analyse the garnered data by using Statistical Package for Social Sciences software (SPSS). 4.2 Reliability Analysis This test helps in measuring the reliability of the measured variables like organization’s approach, government regulations, customer’s needs and social economic pressure. Cronbach’s Alpha would be used to analyse the reliability of these variables based on an alpha of >0.50. This would help in checking the reliability of the whole research (Allen, Yen, 2002) 4.3 Descriptive Analysis Descriptive analysis is used to ascertain mean, deviations, frequencies and percentages. It is very much required in analysing the demographic factors and general tendencies and behavior of chosen samples in a logical manner. This also can be considered as an important part of the data analysis adding great value to the entire research by calculating general mean and frequencies of the sample size. 4.4 Correlation Analysis Correlation analysis is considered as an ideal statistical tool to analyse the correlation between the two variables in a logical manner. It is measured on a scale of +1 and -1 highlighting the positive and negative relationship between variables. If the result shows -1, then there is negative relationship and vice versa. This analysis would help in correlating with the variables. Chapter 5: Interpretation and Conclusion 5.1: Introduction This chapter would highlight the overall findings and future scope of the research in an informative and illustrative manner in context to the data analysis and literature review. 5.2: Findings The impact of corporate governance in curtailing financial risks in the financial institutions of the United Kingdom would be presented in the form of findings based on the conclusion and analysis. This would also help in ascertaining whether corporate governance can be used as a tool for curtailing financial risk or not. 5.3 Limitations and Recommendations The final research would face a number of limitations like time constraint, respondent’s issues and contacting financial institutions. The observed limitations would be highlighted in an honest and ethical manner along with recommending suggestions and solutions to overcome them in the present as well as in the future. It needs to be understood that internal and external environment creates risks that can be minimized by ethical corporate governance requiring help and support from the social, business, economic, political and global world. 5.4 Conclusion This chapter would present the conclusive information collected through thorough analysis of literature and garnered data. 5.5 Bibliography and Appendix This section would highlight the references garnered from authentic sources and resources like books, journals, newspapers, questionnaires and academic sources. Timescale for the Research References Alex Brummer (2008) .The man who crocked Northern Rock- and how the scandal will cost ? 55 billion, Mail Online, [Online]. Available at [Accessed 30 September 2011] Allen, M.J., & Yen, W. M. (2002). Introduction to Measurement Theory. Long Grove, IL: Waveland Press. Clarke, Thomas (ed.) (2004) "Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance," London and New York: Routledge, Denis, D.K. and J.J. McConnell (2003), International Corporate Governance. Journal of Financial and Quantitative Analysis, 38 (1): 1-36. Mark Saunders (2003) Research Methods for Business Students, McGraw Hill. Rachel Stevenson (July 5, 2004) Ten years after Lloyd"s of London Scandal, investors’ faces new threat of financial ruin, The Independent, [Online]. Available at [Accessed 30 September 2011] Sun, William (2009), How to Govern Corporations So They Serve the Public Good: A Theory of Corporate Governance Emergence, New York: Edwin Mellen 1-36 Read More