The Case Of The Failed Australian Insurance Company

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Identify the issue and argument This essay will discuss how to use corporate governance to prevent corporate failure. I will use the case of the failed Australian insurance company HIH to argue how to use ASX Corporate Governance Principles to prevent corporate failure. I will recommend to apply three ASX Corporate Governance Principles to change the HIH situations and finally choose the best course of action of the three. Corporate governance is ‘the system by which business corporations are directed and controlled.’(Cowan, 2004, p. 15) However, there is no specific definition for corporate failure, the definition also vary in different countries. In Australia, the term ‘insolvency’ is commonly used to indicate the scenario of liquidation for an organization, while ‘bankruptcy’ refers to individuals. (Rankin, Stanton, McGowan, Ferlauto, & Tilling, 2012, p. 365) The qualifiers that limit the argument is that ASX Corporate Governance Principles could not promise the survival of organizations in some uncontrollable situations, for example, the Great Depression between 1929-1933. Define the context There are three main reasons cause the collapse of HIH. The first reason is ‘under-provisioning’. In the process of preparing budget for reserves, the board depend on calculations by independent actuaries and on the evaluation of those reports by the auditors. The actuarially based assumptions on those factors, such as discount rates and claims-handling costs, for which small changes

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