NATIONAL GOOD
GOVERNANCE DIALOGUE
Asian Corporate Governance
Deddy Setiady Koesmana
dkoesmana@deloitte.com
+62811893797
December 14, 2015
0
Agenda
• Corporate Governance Vs Firm
Performance: Theoretical
Perspectives
• Asian Corporate Governance Rankings
• Indonesian Banking CG Practices
• Corporate Governance Trends
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Agency Theory
Abdullah and Valentine, 2009
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Stakeholder Theory
Donaldson and Preston, 1995
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Stewardship Theory
Aydemir, 2012
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Agenda
• Corporate Governance Vs Firm
Performance: Theoretical Perspectives
• Asian Corporate Governance
Rankings
• Indonesian Banking CG Practices
• Corporate Governance Trends
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
5
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Source: Asian Corporate Governance
Association
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Source: Asian Corporate Governance
Association
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Source: Asian Corporate Governance
Association
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Agenda
• Corporate Governance Vs Firm
Performance: Theoretical Perspectives
• Asian Corporate Governance Rankings
• Indonesian Banking CG
Practices
• Corporate Governance Trends
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
11
An Overview.. .
Banking Soundness Assessment in Indonesia
Supervisory Review and Evaluation Process
Minimum Capital
Requirement Policy
Assessment on Conventional Bank Soundness
CAR
Risk Profile
GCG
Risk Profile Rank 1: 8%
Inherent Risk
SE BI
15/15/DPNP
(GCG)
Risk Profile Rank 2: 9% -<10%
Risik Profile Rank 3: 10% -<11%
Risik Profile Rank 4-5: 11-14%
Rating Element
Understand the 11 Rating
Element
Assess every element on:
•
Governance Structure
•
Governance Process
•
Governance Outcome
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
Capital
Quality of Risk
Management
Implementation
Understanding the New GCG Policy
Self Assessment
Aspect
Earnings
Self Assessment
Rating
Assign a suitable self
assessment rating
What’s New?
•
Assessment for each element will be organized into 3
aspects (Structure, Process, and Outcome)
•
Assessment will considering significance and materiality
•
Quality of Risk management implementation will be impact
by GCG implementation
•
Self assessment will be conducted semiannual based on
assessment for “Tingkat Kesehatan Bank Umum”,
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An Overview.. .
Banking Soundness Assessment in Indonesia
Kualitas Manajemen
Penerapan Good
Corporate Governance
(GCG)
Penilaian Profil Risiko
Tugas Dekom & Direksi
Risiko Kredit
Tugas Komite
Risiko Pasar
Fungsi Kepatuhan, audit
intern, dan eksternal
Risiko Operasional
Manajemen Risiko
Risiko Likuiditas
Penyediaan Dana Besar
dan Pihak Terkait
Risiko Hukum
Rencana Strategis Bank
Risiko Kepatuhan
Transparansi
Risiko Strategik
Earning
Peringkat
Komposit
TKB RBBR
Permodalan
Risiko Reputasi
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BI CG Principles & Aspects
T A R I F
1.Governance structure
2.Governance process
3.Governance outcome
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
Minimum Factors of BI GCG Assessment
GS GP GO
1. Pelaksanaan tugas dan tanggung jawab Dewan Komisaris
2. Pelaksanaan tugas dan tanggung jawab Direksi
3. Kelengkapan dan pelaksanaan tugas Komite
4. Penanganan benturan kepentingan
5. Penerapan fungsi kepatuhan
6. Penerapan fungsi audit intern
7. Penerapan fungsi audit ekstern;
8. Penerapan manajemen risiko termasuk sistem pengendalian intern
9. Penyediaan dana kepada pihak terkait (related party) dan
penyediaan dana besar (large exposures)
10. Transparansi kondisi keuangan dan non keuangan Bank, laporan
pelaksanaan GCG dan pelaporan internal
11. Rencana strategis Bank
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
Composite Rating
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Know Your Risk Management and Good
Corporate Governance Implementation
Bank Indonesia GCG Framework
Implementation of BoC roles and responsibility
Implementation of BoD roles and responsibility
Implementation of risk management and internal control
Bank’s business plan
Implementation and completeness Committee roles and
responsibility
Conflict of interest handling
Implementation of compliance function
Implementation of internal audit function
Implementation of external audit function
Funding to related parties
Financial and non financial disclosure
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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What is the effect of the
implementation of Bank Indonesia
Regulation No.13/1/PBI/2011 (RBBR)
on the firm value of banking
companies (PBV)?
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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Agenda
• Corporate Governance Vs Firm
Performance: Theoretical Perspectives
• Asian Corporate Governance Rankings
• Indonesian Banking CG Practices
• Corporate Governance Trends
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
19
Key governance issues for 2015
• Through the eyes of the board
− Strategy
− Reputation
• A director’s perspective
− Subsidiary governance
− Board composition
− Regulation
− Technology
− Organizational talent
− Activism
− Corporate reporting
− Sustainability
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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No One-Size-Fits All
ID
UK
US
Good Corporate Governance
implementation for commercial
bank stipulated by Bank
Indonesia regulation on 2013
The UK Corporate
Governance published by
Financial Reporting
Council (FRC) 2014
Corporate Governance
is determined
predominantly by
legislation in the form of
the Sarbanes-Oxley Act
of ("SOX") 2002 published by US
Congress
King Report on
Corporate Governance
(2010) – published by
King Committee
Main principle are BoC - BoD
role and responsibility,
sufficiency of internal control
committee, compliance, internal
auditor, external auditor and
risk management function,
funding to related parties, bank
strategic plan, and financial
statement transparency
Main Principles are:
Leadership,
Effectiveness,
Accountability,
Remuneration and
Relations with
Shareholders
Main Principles are:
establishment of Public
Company Accounting
Oversight Board
(PCAOB), Corporate
Responsibility, Financial
Disclosure, Corporate
Fraud
Main Principles are :
Leadership,
Sustainability and
Corporate Citizenship
“Comply or Else”
“Comply or Explain”
“Comply or Else”
“Apply or Explain”
Enforced by Legislation
Enforced by
Legislation
Enforced by Legislation
Not Enforced by
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
SA
Legislation
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King III
What is King Report on Corporate Governance?
The King Report on Corporate Governance (collectively is called King III) is a ground-breaking code of corporate
governance in South Africa issued by the King Committee on Corporate Governance.
The King Report on Corporate Governance has been cited as the most effective summary of the best international practices
in corporate governance. Three reports were issued in 1994 (King I), 2002 (King II), and 2009 (King III).
King III report was released on 1 September 2009 and is effective from 1 March 2010. In contrast to King I and King II,
King III applies to all entities regardless of the manner and form of incorporation or establishment. Principles are
drafted on the basis that, if they are adhered to, any entity would have practiced good governance.
Boards of directors are confronted with many difficult decisions on a regular basis. The right choice is not always obvious.
The King Report on Governance for South Africa 2009 (King III) provides a list of best practice principles to assist and guide
directors to make the right choice for their company.
King III provides guidance to all corporate entities on various governance in related aspects, as follows:
1. Ethical leadership and corporate citizenship
2. Boards and directors
3. Audit committees
4. The governance of risk
5. The governance of information technology (IT)
6. Compliance with laws, rules, codes and standards
7. Internal audit
8. Governing stakeholder relationships
9. Integrated reporting and disclosure.
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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King III Overview
Taking stock
Although the King III Report builds on the pertinent issues as raised in King I and King II, the
promulgation of the Companies Act, as well as the focus on sustainability, necessitated the inclusion of
or renewed emphasis on a number of issues. These include:
• Integration of strategy, sustainability and governance
• A number of matters concerning the board and directors, such as the composition of the board, duties for the
chairperson and the CEO, the board appointment process, director development, remuneration, and
performance assessment of directors
• Clearly defined role and functions of the audit committee
What’s
New in
King III
• While not a new concept, emphasis on the risk based approach to internal audit and the strategic positioning
of the internal audit function within the company
• Inter-relation between risk management and the company’s strategic and business processes
• The concept of combined assurance
• Alternative dispute resolution and stakeholder relationships
• IT governance and IT risk management
• Compliance with laws and regulations
• Integrated reporting and disclosure
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
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King III GCG
Principles
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
Governance
Elements
Recommended
Practices
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Aligning Role Players
Integrated Report Audit
by 3rd Party
Organization Strategy
Strategic Objectives
Risk circumventing achievement of
Strategic objectives
Written Assessment
by Internal Audit
Combined
Assurance
Internal
Control
Internal Controls
Risks
Combined Assurance
Written Assessment
by Internal Audit
Integrated Report
Audit by 3rd Party
Strategic
Objectives
Organization
Strategy
Risk Appetite
Strategic
Compliance
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Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
Combined Assurance Model
Management
Assurance
Control
Identification &
Management of Risk
Assurance Providers
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
Financial
Control
Assurance
Combine
Assuranc
e
Control
Assurance
Risk
Assurance
&
Monitoring
Legal
Monitoring & Assurance
Control
Assurance
Risk
Assurance
&
Monitoring
Complianc
e
Assurance
&
Monitoring
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Maturity Model
Assurance Maturity Model
Optimized
Unaware
Fragmented
Integrated
Comprehensive
Maturity level
Policy
Assurance policies are
not defined or in place
Assurance policies are
defined and in place but
may not be documented
Assurance policies are
defined, in place, and
documented
Assurance policies are
communicated to
personnel and training
occurs as necessary
Continuous monitoring and
updating for necessary
changes and emerging
leading practices
Methodology
And Process
Methodology and
processes are not
defined or in place
Uniform methodology
and processes are
defined and in place but
may not be documented
Uniform methodology and
processes are defined, in
place, and documented
Methodology and
processes are
communicated to
personnel and training
occurs as necessary
Continuous monitoring and
updating for necessary
changes and emerging
leading practices
People
Resource skills and
credentials do not
match process
requirements; training
programs not defined
Some specialized
technical skills and
credentials; training and
development defined
but may not be
documented
Appropriate skills and
credentials in place;
training requirements
documented and executed
All resources have
appropriate skills and
credentials; targeted
training and development
in place
Subject matter experts are
identified and used; training
and development monitored;
robust succession planning
in place
Systems and
Information
High reliance on
manual systems and
spreadsheets;
critical information not
readily available
Fairly effective systems
are in place; low
reliance on data and
information generated
from systems
Stable systems in place;
information generated is
reliable and relied upon
Data integrity is high;
automated reports are
reliable; key data is
monitored continuously
Extensive use of data mining
and analytics; continuous
assurance and monitoring
processes in place driving
value
Communicatio
n and
Reporting
Communication and
reporting done on an
ad hoc basis; no
validation of results or
focus on quality
Communication and
reporting processes are
defined and in place but
may not be documented
Communication and
reporting processes are
defined, in place, and
documented; effective use
of reporting templates
Communication and
reporting highly effective;
quality and timeliness
metrics defined and
monitored
Communication and
reporting highly effective;
high level of quality
demonstrated in timely
reports
Deddy Setiady Koesmana, dkoesmana@deloitte.com, +62811893797
Thank You
Deddy Setiady Koesmana
dkoesmana@deloitte.com
+62811893797
29