Comparative Studies on Effect of Business Troubles to Corporate Performance and Internal Control Practice -

2003 Fiscal Year Final Research Report Summary

• Project/Area Number: 13630141
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Single-year Grants
• Section: 一般
• Research Field: Business administration
• Research Institution: Kyushu University
• Principal Investigator: NAKAMURA Hiroaki Kyushu University, Graduate School of Economics, Professor, 経済学研究院, 教授 (60325553)
• Project Period (FY): 2001 – 2003
• Keywords: Business Troubles / Risk Management / Compliance / International Corporations / Business Performance / Risk Control / Internal Control / Corporate Ethics

Research Abstract

In the Japanese business community, many companies began to realize the necessity of establishing organizational risk management program and internal control systems, however, few companies take steps in scientific approach for better internal control of management. Furthermore, few companies analyze their business risk factors sufficiently and control risks having integrated risk management programs. When companies face serious business troubles, they set up such temporary measures as 'training programs' and 'compiling ethics manuals' to cope with the issues. These actions may be effective occasionally, but not sufficient for turning the organizational behavior around.
During this research, I recognized that the large and matured global companies in the US and European countries have integrated risk management programs and internal control systems which stress not only "Conformance" but the equilibrium between "Conformance" and "Performance" of their businesses. They cover wide range of risk factors from pure risks to management's ethics. Even in such competent risk management programs, many business troubles happened in recent years. Those incidents (especially accounting fraud) happened, in many cases, to satisfy individual's personal interests.
Both in Japan and other developed countries, social criticism against the troubled companies gradually weakens once the companies get financially recuperate even though the fundamental causes or reasons of risks have not been completely swept away Highly evaluated companies (from the risk management, legal compliance and corporate ethics point of view) equip good internal control programs not because they faced serious business troubles in the past, but they believe that the good risk management enhances good performance of the companies.