Recently, there has been a noticeable advance in the field of corporate governance in many countries. Mauritius, as well, has shown its concern for good governance through the introduction of its own code of corporate governance in 2004.

During the last decade, the financial services sector started to become one of the major pillars of the economy. The nature and complexity of this particular sector has needed the set up of the Financial Services Commission, as a regulator, and new enactments and amendments in laws governing financial operations.

The Collective Investment Industry has also experienced major changes. Previously, Collective Investment Schemes (CIS) were managed by Asset Managers and were fairly regulated. With the growing interest of investors in collective funds, it became necessary to regulate asset management firms as they involved large amount of funds under their management. The securities act was amended and other regulations were introduced to regulate the industry. However, though being a highly regulated industry in many countries, a series of corporate scandals and malpractices have still been witnessed in fund management.

1.2 Motivation of study

In Mauritius, evidences in many corporate governance studies and dissertations have shown that firms in various sectors as well as in the financial services sector do not maintain a robust corporate governance structure. Moreover, there has been a widely held perception that in recent years many boards have not managed the risks associated with their businesses. The Board of Directors is usually the one who is responsible for good governance practices and to implement efficient risk management procedures in an organisation. Risk mitigation and good governance practices are an important concern in CIS. However, there are little research in the field of risk management and corporate governance in the management of collective investment schemes.

The aim of this study is to examine risk management practices by CIS Managers and their compliance to the rules ascertaining good governance. Analyses are performed at board level to determine the effectiveness of board and board committees in the management of collective investment. The research also identifies the different risks and risk management techniques involved while managing the funds and how good governance practice aid in mitigating those risks.

1.3 Outline

Chapter 1:Introduction

This chapter gives an overview of the dissertation.

Chapter 2: Literature Review

It provides a study of corporate governance and good governance practices and requirements for good risk management process through board structures.

Chapter 3: Background

The purpose of this chapter is to outline the CIS industry in Mauritius and provide an overview of CIS Management companies.

Chapter 4: Research Methodology

Chapter 4 describes the means and ways adopted to carry out the research for this dissertation. A description of the types of methods used will also be given, followed by an explanation of the problems faced while collecting the data.

Chapter 5: Analysis & Findings

This part of the dissertation displays an overview and a general indication of the findings from the survey carried on corporate governance and risk management in CIS Managers.

Chapter 2.

Literature Review

“Reading maketh a full man; conference, a ready man; and writing, an exact man.”

~ Francis Bacon ~

2.0 Literature Review

2.1 Corporate Governance

2.1.1 History

Corporate Governance has been practised ever since the existence of corporate entities. Yet, the study of the subject is as old as about half a century only. The UK Cadbury Report in the 1990’s considerably influenced thinking about good governance practices in many countries. Soon later, many of them founded their own reports on corporate governance; for instance, the Viénot Report (1995) in France, the King Report (1995) in South Africa, the Report on corporate governance in Hong Kong (from the Hong Kong society of Accountants in 1996), the Netherlands Report (1997), amongst others. Corporate Governance is now viewed as the practise to which an organisation is run; laying emphasis on accountability, integrity and risk management.

2.1.2 Definition

Although being an extensively researched subject, researchers and academics have, till now, not yet arrived to a common and widely accepted definition to corporate governance. Shleifer and Vishny, (1997) put it as “dealing with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.” Other explanations were provided by Monks and Minow (1995) [i] , the Cadbury report (1992) [ii] , the World Bank report (1999) [iii] , Mathiesen (2002) [iv] , amongst others. However, a proper and elaborated definition seems to be that of the OECD (2004), stating that: “Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which a company’s objectives are set, and the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently. Good corporate governance is only part of the larger economic context in which firms operate that includes, for example, macroeconomic policies and the degree of competition in product and factor markets. The corporate governance framework also depends on the legal, regulatory, and institutional environment”. The Executive summary of the King Report on Corporate Governance (2002) draws attention to the subject by listing out 7 characteristics indispensable for good corporate governance; which are: Discipline, Transparency, Independence, Fairness, Accountability, Responsibility and Social Responsibility. [v]

2.1.4 Organisational Structure.

In an organisation, each individual has his own duties and status within the firm. Corporate governance identifies some interest groups that have a distinct role in the governance o