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NIK ZAFRI BIN ABDUL MAJID,
CONSULTANT/TRAINER
Email: nikzafri@yahoo.com, nikzafri@gmail.com
https://nikzafri.wixsite.com/nikzafri

Kelantanese, Alumni of Sultan Ismail College Kelantan (SICA), IT Competency Cert, Certified Written English Professional US. Has participated in many seminars/conferences (local/ international) in the capacity of trainer/lecturer and participant.

Affiliations :- Network Member of Gerson Lehrman Group, Institute of Quality Malaysia, Auditor ISO 9000 IRCAUK, Auditor OHSMS (SIRIM and STS) /EMS ISO 14000 and Construction Quality Assessment System CONQUAS, CIDB (Now BCA) Singapore),

* Possesses almost 30 years of experience/hands-on in the multi-modern management & technical disciplines (systems & methodologies) such as Knowledge Management (Hi-Impact Management/ICT Solutions), Quality (TQM/ISO), Safety Health Environment, Civil & Building (Construction), Manufacturing, Motivation & Team Building, HR, Marketing/Branding, Business Process Reengineering, Economy/Stock Market, Contracts/Project Management, Finance & Banking, etc. He was employed to international bluechips involving in national/international megaprojects such as Balfour Beatty Construction/Knight Piesold & Partners UK, MMI Insurance Group Australia, Hazama Corporation (Hazamagumi) Japan (with Mitsubishi Corporation, JA Jones US, MMCE and Ho-Hup) and Sunway Construction Berhad (The Sunway Group of Companies). Among major projects undertaken : Pergau Hydro Electric Project, KLCC Petronas Twin Towers, LRT Tunnelling, KLIA, Petronas Refineries Melaka, Putrajaya Government Complex, Sistem Lingkaran Lebuhraya Kajang (SILK), Mex Highway, KLIA1, KLIA2 etc. Once serviced SMPD Management Consultants as Associate Consultant cum Lecturer for Diploma in Management, Institute of Supervisory Management UK/SMPD JV. Currently – Associate/Visiting Consultants/Facilitators, Advisors for leading consulting firms (local and international) including project management. To name a few – Noma SWO Consult, Amiosh Resources, Timur West Consultant Sdn. Bhd., TIJ Consultants Group (Malaysia and Singapore) and many others.

* Ex-Resident Weekly Columnist of Utusan Malaysia (1995-1998) and have produced more than 100 articles related to ISO-9000– Management System and Documentation Models, TQM Strategic Management, Occupational Safety and Health (now OHSAS 18000) and Environmental Management Systems ISO 14000. His write-ups/experience has assisted many students/researchers alike in module developments based on competency or academics and completion of many theses. Once commended by the then Chief Secretary to the Government of Malaysia for his diligence in promoting and training the civil services (government sector) based on “Total Quality Management and Quality Management System ISO-9000 in Malaysian Civil Service – Paradigm Shift Scalar for Assessment System”

Among Nik Zafri’s clients : Adabi Consumer Industries Sdn. Bhd, (MRP II, Accounts/Credit Control) The HQ of Royal Customs and Excise Malaysia (ISO 9000), Veterinary Services Dept. Negeri Sembilan (ISO 9000), The Institution of Engineers Malaysia (Aspects of Project Management – KLCC construction), Corporate HQ of RHB (Peter Drucker's MBO/KRA), NEC Semiconductor - Klang Selangor (Productivity Management), Prime Minister’s Department Malaysia (ISO 9000), State Secretarial Office Negeri Sembilan (ISO 9000), Hidrological Department KL (ISO 9000), Asahi Kluang Johor(System Audit, Management/Supervisory Development), Tunku Mahmood (2) Primary School Kluang Johor (ISO 9000), Consortium PANZANA (HSSE 3rd Party Audit), Lecturer for Information Technology Training Centre (ITTC) – Authorised Training Center (ATC) – University of Technology Malaysia (UTM) Kluang Branch Johor, Kluang General Hospital Johor (Management/Supervision Development, Office Technology/Administration, ISO 9000 & Construction Management), Kahang Timur Secondary School Johor (ISO 9000), Sultan Abdul Jalil Secondary School Kluang Johor (Islamic Motivation and Team Building), Guocera Tiles Industries Kluang Johor (EMS ISO 14000), MNE Construction (M) Sdn. Bhd. Kota Tinggi Johor (ISO 9000 – Construction), UITM Shah Alam Selangor (Knowledge Management/Knowledge Based Economy /TQM), Telesystem Electronics/Digico Cable(ODM/OEM for Astro – ISO 9000), Sungai Long Industries Sdn. Bhd. (Bina Puri Group) - ISO 9000 Construction), Secura Security Printing Sdn. Bhd,(ISO 9000 – Security Printing) ROTOL AMS Bumi Sdn. Bhd & ROTOL Architectural Services Sdn. Bhd. (ROTOL Group) – ISO 9000 –Architecture, Bond M & E (KL) Sdn. Bhd. (ISO 9000 – Construction/M & E), Skyline Telco (M) Sdn. Bhd. (Knowledge Management),Technochase Sdn. Bhd JB (ISO 9000 – Construction), Institut Kefahaman Islam Malaysia (IKIM – ISO 9000 & Internal Audit Refresher), Shinryo/Steamline Consortium (Petronas/OGP Power Co-Generation Plant Melaka – Construction Management and Safety, Health, Environment), Hospital Universiti Kebangsaan Malaysia (Negotiation Skills), Association for Retired Intelligence Operatives of Malaysia (Cyber Security – Arpa/NSFUsenet, Cobit, Till, ISO/IEC ISMS 27000 for Law/Enforcement/Military), T.Yamaichi Corp. (M) Sdn. Bhd. (EMS ISO 14000) LSB Manufacturing Solutions Sdn. Bhd., (Lean Scoreboard (including a full development of System-Software-Application - MSC Malaysia & Six Sigma) PJZ Marine Services Sdn. Bhd., (Safety Management Systems and Internal Audit based on International Marine Organization Standards) UNITAR/UNTEC (Degree in Accountacy – Career Path/Roadmap) Cobrain Holdings Sdn. Bhd.(Managing Construction Safety & Health), Speaker for International Finance & Management Strategy (Closed Conference), Pembinaan Jaya Zira Sdn. Bhd. (ISO 9001:2008-Internal Audit for Construction Industry & Overview of version 2015), Straits Consulting Engineers Sdn. Bhd. (Full Integrated Management System – ISO 9000, OHSAS 18000 (ISO 45000) and EMS ISO 14000 for Civil/Structural/Geotechnical Consulting), Malaysia Management & Science University (MSU – (Managing Business in an Organization), Innoseven Sdn. Bhd. (KVMRT Line 1 MSPR8 – Awareness and Internal Audit (Construction), ISO 9001:2008 and 2015 overview for the Construction Industry), Kemakmuran Sdn. Bhd. (KVMRT Line 1 - Signages/Wayfinding - Project Quality Plan and Construction Method Statement ), Lembaga Tabung Haji - Flood ERP, WNA Consultants - DID/JPS -Flood Risk Assessment and Management Plan - Prelim, Conceptual Design, Interim and Final Report etc., Tunnel Fire Safety - Fire Risk Assessment Report - Design Fire Scenario), Safety, Health and Environmental Management Plans leading construction/property companies/corporations in Malaysia, Timur West Consultant : Business Methodology and System, Information Security Management Systems (ISMS) ISO/IEC 27001:2013 for Majlis Bandaraya Petaling Jaya ISMS/Audit/Risk/ITP Technical Team, MPDT Capital Berhad - ISO 9001: 2015 - Consultancy, Construction, Project Rehabilitation, Desalination (first one in Malaysia to receive certification on trades such as Reverse Osmosis Seawater Desalination and Project Recovery/Rehabilitation)

* Has appeared for 10 consecutive series in “Good Morning Malaysia RTM TV1’ Corporate Talk Segment discussing on ISO 9000/14000 in various industries. For ICT, his inputs garnered from his expertise have successfully led to development of work-process e-enabling systems in the environments of intranet, portal and interactive web design especially for the construction and manufacturing. Some of the end products have won various competitions of innovativeness, quality, continual-improvements and construction industry award at national level. He has also in advisory capacity – involved in development and moderation of websites, portals and e-profiles for mainly corporate and private sectors, public figures etc. He is also one of the recipients for MOSTE Innovation for RFID use in Electronic Toll Collection in Malaysia.

Note :


TO SEE ALL ARTICLES

ON THE"LABEL" SECTION BELOW (RIGHT SIDE COLUMN), YOU CAN CLICK ON ANY TAG - TO READ ALL ARTICLES ACCORDING TO ITS CATEGORY (E.G. LABEL : CONSTRUCTION) OR GO TO THE VERY END OF THIS BLOG AND CLICK "Older Posts"


 

Friday, March 29, 2024

PART 3 (Final) - ESG - ENVIRONMENT, SOCIAL AND GOVERNANCE - WHAT ORGANIZATIONS SUPPOSED TO ASSESS - by Nik Zafri






3. GOVERNANCE

These criteria focus on the leadership, policies, and internal controls of the organization.

i. Board/C-Suite diversity

Evaluation of composition in the organization's board of directors or C-Suite in terms of gender, ethnicity, and expertise.

  • Review the Current Composition - Start by examining the current makeup of the board of directors/C-Suite. Look at the names, backgrounds, and qualifications of each member.
  • Gender and Ethnicity Representation -  Assess the gender and ethnicity diversity of the Board/C-Suite. Look for a balance that reflects the diversity of the organization's stakeholders and the broader community. Compare the representation of women and minority ethnic groups to their presence in the general population or relevant industry.
  • Expertise and Skills -  Evaluate the expertise and skills present on the Board/C-Suite. Consider factors such as industry experience, financial acumen, strategic planning skills, legal knowledge, technological expertise, and international business experience. Ensure that the board collectively possesses a diverse set of skills necessary for effective governance and decision-making.
  • Benchmarking - Compare the composition of the Board/C-Suite to industry benchmarks and best practices. Many organizations and advocacy groups publish reports and guidelines on Board/C-Suite diversity and composition. Use these resources to assess whether the organization's Board/C-Suite aligns with accepted standards
  • Stakeholder Engagement -  Consider the perspectives of various stakeholders, including shareholders, employees, customers, and community members. Engage with these groups to understand their expectations regarding Board/C-Suite composition and diversity.
  • Long-term Strategy -  Evaluate whether the current composition of the Board/C-Suite aligns with the organization's long-term strategic goals. Consider factors such as market trends, technological advancements, regulatory changes, and global expansion plans. Ensure that the Board/C-Suite has the expertise and diversity necessary to guide the organization through future challenges and opportunities.
  • Continuous Improvement -  Recognize that Board/C-Suite composition is not static and should evolve over time. Encourage ongoing efforts to enhance diversity and expertise through recruitment, training, and succession planning initiatives.

ii. Executive Compensation

Assessing whether executive pay is aligned with organization performance and shareholder interests to better evaluate whether executive pay is aligned with organization performance and their interests.

  • Performance Metrics Alignment -  Review the performance metrics used to determine executive compensation. Ensure that these metrics are closely tied to the organization's strategic goals and long-term shareholder value creation. Common performance metrics include :revenue growth, earnings per share (EPS), return on equity (ROE), return on investment (ROI), and total shareholder return (TSR).
  • Pay-for-Performance Sensitivity - Evaluate the sensitivity of executive pay to performance outcomes. High levels of variable compensation, such as bonuses and stock-based awards, should be directly linked to achieving predetermined performance targets. Analyze how changes in organization performance correspond to changes in executive pay.
  • Peer Group Comparison - Compare executive pay levels and structures to those of peer organizations within the same industry or sector. This analysis helps determine whether executive compensation is competitive and reasonable relative to market norms. Consider factors such as organization size, complexity, and financial performance when selecting peer organizations for comparison.
  • Long-Term Incentives - Assess the proportion of executive compensation tied to long-term incentives, such as stock options, restricted stock units (RSUs), and performance shares. Long-term incentives align executive interests with those of shareholders by promoting sustained value creation and discouraging short-termism.
  • Say-on-Pay Votes - Monitor shareholder voting results on executive compensation during annual "say-on-pay" votes. Pay attention to the level of support or dissent expressed by shareholders regarding the organization's executive pay practices. Significant shareholder opposition may indicate concerns about alignment with organization performance and shareholder interests.
  • Executive Pay Ratio - Calculate the ratio of CEO pay to median employee pay within the organization. While not directly related to performance alignment, this ratio provides insight into the fairness and equity of executive compensation relative to the broader workforce. Excessive pay disparities may raise concerns among shareholders and other stakeholders.
  • Transparency and Disclosure -  Evaluate the transparency and disclosure of executive compensation practices in the organization's proxy statements and annual reports. Look for clear explanations of the rationale behind pay decisions, performance targets, and the alignment between pay and performance.
  • Board/C-Suite Oversight - Assess the effectiveness of the board of directors/c-suite in overseeing executive compensation practices. Consider the independence and expertise of the Board/C-Suite's compensation committee, as well as its engagement with shareholders on compensation-related matters.

iii. Disclosure of Information

Examining the disclosure of information to stakeholders and adherence to ethical standards involves thorough analysis and evaluation of the organization's communication practices and ethical framework.  By doing so, stakeholders can gain insights into the organization's disclosure practices and ethical standards, enabling them to make informed decisions and hold the organization accountable for its actions.

  • Review Corporate Governance Policies - Start by reviewing the policies and codes of conduct. Look for explicit commitments to transparency, integrity, and ethical behavior. Assess whether these policies are regularly updated and effectively communicated to employees, management, and the board of directors/c-suite.
  • Transparency in Financial Reporting - Examine the transparency and comprehensiveness of the organization's financial reporting. Evaluate the clarity and accessibility of financial statements, including balance sheets, income statements, and cash flow statements. Look for adherence to accounting standards and disclosure requirements set by regulatory bodies.
  • Disclosure Practices - Analyze the organization's disclosure practices regarding key business operations, risks, and performance indicators. Review annual reports, quarterly filings, investor presentations, and other public communications to assess the quality and timeliness of information provided to stakeholders. Look for transparency regarding strategic initiatives, competitive positioning, and potential challenges facing the organization.
  • Stakeholder Engagement - Evaluate the organization's engagement with various stakeholders, including shareholders, employees, customers, suppliers, and the local community. Assess the effectiveness of communication channels, such as annual general meetings, investor conferences, employee town halls, and customer feedback mechanisms. Look for evidence of active dialogue, responsiveness to stakeholder concerns, and efforts to solicit feedback and input.
  • Ethical Standards and Compliance - Examine the organization's commitment to ethical standards and legal compliance. Assess the effectiveness of internal controls, risk management processes, and compliance programs in preventing misconduct and unethical behavior. Look for evidence of training programs, whistleblower mechanisms, and disciplinary actions taken against violations of ethical standard.
  • Supplier and Partner Relationships - Consider the organization's relationships with suppliers, business partners, and third-party vendors. Evaluate the organization's efforts to ensure ethical sourcing practices, fair labour conditions, and environmental sustainability throughout its supply chain. Look for policies and initiatives aimed at promoting responsible business conduct among partners.
  • Independent Audits and Reviews - Review the findings of independent audits, reviews, and assessments conducted by external parties. Evaluate the scope and rigor of these audits, as well as any identified areas of concern or improvement. Look for certifications or accreditations that demonstrate the organization's commitment to ethical and responsible business practices.
  • Public Perception and Reputation - Monitor public perception and reputation of the organization regarding its disclosure practices and adherence to ethical standards. Pay attention to media coverage, analyst reports, industry rankings, and social media sentiment. Look for any indications of reputational risks or controversies that may reflect shortcomings in transparency or ethical conduct.

INDUSTRIES (EXAMPLES)

Industries where governance criteria are critical include finance (regulatory compliance and risk management), real estate (corporate governance in property management), and telecommunications (fair competition and anti-corruption measures).

Here are critical governance criteria for each of the mentioned industries:

A)       FINANCE (Regulatory Compliance and Risk Management)

I. Regulatory Compliance - Ensure adherence to relevant financial regulations and laws, such as those governing banking, securities, and insurance activities. Monitor changes in regulatory requirements and implement necessary controls and procedures to maintain compliance.

II. Risk Management Framework - Establish a robust risk management framework to identify, assess, and mitigate various types of risks, including credit risk, market risk, liquidity risk, and operational risk. Implement risk monitoring tools and internal controls to mitigate potential threats to financial stability.

III. Board/C-Suite Oversight - Ensure active oversight and involvement of the board of directors/c-suite in monitoring regulatory compliance and risk management practices. Establish clear lines of responsibility and reporting to the Board/C-Suite's audit or risk committee.

IV. Internal Controls and Reporting - Implement effective internal control mechanisms and reporting systems to ensure the accuracy and reliability of financial information. Conduct regular audits and reviews to assess the effectiveness of internal controls and identify areas for improvement.

B)       REAL ESTATE (Corporate Governance in Property Management)

I. Property Portfolio Management - Develop and implement a comprehensive strategy for managing the organization's real estate portfolio, including acquisition, development, leasing, and disposition of properties. Ensure alignment with the organization's overall business objectives and risk tolerance.

II. Compliance with Regulations and Zoning Laws - Ensure compliance with local, state, and federal regulations governing real estate development, construction, and property management. Adhere to zoning laws, building codes, environmental regulations, and other legal requirements.

III. Tenant Relations and Customer Service - Maintain positive relationships with tenants and prioritize customer service and satisfaction. Address tenant concerns promptly and fairly, and ensure transparent communication regarding lease terms, property maintenance, and other relevant issues.

IV. Financial Management - Implement sound financial management practices, including budgeting, accounting, and financial reporting for real estate assets. Monitor operating expenses, rental income, and capital expenditures to maximize returns and ensure financial sustainability.

V. Risk Management - Identify and mitigate risks associated with real estate investments, such as market volatility, property valuation fluctuations, and legal liabilities. Develop contingency plans and insurance strategies to protect against unforeseen events and minimize potential losses.

C)      TELECOMMUNICATIONS (Fair Competition and Anti-Corruption Measures)

I. Fair Competition Practices - Promote fair competition in the telecommunications market by adhering to antitrust laws and regulations. Avoid anti-competitive behaviors such as price-fixing, collusion, and monopolistic practices. Encourage innovation and consumer choice through open and transparent market competition.

II. Anti-Corruption Policies and Procedures - Establish comprehensive anti-corruption policies and procedures to prevent bribery, extortion, and other corrupt practices. Conduct due diligence on business partners, vendors, and third-party agents to mitigate corruption risks. Provide training and guidance to employees on ethical business conduct and compliance with anti-corruption laws.

III. Transparency in Pricing and Service Delivery - Ensure transparency in pricing, billing, and service delivery to customers. Provide clear and accurate information about telecommunications products and services, including terms of use, fees, and charges. Avoid deceptive or misleading marketing practices that could undermine consumer trust and confidence.

IV. Data Privacy and Security - Safeguard the privacy and security of customer data and communications. Comply with regulations governing data protection, confidentiality, and cybersecurity in telecommunications operations. Implement robust security measures to prevent unauthorized access, data breaches, and cyber-attacks.

CONCLUSION

By considering ESG criteria, investors aim to support organizations that prioritize sustainability, social responsibility, and ethical practices, potentially leading to long-term value creation and positive societal impact.

  • Sustainability

refers to the ability of a organization to meet its present needs without compromising the ability of future generations to meet their own needs. In the context of environmental sustainability, it involves minimizing environmental impacts, such as carbon emissions, waste generation, and resource depletion, while promoting conservation and responsible stewardship of natural resources. Sustainable practices also encompass economic and social dimensions, ensuring the long-term viability and resilience of businesses, communities, and ecosystems.

  • Social Responsibility

entails the organization's commitment to act ethically and contribute positively to society, beyond its legal obligations. This includes initiatives to promote diversity and inclusion, ensure fair labour practices and human rights throughout the supply chain, support community development and philanthropic activities, and address social issues such as poverty, inequality, and access to education and healthcare. Socially responsible organizations strive to balance profit-making objectives with the well-being of stakeholders and the broader community.

  • Ethical Practices

involve conducting business with integrity, honesty, and transparency, and adhering to high moral and ethical standards in all interactions and transactions. This encompasses fair treatment of employees, customers, suppliers, and other stakeholders, as well as compliance with laws, regulations, and industry standards. Ethical considerations may include avoiding conflicts of interest, respecting privacy and confidentiality, preventing corruption and bribery, and upholding human rights and ethical labour practices

  • Long-Term Value Creation

focuses on generating sustainable and resilient financial returns for shareholders while considering the interests of other stakeholders and the broader society. This involves strategic decision-making that balances short-term profitability with long-term growth and value preservation. Organizations that prioritize long-term value creation invest in innovation, research and development, employee training and development, and stakeholder engagement to drive competitive advantage, market leadership, and enduring success over time.

  • Positive Societal Impact

refers to the beneficial effects that organizations can have on society and the environment through their business activities and operations. This includes efforts to address social and environmental challenges, such as climate change, poverty, inequality, and access to basic needs and services. Organizations can achieve positive societal impact by integrating sustainability, social responsibility, and ethical practices into their core business strategies, products, and services, and by collabourating with stakeholders to create shared value for communities and society as a whole.

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