Reference no: EM133544505

Assessment - Case Study

Human Data Technology Pty Ltd (HDT) has engaged you as an independent consultant to advise them on their approach to corporate governance, risk and sustainability.

HDT is a human resource (HR) technology business, offering cloud-based HR information systems to businesses. Companies collect and store employee data in these systems and allow employees to update their own personal information for their employer. These systems save companies cost, time and effort by reducing the need for employed staff to provide in-house employee services such as timekeeping, payroll and leave management. The link below is a good starting point to understand the functions HR systems perform and their benefits to organisations:

HDT Company History

HDT was started in 2003 by brother and sister Amir and Divya Daxa (now Daxa-Bhatt). Since HDT became an ASX listed company five years ago, the share price has grown steadily. HDT employs a small core of full-time employees and many more contractors, mostly offshore. Current annual company revenue is around $100 million, generated from subscriptions and additional service fees.

Amir's career started at a HR consulting firm after graduating with an MBA while Divya completed a Master's in IT. This led them, along with Diya's husband, Ramm, to create HDT from their pooled expertise. At first it was difficult to win clients, but the company gradually grew and built up a good client portfolio.

The company is looking to expand its customer base to larger companies.

Two meetings were held, one with the founding directors and one with the recently joined board members. These meetings were to gather information for you to develop advice and recommendations. Key points from these meetings are presented below.

Meeting 1: The Founders.

Amir Daxa- Founder and CEO. Amir proudly highlights the success of the company, its challenges, and his aspiration for the future.

"No business is perfect, right? We've had some delays in disclosing data breaches and incidents, but we need to judge when the time is right, otherwise our share price might be affected and we don't want that. After all, our shareholders are counting on us. We want to grow the business dramatically and to do that we've been told we need to get our house in order. What do we need to do?"

Ram Bhatt, Founder, former sales executive and board member. Ram discusses the current composition of the board.

"Some say our board lacks independence, raising concerns about conflicts of interest and compromised decision-making. That's not an issue, is it? After all, Divya, Amir and I built this company from nothing to what it is today. We have the skill and foresight to keep it growing, and to steer it into the future. Why should the board be loaded with independent members anyway? That will only slow us down. Besides that, we have Myra, Edward and Jack."

Divya Bhatt, Founder, operations expert. Divya gave up her role as COO when the company joined the ASX but is still well across the company strategy. She initiated offshoring of client data in her time as COO to reduce costs. She explained,

"Energy and basic staff costs are lower outside Australia, so by going offshore the company is much more profitable, we can offer better client deals and keep expanding. Our offshore service providers assure us our clients' data is very safe. That's all we need to know."

Meeting 2: The Independent Board members.

Myra Winchip, board HR expert. Myra's original engagement with HDT.was helping source new employees when they listed on the ASX.

"It turned out so well that they offered me this exciting role on the board. People think employees in this industry can be exploited. If employees are not happy there's always another job out there. Moving workload overseas has saved us employing people locally and reduced the need for legal compliance. The next exciting opportunity will be to use artificial intelligence to reduce the number of employees further."

Edward Winchip is a Certified Practicing Accountant (CPA). Edward was briefly a CFO in a similar company. He is Myra's partner, a friend of Amir from their university days, and is engaged as an independent board member. He says:

"I trust Amir, he's a great guy. The company employs the necessary accounting expertise so I'm not really involved on an ongoing basis but if financial input is needed, I'm happy
to help out."

Jack Vertigan is the team's legal expert. Jack's concern is with the company's approach to sustainability.

"Sustainability is irrelevant according to the board because HDT doesn't use much energy or equipment and has few employees, but they miss the point. The company needs a holistic approach to sustainability. Stakeholders need confidence that HDT's supply chain is ethical and contributes positively to the local communities where they operate. You need to help us understand how sustainability relates to us."

From these meetings you can see a range of issues to consider and address.

1. The company must build its reputation as reliable and trustworthy. To do that they must show their compliance with relevant ASX corporate governance principles.

2. With the corporate governance principles in mind, carefully consider the viewpoints of board members.

3. Use the tools you have covered in your studies to help you get started. Use your your own research to strengthen this.

REQUIREMENTS

Focused answers to the following three questions are required:

1. Risk Matrix Analysis: Use the risk matrix model to present and assess the potential risks you see facing HDT, particularly related to data privacy and security. Rank the risks in descending order from most to least serious and briefly describe risk mitigation strategies for the top three. Consider whether the views of board members are realistic, and whether other risks exist which are not seen by the board members. (700 to 750 words)

2. Board Relationships and Governance: Using ASX Corporate Governance Principles 1, 2 and 5 as a guide, critically analyse the views and relationships between the board members at HDT and their potential impact on governance and decision- making. Assess whether the need for board diversity, competence and independence are being addressed, and propose strategies to enhance governance practices.  (700 to 750 words)

3. Application of Sustainability Practices: Evaluate the company's current reported sustainability practices and propose recommendations to address stakeholder engagement, ethical supply chains, and social responsibility. (600 to 660 words)

A. The views of the relevant people in the case.

B. Relevant research and news releases relating to best practice corporate governance, sustainability and risk management.