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MBA/560
1 carenetwest situation analysis
The Situation at CareNetWest
CareNetWest Companies, Inc., is a relatively new public healthcare company facing several risk management challenges, including implementation of the requirements of the Sarbanes-Oxley Act of 2002 (SOX). The corporation has just lost its Chief Risk Officer and is seemingly unprepared to enact pending corporate governance and SOX requirements or best practices. Furthermore, as a company in a heavily regulated industry, CareNetWest has apparently failed to establish sound regulatory risk processes to address this rather significant burden. As the CEO, Dr. Tad Smith, learns of these issues and begins to dialogue with key players, he comes to realize that the company may not house the internal expertise necessary to address these issues and has sought the assistance of industry consultants to facilitate recommendations for action.
Issues Facing CareNetWest
• Risk management has failed from an infrastructure perspective due to lack of expertise, communication, and management and Board support.
• The Board does not possess significant business experience.
• The Board has not seated relevant committees to address risk management issues.
• The CEO does not understand governance and accounting control expectations; there is no internal healthcare risk expertise or SOX expertise.
• The CFO has little accounting control or healthcare operations experience and has provided little guidance to risk management personnel; however, all operational functions report to this position.
• Several key operational positions are vacant.
• The company relies extensively on its outside accountant to provide expertise where such expertise should be vested internally.
• There is little to no communication about risks within the company.
• The board has not been involved in risk management generally and SOX specifically.
• There has been no accountability for significant pending risk...