As provided by principle 7 of the Australian Securities and Investment Commission it is the duty of the board of directors of a listed company to identify risk and adopt a proper framework to address them. In case there is a failure on the part of the board of the listed organizations to recognize or address risks it might not only have an adverse effect on the organization but also the stakeholders such as shareholders, creditors, employees , consumers and the society as a whole. According to the recommendations provided by AISC on risk management, the listed organization’s board should have in place at least one committee to oversee identify and address risks. The committee must have three independent directors. It further states that the committee of the board or the board itself must review the risk management structure of the company every year at the least so that they can be sure that it is effective. The process of the review must also be disclosed in order to ensure accountability. The internal audit function of the entity has to be disclosed in accordance to structure and role of the function. It is also the duty of a listed organization to disclose any kind of material exposure on its part in relation to social, environmental and economic risk and further how such risks are intended to be managed by the organization. In the given circumstances it has been provided by that a substantial financial harm had been suffered by the company Ardent Leisure Ltd (Ardent) in relation to the Dreamworld leisure park (Dreamworld) operated and owned by them on the Queensland Gold Coast. This was because an accident had taken place at Dreamworld which had resulted in the death of a few partons as a result of a ride failure. Accidents are events which are beyond the control of the owners. However if proper safety measures are taken accidents can be avoided to a large extent and its effects could be minimized. In this situation it has been provided that no proper initiatives had been taken by the company after the incident which can be said because the company had been criticized for not been able to deal with the risk arising from the incident. The owner of a place is liable to any harm which has been caused to any person with respect to the place. Thus in this case Ardent is liable for the accident. If the risk management framework would have been placed Ardent would have been able to identify the risk associated with the ride before any accident took place and the risk could have been addressed properly. Even if the accident would have taken place after a proper risk identification system the harm from the accident would have been minimized if a proper framework would have been in place to manage the incident. However people were killed and the and not only it was a social loss but also a severe financial and goodwill loss for the company. Thus it can be said that the board of Ardent failed to recognize and manage risk in relation to the incident.
As discussed above the principle 7 of the Good Corporate Governance Recommendations imposes an obligation on the listed organizations to identify and manage risks through the implementation of a proper risk management framework. The principles highlight the formation of one or more risk management committees within the organization which would have the role to identify and risk situation and have a framework in place for addressing it. In the provided circumstances Dreamworld needed a crisis management team in place which would have been able to ensure prompt action with respect to the accident and the adverse effects of it would have been minimized. Principle 7 further provides for a disclosure of any economic, social or environmental risk and if such recommendation would have been followed by Ardent that they would have been more accountable towards the identification of risk and the accident could have been avoided. Thus in this case it can be evidently said that Ardent have violated the principle 7 of the ASX good governance principle by not been able to identify and manage risks.
Breaching the provisions of principle 7 not only results in legal consequences but also subjects an organization to competitive disadvantages because of the results of poor governance. A failure to identify and address risks exposes an organization to various accidents which is not beneficial to its interest. If risks are not identified the organization becomes prone to accidents and as there is no or improper structure of meaning the after effects the organization has to suffer heavy losses. As a result of the accidents the organization does not only suffer financial losses but also the loss of goodwill which impacts on the value of the organization in the society. Investors become reluctant to invest in such organization. In addition the absence of a risk management system does not impose any accountability on the employees which subsequently results in loss of productivity and bad quality services.
The Executive office of the ASX has the responsibility to initiate enforcement actions against corporation for the violation of the rules of ASX. It has an “if not why not” principle in place according to which if an organization does not wish to accept the corporate governance polices of ASX it is free to do so but it has to provided explanation that why the polices are not being followed. Initially enforcement decisions are made by the ASX Chief Compliance officer and then an appeal lies in the ASX appeal tribunal. As provided by ASX Enforcement and Appeals Rulebook a penalty of $250000 may be imposed by the ASX for the breach of operating rules and a penalty of $1000000 for the breach of Austraclear Regulations. For instance in the case of Sino Australia Oil and Gas Limited (Company) the ASX was able to impose a penalty of $80000. Thus in this case the ASX can seek civil penalties such as disqualification of directors along with pecuniary penalties.
The duty of care and diligence towards the organization by the directors is provided in Section 180 of the Corporation Act 2001. According to the Section 180 the board of directors or any other executive officer of an organization must discharge their duties and exercise their powers in accordance to a degree of diligence and care which would have been exercised by a reasonable person if they were the directors in similar circumstances or had the same responsibility like the directors in context. The breach of this section results in civil penalties Section 1317. When it comes to business judgment a course of action can be considered to be appropriate if the action is done in for a just purpose and in a good faith, do not have any personal interest in the judgment, indulge in informed decision making and believe rationally that the decision is for the benefit of the organization. The actions of the directors are considered to be rational if any reasonable person would hold the same view. The section is also applicable on duties resulting out of common law and equity. Business decision means any action which is associated with the business.
In the recent case of Australian Securities and Investment Commission (ASIC) v Cassimatis (No. 8)  FCA 1023, the court held that the directors to be liable for the breach of section 180(1) of the CA as they their actions contravened the provisions of CA. In the case of Re Centura Global Holdings Pty Ltd NSWSC 1744 the judge held that breaches of the Environmental Planning and Assessment Act 1979 accounted to the breach of section 180(1) on the part of the directors. In the case of ASIC v Mariner Corp (2015) 327 ALR 95 at  it was held by the court that section 180 does not impose various obligations on the directors but the only obligation is to act in accordance to the existing legal provisions. In the case of Sheahan (as liquidator of SA Service Stations) (in liq) v Verco (2001) 79 SAR 109 the court ruled that the duties of the directors under section 180(1) are only towards the company and not the environment or shareholders UNLESS proceedings are brought against the directors by the ASIC it has to be proved that actual loss had been suffered by the company.
In the particular circumstances it has been established in the previous section that Ardent had breached the principles laid down by ASX in relation to risk management. it can be derived from the cases discussed above that one of the primary requirements for establishing the breach of section 180 of the CA by the directors is the contravention of any existing legal provisions which would have not been done by a reasonable person under any circumstances. It can further be analyzed that a reasonable person would have not breached the good governance principles related to risk identification and management provided by ASX. As such provisions have been breached by the directors of Ardent they are liable for the breach of Section 180 of the CA and additional penalties have to be imposed on the directors other than the financial harm suffered by the company.
The CEO of Ardent Leisure Deborah Thomas had stepped down for the post after the fatal accident which took place in Dreamword. She had been subjected to criticism for not been able to provide a appropriate response to the disaster. The company seeks to become one of the leaders in global entertainment and particularly focus on the market in US. The shares of the company had fallen by 7.8% since the fatal accident took place. The company has been subjected to much attention since the accident as investigation had been initiated towards the incident. The company has indulged in damage control since the incident has taken place. The company provided the statement that they are deeply saddened and shocked by the incident and they provide their condolences to the involved famines. It has been further stated by the company that company is rapidly working along with police and emergency authority to determine the facts and cause around the incident. After the tragedy the company had suffered a loss of 49.4 million. The theme park was closed for a period of 45 days since the accident. During the shutdown the company was involved in commissioning and commencing a comprehensive safety and operation review process for the park. The company admitted to the fact that they did a mistake in the way the first 48hours after the incident had been handled. A crisis management expert Graeme Newton has been brought into the company from Deloitte along with Mike McKay who was the former Queensland policeman. The company has initiated a safety review process which has to be passed by all rides before they can become operational and closed the controversial thunder river rapid ride permanently. Whenever a crisis occurs where a loss of life takes place according to the “ten commandments” the first and foremost thing which is to be done is to contact the family of the deceased which has not done by the company. Following the incident, the polices which have been initiated by the company are collaborating with the private sector, proper planned outcome process and establishment of a crisis management committee within the organization. However the company is still in a defensive mode with respect to the incident and providing justification from what has gone wrong. The company is still boasting it’s so called “robust policy and procedures” when made them had 30 million people visit the park since 1981.
The Guardian. (2017) <https://www.theguardian.com › World › Australia › Dreamworld>.
Dreamworld’S Parent Ardent Leisure Is In Damage Control (2017) NewsComAu https://www.news.com.au/finance/business/other-industries/dreamworld-parent-company-ardent-leisure-in-crisis-after-fatal-theme-park-accident/news-story/00c3d7a283c19e05427f273bb3a44e39
ABC (2017) <https://www.abc.net.au/news/2017-04-26/ardent-leisure-ceo-to-stand-down.../8472304>.
Council, ASX Corporate Governance, and A. S. Exchange. "Corporate governance principles and recommendations . ASX Corporate Governance Council." (2014).
Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and practices. Oxford University Press, USA, 2015.
Council, ASX Corporate Governance. "Corporate Governance Principles and Recommendations, 3rd edn (ASX, Sydney)." (2014).
Glendon, A. Ian, Sharon Clarke, and Eugene McKenna. Human safety and risk management. Crc Press, 2016.
Pritchard, Carl L., and PMI-RMP PMP. Risk management: concepts and guidance. CRC Press, 2014.
Booth, Simon A. Crisis management strategy: Competition and change in modern enterprises. Routledge, 2015.
Gilligan, George, et al. "Penalties Regimes to Counter Corporate Misconduct in Australia–Views of Governance Professionals." (2017)
 Council, ASX Corporate Governance, and A. S. Exchange. "Corporate governance principles and recommendations . ASX Corporate Governance Council." (2014).
 Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and practices. Oxford University Press, USA, 2015
 Pritchard, Carl L., and PMI-RMP PMP. Risk management: concepts and guidance. CRC Press, 2014.
 Council, ASX Corporate Governance. "Corporate Governance Principles and Recommendations, 3rd edn (ASX, Sydney)." (2014).
 Glendon, A. Ian, Sharon Clarke, and Eugene McKenna. Human safety and risk management. Crc Press, 2016.
 Gilligan, George, et al. "Penalties Regimes to Counter Corporate Misconduct in Australia–Views of Governance Professionals." (2017).
 Australian Securities and Investment Commission (ASIC) v Cassimatis (No. 8)  FCA 1023
 Re Centura Global Holdings Pty Ltd NSWSC 1744
 ASIC v Mariner Corp (2015) 327 ALR 95 at 
 The Guardian. (2017) <https://www.theguardian.com › World › Australia › Dreamworld>.
 Dreamworld’S Parent Ardent Leisure Is In Damage Control (2017) NewsComAu https://www.news.com.au/finance/business/other-industries/dreamworld-parent-company-ardent-leisure-in-crisis-after-fatal-theme-park-accident/news-story/00c3d7a283c19e05427f273bb3a44e39
 Booth, Simon A. Crisis management strategy: Competition and change in modern enterprises. Routledge, 2015.
 ABC (2017) <https://www.abc.net.au/news/2017-04-26/ardent-leisure-ceo-to-stand-down.../8472304>.