In early of 2020, the management of your audited client, Yellow is reviewing the need for compliance with corporate governance provisions. Yellow is engaged in design contracts of electronic parts. Recently, the directors were aware that one of its key design projects may face litigation about design’s safety flaws. In accordance with the terms as set out in the respective design contract, the customer has the right to claim against Yellow for any loss arising from such safety flaws. Based on the project team's estimation, the claim may amount to HK$10 million.

Question: From the corporate governance perspective, suggest actions that the directors of Yellow should take; and please briefly explain the broad principles of effective corporate governance.

Answer rating: 100% (QA)

From a corporate governance perspective the directors of Yellow should take several actions to address the potential litigation and uphold effective corporate governance ... View the full answer