Dear Usman. Your question is “Volkswagen's share price suffered a large decline amid US air-pollution-tests scandal. Can financial analysts anticipate risk of such losses through analysis of a company's governance and internal controls? “

We are actually back to the role of environmental, social and governance factors (ESG) as well as the importance of social network related data which should act complementary to financial analysis.
From a governance perspective what first comes to our mind is the existence of dedicated/appointed board members whose main role is to ensure that ESG aspects are trickled down into the entire organization, across all functions.
This holistic structure could also include a whistle blowing function to ensure that such breaches are reported back within the organization, potentially even to the supervisory board (i.e. the non-executive directors). One could check for such solid structures as part of the analytic process. If executive managers and non-independent directors ( see also
http://www.sonean.com/uploads/media/20744_SONEAN_Whitepaper_Feb_2015_en… ) are socially independent from their executives it potentially adds more credibility to the control function as well. Such cover ups are typically known within a network of strong ties (similar to a cartel) and the probability of defection is increased if you offer people from the network, who blow the whistle, a fair and just process. An internal process to guarantee this would certainly add value. It should also offer the opportunity to communicate externally to an independent entity if the internal process fails. This makes especially sense among listed companies where shareholders are generally detached form professional management.