Corporate governance needs to be built very strongly into the genes of any company, institution, or individual.
Build it into DNA, and that is something which will increase value without spending serious marketing dollars. How often has one heard of companies, governments, political parties spending huge amounts of money in marketing and branding themselves, while having extremely loose and opaque governance practices which are very visible on a document, but not necessarily in practice.
Briefly defined, corporate governance is the structure and process for the direction and control of companies and institutions. It is also about the relationships among the management, Board of Directors, controlling shareholders, minority shareholders and all other stakeholders. High transparency and accountability are basic important elements of best corporate governance that strives for the sustainability and long term continuity of corporations and society.
Corporate governance makes companies more accountable and transparent to investors, to shareholders, management, employees and customers. It contributes in a major way towards development, ability to raise capital relatively more easily, it encourages new investments, boosts economic growth, and provides for better employment opportunities.
A lack of corporate governance can lead to profit loss, corruption and a tarnished image, not only to the corporation, but to the society as a whole. Good corporate governance management is also designed to limit risk and eliminate corrosive elements within any organization.
Essentially, anything that is a danger to the survival and growth prospects of an organization can be termed as “enterprise risk”. In today’s VUCA world ( a world with very high levels of Volatility, Uncertainty, Complexity and Ambiguity), Boards and leadership teams need to have a clear road map to devote time in proactively discussing the various risk elements and the organization’s preparedness in case of any such incidents.
To maintain their personal as well as the company reputation, board of directors and senior management need critical markers or early-warning-signs. It is important here to note that Finance and Accounting is a very strong function, a backbone of any organization. Yet it is like a form of forensic science or intelligence. Forensics is considered as a post-event tool.
Therefore, along with finance and accounting, more and more companies are feeling the need to use “market intelligence” as a governance-marker.
Board of directors, owners and senior management need frequently updated, and also honestly relevant information about the marketplace and the competition to help them make informed and timely decisions. But more importantly, the onus is also on the Boards and senior management for ensuring that there is nothing wrong with the doings of the companies internally.
It is therefore important to determine that the data & information they are presented with is not only timely and accurate, but more importantly, can be cross verified by them thoroughly through more than one source. Relying on only one information source, no matter how reliable, can over time create an imbalance in the decision making.
This balanced process would allow them to take charge and respond faster during times of crisis. During times of trouble, only a short window of time is available in which they can respond.
Market intelligence is the gathering of bits and pieces of formal, as well as semi-formal, at times unstructured information, along with structured information available across various sources in the market. The inputs can range from Competitor Intelligence to Product information, Market Understanding, and Customer perceptions. Getting the right information requires extracting the most useful information from an enormous amount of dedicated and reliable resources.
Market Intelligence is also the ability to connect the dots between the raw information available in the public domain. It provides access to unstructured but actionable information, which can and needs to be adopted into the corporate governance framework.
Insights don’t necessarily mean price-sensitive inside-information. Insights could mean knowing the background or the intent or the behavior of the key executives and key people within any set-up.
Considering the risks associated with highly leveraged parties these days, it’s always advisable to have a Pre-Approved Board Policy in place in dealing with such parties.
For dealings above certain monetary values, it is advisable to have a Risk Committee composed of owners, board and key management. The Risk Committee can also be given the role of formalizing a framework of getting the “market intelligence” reports from various different sources. This will be a very welcoming step for all medium to large entities for better transparency, especially from the point of view of all stakeholders and regulators.
Such a risk committee should meet at least once in a quarter. Quarterly overview must include market intelligence, financial, operational, information and cyber security, environmental, social and governance (ESG) related risks and impact assessment.
The risk of dealing with third parties has grown significantly, and it has become essential to verify vendors, suppliers, business partners to avoid unpleasantness later. In light of new international anti-money laundering laws, companies, their owners and senior management bear more responsibility, including liability for the actions of their business partners as well as internal employees. The right information will help leaders to define their risk appetite and incorporate risk intelligence into their overall business strategy.
All of the above applies in equal measure not only to corporations, but also to private institutions, NGOs, medical institutions, societies, clubs and religious bodies.
Having a fortified framework of governance rules and regulations, and more importantly, having an overseeing body that supervises the implementation of such rules and processes ultimately creates a far superior brand value for that institution. At significantly lower marketing dollars.
And it also helps in pulling up that institution’s valuations, whether monetary or reputational.
For that matter, if each of us sets up our own personal governance norms and principles, we too can enjoy a better reputational and brand value for ourselves.