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The Key Lies in Good Governance

Upon hearing the term ‘governance’, some people in small and medium enterprises (SMEs) may have the impression, “Oh that’s just for the big corporates”.

Alternatively, eyes may glaze over a bit, perhaps while reflecting on past negative experiences with dry policy documents and/or legal requirements with the potential to impose extra costs on an already struggling business.

However, there is a strong body of evidence that good governance is good business. This begs the question, “What does ‘good’ governance mean?”A short answer would be ‘good’ = ‘fit for purpose’. Applied to business governance, this means having a crystal-clear and readily understood statement of purpose and goals, communicating them clearly, and using them to guide governance-related activities and forums.

The Australian Securities & Investments Commission (ASIC) gives the following definition:?“Corporate governance is a driver of the operations and performance of a company.?The term 'corporate governance' is broad and has many components, including relationships between stakeholders, frameworks, decision making and responsibility.”

Reputable sources in Australia and internationally provide listings of essential governance considerations for any business – some listings are longer than others. After reviewing such sources through the lens of our own experience, we believe that key considerations are:

1. Establish a Board

• Boards aren’t just for big business, and don’t have to be big in terms of numbers of directors.
• You need directors who are knowledgeable?about their accountabilities and responsibilities, and able to perform them well.
• Importantly, you need those directors to be decision-makers who have the courage to be a dissenting voice if they believe that a proposed decision is not good for business, and have the emotional maturity to constructively engage on such issues with other directors.

2. Engage your stakeholders

• All of them! (Directors; any person performing work for the business; customers/clients; suppliers; government representatives; etc.)

3. Have fit-for-purpose policies and policy-related documents (e.g., procedures)

• This entails first identifying the core policy topics that define your business needs, being essential for your business performance and sustainability.
• The policies and related documents need to be clear, concise, complete, correct, comprehensible, and useful to those who need to use them.

4. Manage risk

• Identify key risks for your business, rate/prioritise them (consequences x likelihood), develop controls/treatments, then monitor and manage the risks.

One other consideration is that, if you ever decide to sell your business, a well-governed operation will position you favourably when a prospective buyer is doing their due diligence.

The process of establishing good governance doesn’t have to be onerous.?We at Quantum Leap Global?can support you on your governance journey, tailoring a solution in consultation with you, to address your specific needs.?Contact us?for an obligation-free chat.?

Your partner in business success.

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