Good governance is not about making the right decisions but about ensuring there is a good decision-making process used in the business.
In a large enterprise, the management board will have a team who are charged with ensuring the firm adheres to the principles of good corporate governance as is expected of a large organisation. Good governance is about having policies and procedures in place to ensure accuracy, consistency and responsiveness to key stakeholders including customers, shareholders and regulators.
In a small business, the governance structure may be as simple as having a trusted advisor and some form of administrative support. A step up from that may be a couple of non-executive Directors or even appointing an advisory board. Regardless of the size of your business, good corporate governance is good for business because it:
Encourages good decision making
If a market shifts or a new trend / opportunity emerges in your business sector, having a robust decision making methodology in your firm can help you to change direction efficiently in order to drive the business forward.
Helps manage risk
You and your team may be focused on executing growth strategies, growing key client accounts and generating new business. This means there is a risk you could miss something. Good corporate governance practices ensure the business stays on top of statutory reporting, annual returns, renewing insurance or licenses, etc. Perhaps having an advisor on your board of management will help you to remain accountable and focus on meeting these obligations.
Encourages management to seek advice
Adhering to good corporate governance practices encourages managers to regularly review the firm’s strategy and performance and seek external opinions where necessary. Bringing in external expertise to aid strategic decision-making can add significant benefits to the firm.