By Neville Par­sons

[Down­load Gov­er­nance, Cul­ture and Risk Man­age­ment Review PDF here]

In order for a busi­ness to remain viable and sus­tain­able it needs to be able to demon­strate resilience, ensure com­pli­ance with rel­e­vant reg­u­la­tions and author­i­ties, suc­cess­ful­ly man­age risks and allo­cate resources appro­pri­ate­ly.

By neglect­ing these key fun­da­men­tals of gov­er­nance, a busi­ness could face poten­tial neg­a­tive impacts on their busi­ness oper­at­ing mod­el as well as their future growth and posi­tion­ing.

The fol­low­ing prin­ci­ples pro­vide a sol­id foun­da­tion for an effec­tive and effi­cient gov­er­nance frame­work for any busi­ness. The prin­ci­ples below are doc­u­ment­ed for a com­pa­ny struc­ture and will also apply equal­ly to the Board or Com­mit­tee of an Incor­po­rat­ed Asso­ci­a­tion or the Part­ners of a Part­ner­ship.

a. Respon­si­bil­i­ty — the Board of Direc­tors is ulti­mate­ly respon­si­ble and account­able for the deci­sions and actions tak­en by the busi­ness;

b. Inde­pen­dence — inde­pen­dence is key for each direc­tor and is demon­strat­ed by a Board that dis­charges its review and over­sight role effec­tive­ly and inde­pen­dent
of any over­ar­ch­ing inter­ests of dom­i­nant share­hold­ers, man­age­ment, and com­pet­ing or con­flict­ing busi­ness inter­ests;

c. Renew­al — a pol­i­cy of Board renew­al pro­vides for fresh insight and gen­er­al rein­vig­o­ra­tion of a Board while also ensur­ing ongo­ing effec­tive over­sight and under­stand­ing of the busi­ness by the Board;

d. Exper­tise — demon­strat­ed by a broad range of skills on the Board with the nec­es­sary col­lec­tive exper­tise to ful­fil its required role and func­tions, and from time to time as and when required access to inde­pen­dent exper­tise not read­i­ly avail­able amongst the cur­rent direc­tors;

e. Cul­ture — the cul­ture of the busi­ness is set by the ‘tone at the top’ and cas­cades pos­i­tive­ly through the busi­ness. Every­one involved in the busi­ness demon­strates the agreed cul­ture and val­ues;

f. Dili­gence — demon­strat­ed by a Board that dis­charges its duties and respon­si­bil­i­ties care­ful­ly, effi­cient­ly and con­sci­en­tious­ly;

g. Pru­dence — demon­strat­ed by a Board with a clear focus on the pru­dent man­age­ment of the busi­ness oper­a­tions and does so through reliance on appro­pri­ate­ly skilled and tal­ent­ed man­age­ment;

h. Trans­paren­cy — demon­strat­ed by a Board that is open and hon­est in its deal­ings on behalf of the busi­ness and all of its stake­hold­ers; and

i. Over­sight — demon­strat­ed by a Board that is able to sat­is­fy itself that the man­age­ment and oper­a­tion of the busi­ness oper­a­tions con­forms to the Board’s strat­e­gy, direc­tion and poli­cies.

Com­mon caus­es of poor gov­er­nance & risk man­age­ment out­comes include the fol­low­ing:

  • resource gaps — par­tic­u­lar­ly in the com­pli­ance area of the busi­ness.
  • blurred roles and respon­si­bil­i­ties for risk man­age­ment and / or under­in­vest­ment in risk man­age­ment resources.
  • inad­e­quate busi­ness sys­tems, poli­cies and process­es and / or insuf­fi­cient mon­i­tor­ing and over­sight of day to day busi­ness sys­tems poli­cies and process­es with appro­pri­ate account­abil­i­ty defined and accept­ed by staff.
  • a cul­ture with­in the busi­ness that does not sup­port the fact that risk man­age­ment is everyone’s busi­ness and respon­si­bil­i­ty.
  • the reliance on the three invis­i­ble but ever so dam­ag­ing employ­ees that can from time to time infil­trate any busi­ness — any­body, some­body and nobody.

The team at Dono­van Oates Han­naford have the exper­tise and com­pas­sion required to lis­ten, advise and guide you in the process of prepar­ing and exe­cut­ing rel­e­vant gov­er­nance and risk man­age­ment prac­tices.

We can also help you pre­pare crit­i­cal strate­gic and aligned oper­a­tional plan­ning to help you reduce risk and improve busi­ness per­for­mance.

To organ­ise an inde­pen­dent review of your busi­ness­es gov­er­nance, cul­ture and risk man­age­ment, please con­tact Neville Par­sons on 02 6583 0436 or nparsons@dohlaw.com.au.

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