Corporate Governance?
Goals and strategic business objectives are important in every organisation. A Company works towards these goals while complying with legislation and regulatory requirements, and minimising risk exposure. It is the responsibility of the Company’s Board to ensure this.
Corporate Governance influences how a Company runs by bringing together and connecting:
- Management
- Directors
- Members/Shareholders/Owners
- Stakeholders
These people have a vested interest in ensuring that the company operates smoothly.
Are you a successful Director?
You may be the Director of a Company, or someone charged with governing an organisation. Either way, the principles you need to apply for effective risk management and governance are highly relevant to the success of your role.
Who do the rules apply to?
Corporate governance applies to directors and Those Charged with Governance, the TCWGs of an organisation.
The TCWGs are responsible for ensuring that all decisions are made in the best interest of an organisation, and also in the interests of stakeholders.
The law and Corporate Governance
There are broadly three sources of influence in Corporate Governance in Australia:
- The listing rules of the Australian Securities Exchange (ASX)
- Binding law and legislation, including the Corporations Act 2001
- ASX guidelines and principles
- Other industry and sector specific regulatory bodies, e.g. the Australian Charities and Not-for-profits Commission
Businesses must understand the principles of risk and governance enshrined by these rules because well-run businesses naturally perform better than poorly-managed companies.
The responsibilities of Corporate Governance
Those responsible for Corporate Governance must:
- Be transparent in their actions and activities
- Make decisions that best serve the Company and improve its performance
- Act ethically and responsibly
- Choose and supervise the Company’s management
- Set the Company’s goals and direction
- Oversee and monitor the Company’s risk management strategies
It is significant that Directors and TCWGs can’t delegate Corporate Governance responsibilities to management or other members of an organisation.
Detailed information on director responsibilities can be found here.
The importance of risk management strategies
The identification and management of risks is an important responsibility of Directors and TCWGs, and in this regard the development of risk management strategies is important.
Developing such strategies involves addressing the following:
- What are the potential risks to the business?
- How would you assess the risks identified and how might they affect the business?
- How would you rank and prioritise the significance of these risks?
- How would you regularly monitor and manage the risks?
- Which risks need to be communicated to other members of the business?
- How would you communicate the above specific risks to those with the need to know?
- Which compliance rules, including rules affecting data and cyber security, need to be followed?
- How would you ensure knowledge of and familiarity with risk registers?
The potential risks that affect your business change frequently. As such, your risk management strategies need to be dynamic to be able to respond to changing risks resulting from evolving forces impacting your business. Dynamic evolving risk management strategies ensure you are best prepared both for the problems which are most likely to affect your business, and the associated costs involved.
We assist our clients in achieving the most effective risk management strategies for their businesses. Our Audit Specialists have the expert knowledge you need! Should you have any questions, please contact us today on 03 9835 8200, or alternatively complete your details below and Accru will come to you.
