Why is good governance important?

Why is good governance important? For when the wheels fall off. 

To understand why good governance is important, you have to understand what happens to an organisation without it. Poor corporate governance can weaken a company’s potential, reduce its chances of fulfilling its purpose and even lead to financial difficulties down the track. Time and time again you will see that the companies that perform the best are often well governed, and with that feather in their cap, they’re able to attract the right investors who can finance further growth.

If an organisation vows to uphold upstanding behaviour and practices, all the while being transparent with consumers, employees and stakeholders alike, it will undoubtedly lead to ethical decisions that stand to benefit all those involved. On the other hand, bad corporate governance can lead to a failure to thrive, limited profits and an undesirable reputation.

While corporate scandals and corrupt businesses are a tale as old as time, as we head into 2023 with a plethora of new technology that leaves businesses much more exposed, having great governance may be seen as a more urgent priority for a lot of decision makers.

Also, with the release of the new ISO37000 standard which provides a framework for corporate governance, there is now a perceived level of governance to both meet and uphold within the corporate world.

But what does it mean to be well governed?

It means having the right leaders steering the ship, providing counsel, direction and constantly reviewing progress to ensure the organisation stays the course. 

A well-governed company will have a board of directors or governing body that meets regularly to keep things on track, and each member will be confident in their responsibilities. Members will also be well-versed in the organisation’s risk management systems and know exactly how the organisation would plan to attack any given situation.

Having good governance in place in today’s digital world, also helps to discourage negative thinking around your business not keeping up with the times or being open-minded to the struggles of today’s consumers and employees. This can be particularly important in a world driven by online commentary and freedom of speech.

Good governance practices also allow an organisation to set aside the time to think about what really matters to them which can encourage progressive practices such as environmental action, charitable giving and fair trade that all help to differentiate an organisation from its competitors.

Most importantly, good governance makes for a tangible and protective first line of defence if your organisation was to face any allegations of malpractice or the like, as it provides proof of a system of checks and balances that make any such misstep unlikely.

Just as a country couldn’t survive the tough times without a good leader at the helm, the same can be said for an organisation without the right governance team. But on the flipside, strong governance is equally important during the good times, and it just might be the very tool that can lead your business there.

-Govn365