Wednesday, April 14, 2021

Very Characteristcs of Governance

The Corporate Governance rules and principles need to be followed to improve the functioning and transparency of the company,

Remember governance isn’t just about putting restrictions on what you can do, it is also about monitoring and knowing when things are not going to plan so that you can take appropriate action at the right time. 

How to enforce the organizational governance discipline depends on the nature, scale, and complexity of the organization, as well as understanding one's risks and conducting. To improve organizational maturity, governance is critical for "decision-making optimization," or “accountability enforcement,” and “innovation advocacy.”

Decision-making optimization:
Due to the complexity and ever-changing business dynamic, sound judgment is a hardcore decision-making competency which often does not come from “gut feeling,” but based on multidimensional thinking, updated information, solid knowledge, and contextual understanding. For decision-making to be effective, the decision-maker must have the right dose of "gut feeling," and sufficient knowledge to make their decisions rich in information and significantly different from the available data. The psychology to make a decision is embedded with the "choice" process, which includes identification, contemplation, evaluation, and selection of a universe of alternatives within the thoughts block. Good corporate governance enables a good decision-making system and a good controlling system. It can assure the corporation’s operation under the correct directions and behaviors correctly.

Corporate boards oversee strategies. Most Board decisions are not so "binary" as to demand a yes/no or up/down decision, but rather, an airing of the issues and adjusting the terms to meet objections. If a decision is too complex, if a clear outcome is uncertain, try not to be the winner of close votes on important issues. Therefore, BoDs need to be inquisitive, ask tough questions, be scrutinizable, not simply accept what is being told, but gain more understanding, that would be positive to avoid many common sense pitfalls, and leverage systematic methodology and logical analysis to optimize decision-making.

Accountability enforcement: Leadership and accountability must go hand in hand. Accountability is to be wise and brave enough as a leader to remove and change in time before the problem becomes overwhelming and take responsibility for what he/she does. Accountability goes hand in hand with the delegation of authority or power. In an ideal workplace, culture should be to listen, consider, adjust, listen some more before acting. The corporate board director with an accountability mind is learning agile, wise, courageous, resilient and highly mature. Behaving accountable is the result of a culture with values that need to be organized and nurtured. Accountability is a two way street and is only as effective as the people who value and believe in it.

True accountability focuses on learning to do things differently, rather than punishment. We are all leaders participating in our many systems connected to everyone. How we hold ourselves accountable and those around us sets the tone and pace for everyone not just for today, but for the next generations to come. The corporate board plays a significant role in taking ultimate accountability to shareholders and the courts for the performance and conformance of the organization. They help to oversee a corporate performance management system that encourages responsible communication, enforces accountability, enhances open door listening, improves decision effectiveness, harnesses transparency, and monitors performance accordingly.

Innovation advocacy: Innovation differentiates the leader from followers. Innovation requires thinking beyond, as opposed to outside the box, altering or changing the frame of reference to create previously unconsidered solutions. Governance is critical for meaningful innovation. Innovation is simply too important to delegate to the management without the corporate board oversight. Innovation governance on the board level needs to advocate, steer, and sustain innovation, involves updating rules, optimizing processes, or developing/scaling new governance practices, etc, for improving GRC discipline. A good governance standard provides a common corporate "language" and work instructions to decide and take actions for either grasping opportunities or managing risks.

Look at innovation and governance as a continuum. Innovation cannot be separated from a specific business purpose and in a broad context. Innovation needs a level of guidance, it has to deliver business objectives, but it needs the right kind of governance to thrive. Tie innovations and the innovative culture to the organization's strategy. This ensures that innovations will be supported by all stakeholders and overseen by corporate boards. The corporate board can help to oversee innovation agenda by asking tough questions to evaluate innovation effectiveness. They can do fantastic work for developing a world-class organization with a strong culture of innovation.

The very characteristics of digitalization are complexity, ambiguity, uncertainty and ambiguity, hence, GRC (governance, risk management and compliance) become more critical than ever. The Corporate Governance rules and principles need to be followed to improve the functioning and transparency of the company, its business strategy, and management performance. And the GRC practices should be enforced to improve organizational maturity and drive seamless paradigm shift.


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