Wednesday, June 30, 2021

Governance Integration

Integrated governance leads to effective management by enforcing accountability, shared ownership, empathetic communication, innovation, consistent decision-making and risk intelligence.

As business leaders today, you can’t predict every turn or curve that the organization will face. There is a myriad of information, conflicts, and change inertia in the modern business environment today. Governance is by definition a framework of principle, structure, process, mechanism, practice, and metric, etc. 

There are varying degrees of understanding of the scope of corporate governance, the context for corporate governance includes a wide range of circumstances and capabilities which are subject to constant organizational variability. Governance and management are not independent disciplines to run a high performance organization. High mature businesses embed governance mechanisms into core processes, and integrate governance structures and practices into different cycles of business management to ensure organizational effectiveness, efficiency, innovativeness, and agility.

Integrate governance in the business strategy and planning cycle: Every business is at the different stage of the business development cycle, with its own set of issues, problems and concerns regarding its strategic and inherent risks. Don’t just see governance as a constraint, but rather, an opportunity. Without strong governance, management perhaps gets lost or even totally out of control. Effective corporate governance could be part of the strategic planning cycle, enforcing decision consistency across the organizational hierarchy. Often the transitional periods are painful for adoption of changes and old governance models may be counter productive. There are some disruptive processes or technologies that need some relaxation of the old governance models during the changeover. The governance bodies such as the corporate board need to ask: does senior management committees make informed proactive and timely decisions to achieve desired results? To what extent and how does the corporate planning align corporate priorities, sector business plans, and resource allocations? Is the current governance model still effective to adapt to dynamic business new normal, enforce innovation and improve the organizational maturity?

Strong governance disciplines enforce the ability to revisit and reinforce what you have put into place at the start of the strategy management cycles consistently before moving on to new phases. Take a proactive approach to figure out what the business need, enhance governance practices so everyone knows what they are to execute on, share unique business insight as to what capacity can provide, work out if it makes financial sense, shorten the strategy management cycle, strike the right balance of opportunity and risks, and bring the value to achieve high performance business results.

Integrate governance in the investment decision cycle of the business: Businesses have limited resources and budget, governance is a self defined framework used by the business to judiciously authorize and manage the portfolio of business investments and resources to produce value in support of business goals and objectives. The governance structure specifies the distribution of rights and responsibilities among different stakeholders in the corporation, and specifies the rules and procedures for making decisions in corporate affairs.

Good corporate governance creates a good decision-making system and good controlling system, makes investment justification to ensure that the organization spends the money in the right way to achieve both operational excellence and innovative growth, helps the business open up new channels of revenue and monetization within the enterprise and their ecosystem, and achieve better business results. If you can integrate governance mechanisms into the investment decision cycle and develop a balanced investment portfolio, it makes instant conceptual sense to board and C-level executives. With strong governance, the management can focus on three keys to presenting investment value: financial returns, return timeline and risk. The Return On Investment value proposition should be an overall measurement based on the combination of cost, schedule, quality, performance, and satisfaction of various stakeholders.

Integrate governance in the performance/potential management cycle: Business performance can be affected by numerous factors of which governance is one of them. Corporate governance definitely creates an impact on business performance. This impact is, however, situational. There is a consensus that governance not only should but must influence to manage the level of performance of all the members of the company. Look for the linkage between operation management and governance rather than compliance, corruption, and tough issues, to improve the quality of performance through governance improvement. Holistic GRC approaches enforce accountability at different levels of the organization. Under strong governance, the well-defined KPIs will help to measure results both qualitatively and quantitatively.

The positive impacts come from corporate governance good practices on the business performance. Shift the governance conversation from availability of business resources to the most productive uses for the enterprise's scarce resources. Corporate governance indicates a relationship with the Board, shareholders, management and the stakeholders. Governance involves the alignment of interests among the stakeholders. Start with a balance among the shareholders and investors. For every corporation which should work effectively and run innovatively, you need strong GRC disciplines that help executives and management perform a risk analysis, harness connectivity, raise visibility and awareness for many things that are captured at the different levels of the organization. If all these parties would perform to the vision and mission of the organization, it would increase the performance.

Theoretically, almost everything in an organization should have both management and governance components, as governance needs to focus on effectiveness-to ensure business doing the right things, and many times, management is about doing things right. Needless to say, effective governance leads to effective management by enforcing accountability, shared ownership, empathetic communication, consistent decision-making, innovation and risk intelligence.


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