Governance is everything that enables the activities of a business. This includes all checks and balances, the structures that are put in place to ensure that a company meets its goals and avoids problems, plus any tasks that are focused on ‘big things’ such as planning long-term strategies or managing risks. You have probably been performing governance tasks since the beginning of your company, whether or not you are aware of it. As your business expands your requirements for governance will also grow. Governance can include any structure you choose, ranging from the sole proprietorship up to a full board of directors. It is essential to to plan your governance arrangements carefully, and then think about the various options that could be implemented for you in relation to your growth plans.
As businesses grow, governance becomes increasingly complicated and requires more focus and resources. For instance, if a company has been made a public-listed company with thousands of shareholders, several share classes, as well as a variety of lenders it is essential to establish robust procedures for shareholder engagement. Additionally, you will require directors with the required skills and experience.
A good governance system allows a business to act in the best interest of its clients, increase their performance and provide greater stability, efficiency and trust. It also makes the business more attractive to investors with high-end expectations and lowers its cost of capital. It improves transparency and provides the ability to swiftly respond to any crisis or controversy.
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