Category: Corporate governance

The importance of corporate governance

By Howard Wallis

05 May 2018

Businesses go through many different forms throughout their lives.

A typical SME will usually start in a very proprietorial manner and, if run and controlled properly, will develop and grow into a mature and profitable business. With maturity brings value, which can be realised when the business owners wish to cash in on the results of their efforts and skills.

However, it is crucial for any business owner to know the point at which proprietorial controls are no longer appropriate and proper corporate governance needs to be introduced. Indeed, in many cases, this should be close to the start of the business’ life.

Over the years, I have worked with many businesses in assisting them to introduce proper and effective governance to their operations which, in turn, has enabled them to work very much more ‘on’ their business. This has given them an opportunity to review their business in its entirety rather than getting bogged down in its day to day running.

So, what does corporate governance really mean? In essence, it is the introduction of appropriate protocols that, if followed properly, will allow any business to grow in a controlled and efficient manner.

Part of governance would be the implementation of regular board meetings as a forum to discuss the various areas of a business that need controlling which is so important to aid growth. At board meetings, there are a number of standard subject areas that need to be considered and regularly reviewed. Some of these are summarised as follows:

1. Finance

Any business should have a plan. This plan should be translated into numbers by way of forecast and budgets. These budgets should be regularly reviewed and ‘actual’ figures should be compared to the forecasts to ensure that the business is growing in accordance with the business owners’ original plans, with any variances having suitable explanations. Key Performance Indicators (KPIs) should also be established and reviewed, to ensure that where it is possible to measure trends as well as performance, this is being done.

2. Operations

This is a very general term but includes HR and all other relevant matters relating to the day to day running of the business. It is essential to identify what is right and working well, and what can be improved upon within the parameters of the business’ operations. Only by considering these at a ‘working on’ meeting will the business owners be able to review and improve their ongoing processes.

3. Sales and Marketing

Any successful business will have a sales and marketing strategy and, of course, such strategy should be reviewed for its successes on a regular basis. It is likely that the direction of a marketing strategy may need to be changed depending on market circumstances.

4. Information Technology

Technological advances play a huge role in all businesses today. Consequently, it is essential to have a strong IT presence within a business and take all the necessary precautions to ensure that technology is used in the most efficient manner to maximise process efficiency. A monthly review of IT processes and expenditure should always be undertaken.

5. Strategy

Business owners should examine how the business is performing against not just the current year’s budgets and forecast but against their ultimate aspirations. This may include an analysis of the market (including competitor behaviour) and the creation of an ‘opportunity map’ for the development of the business, whether through organic growth or mergers or acquisitions.

Within the regular board meetings, it is also important to review other areas of the business that could have a significant impact on the business, such as legal and compliance matters, or indeed any risks that may be evident to the business.

I have often seen businesses that ignore the need for corporate governance and before long, realise that their processes and general organisation are chaotic which often leads to the business underperforming or, worse still, an unfortunate end.

If you feel that you could benefit from an initial chat as to how we may be able to assist you in implementing the appropriate governance and controls required by your business to maximise its value, please get in touch with your usual Gerald Edelman contact or Howard Wallis at hwallis@geraldedelman.com or on 020 8492 5614.

Back to top

To download this report, please provide the following information.