Corporate Governance – What does good governance look like for your business?

22 March 2019
2 min read

The Financial Markets Authority (FMA) has recently released its updated handbook for directors, executives and advisers; Corporate Governance – Principles and guidelines.

The handbook importantly reinforces the fact that effective corporate governance is never a ‘box-ticking’ compliance exercise. Good corporate governance is not just something that directors of listed companies should be concerned with. Two of the 8 principles outlined in the FMA handbook are particularly important for small and medium sized entities as well.

Principle 1 – Ethical standards

Often referred to as “Tone from the Top’, those charged with governance, be they directors or trustees, play a crucial role in setting the right tone for an organisation. This is in terms of respect, ethical behaviour and demonstrating the importance for staff at all levels complying with well-considered policies and procedures.

Does your organisation have a written code of conduct, appropriate policies in place covering areas such as fraud and dealing with conflicts of interest, reporting mechanisms for staff to report concerns, and appropriately detailed delegated authorities?

Principle – Risk Management

Risks that could possibly derail a business should be identified and considered in a robust manner. Boards and owners of small and medium sized entities should be rigorously identifying the risks that are most likely to impact on the business, be it from a financial, business continuity, reputational, legislative or health and safety perspective. Crucially, once the risks are identified, the controls in place to mitigate the impact of these risks should be assessed for effectiveness.

Does your business robustly identify significant risks and the effectiveness of controls? Are significant risks documented in a Risk Register?