The way businesses operate has undergone a drastic change in the last few decades. The managing shareholders, owners, and the top executives in any business are entrusted with the responsibility of taking due regulatory actions and ensuring the roll-out of consistent policies and business practices. This is where the role of compliance and good corporate governance comes into play.
Sound corporate governance lays the foundation of a healthy organization. It sets the environment as to how a company shall function both internally and externally in the market. Corporate governance can be called a performance issue for a business. Compliance and corporate governance are intricately linked fundamentals. Let’s have a detailed look at them:
What is Corporate Governance
Corporate governance is the system by which an organization manages the functioning of its social and institutional aspects. It is the primary influencer to the vision, mission, and goals of a company and helps the owners and management lay down achievable objectives for a business. It also defines how the internal processes of a business are made to function at the optimal level and how risk is calculated and monitored.
What is Compliance
Businesses meet their legal requirements and take care of the policies, contracts, strategies, and regulations with the help of Compliance. When top executives assess the compliance for the company, they evaluate the existing state of compliance. They also calculate the cost of implementing compliance against the cost the business would have to bear for non-conformity to compliance. Thus, they can prioritize, budget, and implement the corrective actions required for the implementation of compliance for the business.
Areas covered under Compliance and Corporate Governance
- The implicit and explicit contracts that a business has with its stakeholders regarding the rights, rewards, and responsibilities and their division between the two.
- It lays down the procedures of handling conflicts between stakeholders concerning their duties and privileges.
- It defines the procedures for establishing checks and balances in the system.
Benefits of efficient Corporate Governance and Compliance
- Proper following of compliance and defined procedures brings consistency and repeatability in the tasks, thus leading to more efficient processes.
- Consistency in processes helps identify nonconformity to the prescribed procedures by making the errors easily visible.
- When the processes get consistent and streamlined, it reduces wastage and reworks, thus bringing down the costs for the business.
- Since all the processes are predetermined and specific, it makes the operations smoother and more productive.
- Efficient processes give better products and services. This brings brand loyalty to the company and fosters trust among the customers.
- Good corporate governance and proper investment compliance monitoring create a positive image for the business in society. This reassures the stakeholders and attracts
- sponsors and financiers who wish to invest in the business and be a part of its growth.
Proper implementation of corporate governance and compliance impacts the business positively in tangible and intangible ways. Businesses can see risk getting controlled, and processes getting streamlined, organized, and consistent. This also attracts fresh talent, sound investors, and loyal customers to the business.