The Power of Governance!
What is this thing called Governance? With all the changes and challenges surrounding your business, Governance may sound like a bureaucratic nuisance. This quarterly advisory is dedicated to the value of Governance to effectively manage your organizational risks. We will share expert definitions of Governance in government and corporations and weave a tapestry of value to your business and Risk Management.
Business Dictionary’s definition is: Establishment of policies, and continuous monitoring of their proper implementation, by the members of the governing body of an organization. It includes the mechanisms required to balance the powers of the members and their primary duty of enhancing the prosperity and viability of the organization.
Investopedia defines: Corporate governance is the system of rules, practices and processes by which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.
All these words and phrases make Governance sound complicated. In our world Governance simply is the collective knowledge and wisdom of several leaders who oversee the major operational, financial, marketing, human talent and legal imperatives for an organization, all focused on the opportunities and risks faced in each business cycle (hour, day, month, quarter or annual). Governance can occur at the Board level, C-suite, Division or operating unit. It captures the simple thought that “several heads are always better than one”!
Risk Governance brings regular and rhythmic deliberations by a team responsible for major segments of the organization regarding the opportunities and risks presented by the pursuit of goals and success. Most effective is when this Governance team owns the organization’s risks and carries the responsibility and accountability to anticipate, prioritize and mitigate situations that could impair progress toward successful outcomes.
This process isn’t a one day or week exercise. It is a process that lives constantly with the Risk Governance team! The outcome is an environment of anticipation, planning and preparedness for anything that may occur from operations or external situations outside immediate control. It drives acute awareness and nimble response to emerging circumstances. The process is shared among the team members in a manner of collaborative support that minimizes the friction of organizational silos.
Key words in the definitions presented earlier are “prosperity and viability”, and “every sphere of management”. Effective Governance of opportunities and risk improves the potential for financial success and long-term sustainable operations (remember you don’t need to be perfect – just better than the competitor). Equally important is the engagement of every part of the organization. This is where the natural friction of silos is mitigated.
The ideal is trust, collaboration and problem resolution.
Many organizations compare Governance with Compliance/Regulations. Some see that Governance is a requirement for control. Governance for purposes of control minimizes the value creation from collaborative anticipation of opportunities, Recognition of risk and preparedness for Response and Recovery (faster than anyone else).
The Most Impactful Risk Management Originates from Governance.
Punctuating this practice is the evolution of your Information Systems. The technology has been designed and placed into service over time; enlisting the best available devices, connections, storage and processing. Since your systems are a collection of resources deployed during the past 10-20 years, how would humans have any chance of understanding and protecting the precious data collected and processed? The best chance you have is regularly bringing together the best minds to examine operations, threats and responses to incidents constantly attacking an out-of-date set of systems. Nothing provides certainty better than rhythmic monitoring, assessment and response.
Facebook was designed in the early 2000’s to provide users a platform to share personal information; with all good intents! We have now experienced creative users who manipulated the platform for uses that were not anticipated (in the 2015-2018 timeframe). Facebook now will combine Artificial Intelligence with human Narrators to evaluate content 24X7. These costly steps deploy intensive and rhythmic monitoring combined with Governance-based oversight that will multiply Facebook’s management of risks associated with hacks, data manipulation, theft, misuse and ransom.
With the backdrop of banks experiencing 3 hack attempts per second, cyber-attacks up 20% from 2017, supply chain disruptions at an all-time high, Fraud producing $7 billion in losses in 2017 the most effective counter measure is proactive Risk Management Governance.
Integrated Risk Management Solutions provides Advisory services to help strengthen your business. I look forward to your thoughts and questions – please contact us.
Manage Your Risks Well,
Risk Management is Every Team Member’s Business