Ignoring or misunderstanding financial risks played a major role in the creation of the world financial crisis in 2008 – which is still ongoing.
The financial crisis has essentially upset – and undone -the last decade of deregulation, and corporate leaders and the legal fraternity will bear the responsibility of rebuilding whole industries from the ground up, says Tony Cunningham, MD of the technology-focused business compliance company, Wynleigh International.
Top businessmen around the globe should be pondering what could have been done differently and, indeed, what can be done in the future to avoid a crisis of this proportion, which effectively resulted in a global economic meltdown, costing 1-million jobs in South Africa alone.
A substantial part of the answer lies in the area of governance itself.
“Companies need solid, ethical and well-planned building blocks on which to establish their governance principles – regardless of any future regulations.
“What is naturally important is the over-riding need to implement internal controls, the dismantling of any communication glitches between the various departments, and the centralizing of corporate information. One of the more pressing problems being faced by businesses is the decentralizing of information, which leads to different silos of information. With information scattered across the enterprise in different silos of information, overall control – including good governance – is made exceedingly difficult.”
According to a study by The Economist Intelligence Unit, “Companies are beginning to realize that the full value of [governance] depends in large part on the policies and procedures that govern and control its use, access, analysis, retention and protection.”
A poll conducted by the EIU revealed the following: "77% of respondents expect … governance to be … very important to their company’s success over the next three years. Consequently many firms have begun building the foundation for … governance policies.
"A majority (65%) have defined policies around how information is to be stored and shared among employees and stakeholders. Furthermore, some organisations are forming formal governance bodies to create strategies, policies and procedures surrounding the distribution of information inside and outside the firm.
"This is a good start, but considering that 68% of respondents also expect that the complexity of their company’s information governance issues will grow over the next three years, there is little time to waste.”