The potential for corporate governance to enhance investor confidence makes a periodic, systematic and objective assessment of an organization's framework for governance an imperative. This is an opportune time for organizations to reassess their commitment towards corporate governance and align the same with their vision, objectives & long-term strategy. 

Areas for improvements may be identified with reference to best practices and organizations should remain on the continuous lookout for these, while they review their own practices. It is organizations who vigilantly and diligently monitor the effectiveness of their governance frameworks (with emphasis on strengths & weaknesses) that will go far - they will lead the way for others to follow.

In a recent discussion, which has generated substantial interest, our Managing Partner - Monish Gaurav Chatrath has reiterated MGC Global Risk Advisory's commitment to our clients in assessing and enhancing their systems, controls, policies, procedures and risk management frameworks, to boost their stakeholder confidence and optimize value creation.

In this thought leadership (which is being released on this budget day!), we are setting forth 10 key commandments related to good governance.

Enhance the role of an independent body (or nomination committee, as applicable) | To develop the charter and assess the effectiveness of the functioning of the board of directors and sub-board level committees.

Right size the board of directors and board level committees | Emphasize on experience, diversity & independence - quality versus quantity is the key.

Segregate the roles of Chairman and CEO (where the two positions exist) | To enhance monitoring oversight & objectivity.

Make enterprise-wide risk management an ongoing activity | Integrate risk management with your strategy formulation & implementation and develop a risk-driven internal audit charter for your business.

Benchmark your internal audit function | Focus on aspects such as budget, resources, structure and extent of outsourcing/co-sourcing.

Institutionalize an independent body to assess the level of executive pay and benefits | Ensure that these are consistent with performance (both the company and individual) and the business strategy.

Instill an effective whistle-blower policy framework | One that is applicable for all stakeholders and not limited to employees. Further, ensure that whistle blowing is heard at the highest levels to enable meaningful corrective action. A direct access of the ombudsmen to the audit committee or the board can go a long way in this regard. 

Make ongoing stakeholder engagement a priority | The reasons why unlisted companies should also concern themselves with corporate governance, particularly when it comes to management of relationships with its stakeholders, are equally, if not more compelling as those for listed companies. The bottom line is that all companies need to be transparent in their communications with stakeholders.

Develop robust & reliable Internal Management Reporting ('IMR') systems | Financial statements, while useful for annual planning, often favour consistency, transparency and simplicity over the economic reality of the moment. To ensure that management decisions are fully in line with both ground reality and economic reality, develop effective IMR systems with common characteristics such as accuracy to the most reasonable degree, timeliness (which, due to technological advances, have begun to attain ever more sophisticated standards), alignment with organizational complexity and detailing to a level that facilitates actionable business decisions.

In monitoring your accounting and financial reporting processes and systems of internal control, the board of directors or the audit committee (where formed) should:

• Hold their meetings without restrictions or time constraints (at least quarterly);

• Schedule these meetings well in advance to coincide with the completion of each quarter's financial statements and prior to finalizing the company's quarterly earnings releases;

• Distribute written materials for review sufficiently in advance of the meeting; &

• Meet separately with each of the key players involved in the financial reporting process (members of management, the internal audit department and the independent auditors) to review internal controls, the fullness and accuracy of the company's financial statements, the financial reporting process and other appropriate matters.