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Enhancing Transparency, Responsibility, and Stakeholder Confidence

Corporate governance is a critical component of any successful business, as it provides the framework for making informed decisions, managing risks, and ensuring that the interests of all stakeholders are taken into account. Effective corporate governance starts with a strong foundation of transparency, responsibility, and stakeholder confidence.

Transparency is a key component of corporate governance, as it helps to build trust with stakeholders by providing clear and accurate information about the company’s operations, finances, and decision-making processes. This includes regular financial reporting, disclosure of conflicts of interest, and open communication with shareholders and other stakeholders.

Responsibility is another important aspect of corporate governance, as it ensures that the company is held accountable for its actions and decisions. This includes assigning clear roles and responsibilities to the board of directors, management, and other key stakeholders, as well as implementing systems for monitoring performance and addressing issues that arise.

Stakeholder confidence is vital for the long-term success of any company, as it helps to build trust and establish a positive reputation. Strong corporate governance can help to increase stakeholder confidence by ensuring that the company’s actions align with their interests and values, and by demonstrating a commitment to ethical and responsible decision making.

In conclusion, the foundations of strong corporate governance lie in transparency, responsibility, and stakeholder confidence. By building a framework that emphasizes these key elements, companies can improve their performance, reduce risk, and ensure long-term success.

The modern business environment is fraught with many risks and considerations that any company cannot afford to neglect if they are to be sustainable. For instance, today’s businesses are not solely inspired by the customary need to make profit for their shareholders but companies are also obliged to consider diverse interests from other stakeholders; government, regulators, financiers, customers, employees, suppliers and communities at large. This further stresses the need for companies to have concrete policies of monitoring their compliance status with these numerous stakeholder interests in mind.

Some of these risks and ethical concerns might not be immediately visible to companies or firms’ directors might not be aware or within track of their company’s compliance status. Take for instance the recent tax evasion crack-down that has plunged some notable players in the alcohol industry in a legal and reputational crisis. It is still early days in the tax evasion allegations against these brewery players and it is surely difficult to tell how the cases against the company and its top executives will pan out, but there is no denying their disruption to the said companies operations and the reputational damage so caused.

Because of such incidents, firms’ leadership have to constantly consider real and ethical issues that motivate sustainable corporate behaviour within this context of ethics and risks. It thus remains the responsibility of the board of directors to chart a strategy that addresses or attempts to mitigate majority of these prevalent risks.

To strike a healthy balance between profitability and risks, ‘responsible’ corporations employ a system of checks and balances that aligns profitability goals with the competing stakeholder ethical concerns and risks. In this context, the inclusive approach, more often, is to execute corporate governance from a compliance viewpoint.

At a glance, corporate governance lays the framework or overall management approach that determines an organizations direction and how a company positions itself towards meeting its obligations – both internal and external. It constitutes a set of processes that control how a firm is directed, administered or controlled. Corporate compliance on the other hand, ensures that businesses operate within specific legal, regulatory, contractual, or policy requirements.

Whereas corporate governance and corporate compliance are different strategic initiatives, they are interdependent in so far as their role in protecting against certain risks or guiding the overall business direction is concerned.

Importantly, non-compliance results in poor corporate governance and this brings the question of whether there exist mechanisms of fostering risk awareness and correction of identified risks, aiding compliance and ultimately effective oversight.

Boards can remain on top of compliance requirements with the aid of board management systems that not only ease corporate governance processes but also keep your directors up-to-date with the organizations compliance status with different regulatory bodies. Through such systems that keep board directors aware of what goes on around the company at all times, hence ensuring active oversight of risks that can derail smooth business operations.

What are you waiting for? To learn more about our Board Management System (eHorizon eBoard) , visit our website at www.stl-horizon.com or call +254 709 609 000

If you look at some of the fastest growing economies in Africa, what sets them apart is not just the performance of the large and listed corporations but the robust and vibrant SME presence. SMEs form one of the most influential business sectors in African countries and remain the biggest contributor in accelerating economic growth.

In Kenya for instance, Micro, Small and Medium Enterprises (MSMEs) contribute to about 40% of the GDP. Additionally, SME’s also contribute massively to job creation – about 50% of new jobs created, according to a 2018 World Bank Report on High Growth Firms.

Another report by the Central Bank of Kenya also indicated that SME’s constitute 98% of all businesses in Kenya, further underscoring their importance.

Crucially, in spite of their vital role, 46% of SMEs shut down within a year of founding and subsequently 15% fail in their second year of operation. This high collapse rate remains a threat to the effective development and growth of SME’s and can be attributed to some of the major challenges facing SME’s including inadequate capital, lack of market access, lack of adopting new and emerging technologies, poor infrastructure, lack of skills, unfavourable regulations and lack of proper management.

These challenges notwithstanding, one critical enabling factor for enhancing the performance and sustainability of SMEs is corporate governance. Good corporate governance practices present SMEs with robust business processes and risk management strategies or mechanisms of responding to crises.  It similarly provides a clear-cut path of employing better management practices, effective oversight and control mechanisms.

Regardless of the stage of development SMEs are in, corporate governance lays the crucial framework to ensure transparency and accountability hence making them less prone to system risks and effectively making them more attractive to investors. SMEs seeking to attract investors can thus leverage on good governance track-record as a value proposition to secure funding.

1. Instituting Proper Rules, Policies and Procedures

For SMEs to run as efficiently as possible, business founders and owners of Small and Medium Enterprises need to be clear in their vision on how the business is to be run. This is crucial in defining the strategic direction, financial expectations, roles and responsibilities of management/members, as well as clear-cut systems of achieving the organization’s goals and objectives.

2. Separation between Management and Owners

Lack of competent managerial skills has been cited in many scholarly articles as one of the banes to the growth and development of SMEs. Corporate governance makes room for the introduction of external directors away from the business owner who bring with them diversity of skills hence improve best practice methods of running the business and improving profits.

3. Board of Directors

External board members not only bring diverse skills that in turn lead to better

management decisions but can also provide an important avenue of attracting funds or resources for growth. Whereas SMEs may not have the resources to acquire skilled directors, they can put in place boards through seeking volunteer directors, offering equity as director’s compensation or recruiting board consultants on need basis.

4. Transparency and Accountability

SMEs need to establish clear communication channels and ensure timely and accurate sharing of information about their activities. Information disclosure with internal and external stakeholders creates a consistent track record infuses confidence of possible investors paving the way for attracting funding from financial institutions. Additionally, this also helps in safeguarding from internal fraud and issues pertaining to ethical liability.

5. Succession Planning

This is crucial in minimizing “key-person “risk especially in the start-up stage where the business is largely dependent on the founder in the day-to-day running of the business.

6. Proper Financial Reporting

Majority of SMEs do not do proper accounting nor have implemented international financial reporting standards.  Financial reporting provides a comprehensive and accurate picture of organization operations. Timely financial statements are important for effective business management be it a large or small enterprise.

Want to learn more about our eHorizon Suite of Solutions? Call us at +254 709 609000 or email sales@stl-horizon.com

ESG is a core strategic mandate and principle of the WFE and this year’s survey mapped exchange activities to the WFE’s Sustainability Principles for the first time. These principles, published in October 2018, state that exchanges will: work to educate participants in the exchange ecosystem about the importance of sustainability issues; promote the enhanced availability of investor relevant, decision-useful ESG information; actively engage with stakeholders to advance the sustainable finance agenda; provide markets and products that support the scaling-up of sustainable finance and reorientation of financial flows; and establish effective internal governance and operational processes and policies to support their sustainability efforts.

Successful integration and effective management of sustainability at a company requires having committed leadership, clear direction, and strategic influence—and none of this will happen without a robust governance structure. Sustainability governance helps a company implement sustainability strategy across the business, manage goal-setting and reporting processes, strengthen relations with external stakeholders, and ensure overall accountability.

The WFE sustainability survey captures the nature and extent of member engagement with Environment, Social and Governance (ESG) issues in both developed and emerging markets. By carrying out this survey on an annual basis, the WFE is also able to track the evolution of members’ engagement with ESG issues.

Four Considerations to Keep in Mind when Building Effective Governance Structures:

• Commitment begins at the top. Reporting to the CEO or other key C-suite leadership can help demonstrate that a company is serious about sustainability.
• Accountability must be established and communicated clearly. Accountability helps ensure that sustainability is integrated with other business goals. Including sustainability performance into the company’s annual goals and employee performance review and compensation processes may be helpful mechanisms.
• Alignment between the structure and the business is imperative. Sustainability governance structures that align with and complement the existing business model and organizational structures can be more successful than creating redundant or competing structures.
• Flexibility to adapt and build up on the sustainability program across business units and regions can advance the sustainability agenda. Allowing for some adaptation can help ensure the sustainability program’s relevance to a business unit’s own strategies or region’s local conditions. It also can generate employee engagement.

Is your business as efficient as you’d like it to be? No, take your time, really think about it… Are all the processes as streamlined as you would like them to be? If not, how can you be better?

Business Process Automation (BPA) is simply a defined way to eliminate manual, time consuming and costly tasks within an organization and replace them with automated processes that work faster while reducing redundancy in tasks and overall operating costs. They’re designed to provide companies with a competitive advantage, whether it’s finding ways to provide customers with services more efficiently, reducing order errors, or fixing billing and payment issues, among dozens of other examples.

Why is Business Process Automation great?

• It allows companies to orchestrate, integrate, and automatically execute.
• It centralizes your processes for the greatest amount of transparency, as it keeps the computing architecture intact. It coalesces the business functions that should logically be more integrated and spreads them out across the company.
• It addresses your human-centric tasks and minimizes the need for personal interaction.

“To be strategic is to concentrate on what is important, on those few objectives that can give us a comparative advantage, on what is important to us rather than others, and to plan and execute the resulting plan with determination and steadfastness.”

Richard Koch

How do you go about it?

• Examine your business strategy and look at the key areas that may need automation

• Are the key aspects of your business all working in sync? If not, why?

• Do a customer/product journey map and highlight the areas that may need improvement based on efficiency, speed, effectiveness and environmental consideration i.e how much paper is used?

Software Technologies Limited (STL) was founded in 1991, and has since grown to deliver Software Solutions and Services around Africa and the Middle East. STL develops its own software and focuses on solutions that address the management of people, processes and governance. Our cloud-based solutions have enabled companies of all sizes to access simple and effective systems that allow them to focus on their core business. Call us today at +254 709 609000 / +254 722 207450