The Importance of Governance in a Volatile Environment

Governance at a company may seem like a cost that only sometimes produces a benefit. It could also be a pain point to those who constantly report to certain divisions. This is because it seems like it's more work without a clear benefit. That really couldn't be further from the truth however. Governance is one of the most vital components of your business, especially in a volatile market.

Unfortunately, that volatile market is one that we're approaching now. With the Russian – Ukraine conflict not finding any type of end and winter coming around with record gas prices, we see economies continue to struggle. Combined with the fact that inflation continues to rise. This is especially the case in the Euro Zone, which is nearly at 11%, it can push the global economy into a recession very shortly.

What does governance do?

Governance is not a watchdog, as many say. It's not a way to pinpoint someone doing something wrong or to find a way to punish employees. Instead, it's a way to have everyone involved with the company act in its best interest. While it might seem like a lot of processes and work in the beginning, once the whole flow is mapped out and implemented, it helps to provide a stable benchmark and performance for the whole company.

This is accomplished since the governance division is monitoring everything going on. Not only that, but also looking to smooth out the pain points for those weaker areas. It helps bring in the right type of transparency many companies don't always have. When the seas are calm, no one sees a use case for governance, as any idea is welcome and any risk tolerance is possible. Good governance helps us hedge our risks and navigate these waters when we enter into stormy weather.

Benefits of a strong governance

We say it helps us with risk management, but what happens with strong governance is preparing for risks before they actually occur and understanding the current market risks. It's a way to eliminate internal fraud. It's also a way to develop best practices from those mistakes that did occur as well as promote accountability amongst numerous other benefits.

In addition, because of this risk management, it can also lead to a better compliance system internally. That means ensuring proper regulations are met and the ability to ensure proper accountability when something does fall through the compliance cracks.

With compliance and risk handled, it helps for any type of goodwill loss. That means overall trust and reputation protection and improvement. Your customers and clients will see you as an ethical business that takes the time to govern internal operations and handle best business practices properly. This, in turn, will make investors also feel more confident.

Business growth

All of this, with good governance, provides a smooth path to growing your business, whatever size it may be in. In addition, with strict governance, we can improve performance which cascades to a better bottom line and helps give a competitive advantage.

With the volatility of the overall global economy, it’s important more now than ever to have a tight ship running, so to speak, and that all starts with good governance. For those that have had years of good governance, you will easily see the results. For those that just started or need a refresher, feel free to reach out to us. We can help set up the proper framework to get your business through this.