About Good Governance
Governance refers to the system and processes by which organisations, institutions, or societies are controlled: how they make and implement decisions, manage resources, and establish and enforce rules and policies.
It encompasses the structures, principles, and practices that guide how authority is exercised, how various stakeholders are involved in the decision-making processes and how people are held to account.
Ethics, risk management, compliance and administration are all important elements of governance.
Governance can apply to various contexts, including corporate entities, government, non-profit organisations, and international bodies.
Key elements of governance
There are four key components of good governance:
• Transparency: Being clear and unambiguous about the organisation’s structure, operations and performance, and maintaining a genuine dialogue with stakeholders.
• Accountability: Processes to ensure the right people have the authority to make effective and efficient decisions, with appropriate consequences for failures.
• Stewardship: Recognition that the organisation is managed for the benefit of its shareholders while taking reasonable account of the interests of other stakeholders.
• Integrity: A culture committed to ethical behaviour and compliance with the law.
What is risk management?
Risk can be defined as the ‘effect of uncertainty on objectives’. Risk is important as it assists organisations in setting strategy, achieving objectives and making informed decisions. Taking risks is fundamental to any organisation across all sectors to deliver services to stakeholders and community.
Who manages risk?
Recognising and managing risk is a crucial part of the role of the board and management.
Oversight of risk management is the responsibility of the board, which should regularly review and approve the risk management policies and frameworks.
In this way, the board decides on the nature and extent of the risks it is prepared to take to meet objectives.
Implementing effective governance
Poor governance can result in corruption, inefficiency, and inequality. The structure of a good governance framework depends on the:
• Identities and roles of key stakeholders
The role of an organisation’s board of directors and executive and the extent of their involvement in day-to-day management varies significantly, depending on the type of organisation, size and complexity of its business or activities
• Powers vested in each stakeholder and the basis on which such powers rest
Do the powers arise from legislation, the constitution or other authorising documents?
• Reporting responsibilities of each stakeholder and the identity of the stakeholder to whom the reporting obligations are owed
For example, CEO reports to the board and the board reports to members.
• Extent of board, member and executive management’s decision-making powers.
What do governance practitioners do?
A governance professional:
• Leads and advises on best practice in governance, risk management and compliance
• Champions the compliance framework to safeguard organisational integrity
• Promotes standards of ethical and corporate behaviour
• Balances the interests of the board (or governing body), management and other stakeholders.
Governance practitioners can have a wide range of position titles, depending on the organisation. They may be called, for example:
• Company Secretary
• General Counsel
• Chief Financial Officer
• Chief Governance Officer
• Chief Risk Officer or another title.
Governance practitioners have a significant impact on the level and quality of corporate governance and governance culture within an organisation, including a pivotal role in assisting the board achieve the organisation’s vision and strategy.
Responsibilities and duties of a governance practitioner
A governance practitioner’s responsibilities and duties can cover a broad spectrum of activity. These can include:
• Governance, risk management and compliance policy and practice
• Corporate strategy and board management-administration
• Board performance, remuneration and evaluation
• Human resources, legal and finance
• External adviser communication-liaison
• General administration
Head to our course catalogue to further your career in governance and risk management
Effective tools are essential for implementing and monitoring strategic direction, budgets, and governance and risk management frameworks.
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Useful links to relevant legislation and regulation
Corporations Act 2001 (Commonwealth)
ASX Corporate Governance Principles
Public Governance, Performance and Accountability Act 2013
Australian Competition and Consumer Commission (ACCC)
Australian Securities and Investments Commission (ASIC)
National Anti-Corruption Commission (NACC)