How can we achieve good Corporate Governance (CG) in the Financial Institutions (FIs)?
How can we achieve good Corporate Governance (CG) in the Financial Institutions (FIs)?
Answer: There are numerous benefits to good corporate governance, including improved company culture, increased accountability, and ability to spot potential issues before they occur. But, more than that, it shows investors that the business is organized and well placed to work in their best interests. So, it is crucial that organizations understand how to ensure good corporate governance.
In the following ways FIs can achieve Corporate Governance:
1. Diversified board
If all board members have homogeneity in experience, skill sets and category of profession, diversity of opinion cannot be found in decision which is required to make the best choice of options to formulate the company‘s strategy and other plans. Diversity in the boardroom is all about filling gaps in expertise to provide a broader range of viewpoints.
2. Review the Board Regularly
Regular evaluations are important which helps to track progress over a period of time and understand the strengths of the company as well as giving a good understanding of the areas that need improvement. Evaluations should be candid and in-depth conversations that give real data to work with to instil a culture of continuous improvement.
3. Directors’ independence
Independence of directors is required that wants to free from conservative thinking. Forward-looking boards need directors that are not afraid to think differently, rather than simply continue down the same path the company has always taken in the past. It helps create innovation and avoid rigidity of thoughts.
4. Auditor independence
Undue influence over the work of audit committees and independent auditors is a concern in terms of CG. Investors need to know that they can trust the financial reporting that an issuer makes, so independence is key to show that the reports are accurate and tell the true tale of the company.
5. Transparency
Transparency is an essential tool for good CG. The openness and willingness to share accurate, clear and easy- to-understand information with stakeholders, builds trust and solidifies a business‘s reputation, which is the cornerstone of banking industry.
6. Shareholder rights
Shareholders should know their rights when they invest in a business. They should be ensured of their rights are backed up by Articles of Association, constitution and bylaws.
7. Risk Management
Establish a risk management process and internal control framework that is both effective and conducive to your business needs and aim to review its effectiveness periodically. Disaster plans are critical to any business endeavor, so regularly keeping update is always necessary.
8. Adequate Disclosures
This refers to the disclosure of all related parties transactions, and the other interests of all director‘s involved. If a director has external financial interests outside of the company, it could influence their decision-making.