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CGF ARTICLES, OPINIONS & EDITORIALS

Knowledge is power: Reducing the governance risks (2015-01-19)

Advertorial by Kirsty Ridley (Head: CGF Governance Researcher)

Worldwide, Worldwide, and particularly in South Africa, reports of governance failures occurring in organisations are common.  There have been many instances where poor governance has contributed to the collapse of an organisation and most often, many people are negatively affected for the enrichment of a few greedy individuals.
Good governance practices, however, are not necessarily a guarantee of success.  Nonetheless, governance plays an important role in the eventual success or failure of an organisation.  Lack of good governance allows unsound businesses to continue and increases the magnitude of their eventual downfall.  To this end, a responsible director would be expected to -- as part of their fiduciary duties -- take reasonable measures to prevent governance failures from occurring within the organisation.  Short of doing so is tantamount to reckless behaviour.  Yet history continues to repeat itself with poor governance practices becoming increasingly widespread. This suggests that directors may not be doing enough -- or may simply not have the knowledge -- to improve governance within their organisation.

In order to prevent poor governance practices from occurring within an organisation, directors and key employees need the correct resources.  Arguably, one of the most important resources of them all is information.  However, information that is not used to gain knowledge and understanding is really of no use at all.  As Albert Einstein said “information is not knowledge”.  Bearing this in mind, perhaps it is more correct to say that knowledge is of greater importance.  The adage, “knowledge is power” implies that the greater our knowledge, the greater our influence.  The same can be said in the corporate context - the greater the knowledge of directors and the organisation as a whole, the greater the influence of the organisation.

It is of paramount importance that directors of organisations have corporate governance knowledge.  This will minimise, amongst other, the risk of organisations suffering substantial harm as a result of governance failures.  Due to the fact that many organisations are collapsing as a result of various internal issues and dysfunctional behaviour, it has become increasingly important to assess the skills, experience and knowledge of directors pertaining corporate governance.

It is apt to ask the following question: Why do so many directors not have corporate governance knowledge or keep themselves informed on governance issues?  This pressing question could be answered in some of the following explanations:

  1. The erroneous belief that ‘ignorance’ on the subject may protect them from legal sanction;
  2. The naïve belief that there are more pressing issues to deal with;
  3. Their disregard of the importance of governance issues and how this can affect the organisation.

In some instances, organisations simply do not have access to governance information.  Locating accurate, relevant and up-to-date corporate governance information can be somewhat challenging for organisations without an in-house governance specialist.  However, with the Corporate Governance Body of Knowledge® (‘BoK’), accessing this information is made easy.  CGF Research Institute (Pty) Ltd offers a unique product that is the solution to locating an appropriate corporate governance information resource, namely the BoK.  The BoK is the first port of call on Corporate Governance, Risk and Compliance (‘GRC’) related matters in South Africa, and it is used by many organisations to assist their directors, prescribed officers and other key employees to gain a rapid understanding of the many topics associated with corporate governance.

The BoK is a web-based system consisting of many GRC related resources, including:

  • Governance reports;
  • Executive summaries;
  • Précis;
  • White papers;
  • Governance articles;
  • Government Gazettes; and
  • Governance newsletters.

The BoK consists of eleven years of GRC related intellectual property to which all subscribers are given unlimited access.  In order to locate specific information, an individual is able to conduct online searches across the BoK in order to find specific governance topics.  Furthermore, the Governance Reports are arranged in various categories, covering the areas of Ethics, Reporting, Human Capital, IT Governance, Environment, Sustainability, including Crime and Corruption.
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