Good governance and strong risk management: Needed more than ever

What is good governance?

There have been a number of governance failings in Australian government organisations recently. These were different cases but both ultimately with the same outcome – the fraud of taxpayers and loss of community faith in those organisations.  Read on to learn why investment in good governance and strong risk management is needed more than ever.

There have been a number of governance failings in Australian government organisations recently, with MFB and the ATO being the tip of the iceberg. These were different cases but both ultimately with the same outcome – the fraud of taxpayers and loss of community faith in those organisations.

However, hindsight is 20/20. It’s easy to say that someone should have known the mother inappropriately hired and promoted her two sons in the MFB, or that someone should have noticed the money leaking from the ATO. It is far less easy to implement effective systems that ensure employees are discharging their duties appropriately, that whistle-blowers have the confidence to come forward, and that there are early warning signs when something is amiss.

Good governance is

Good governance is the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations (HIH Royal Commission). Good governance is optimal when both governance artefacts (eg. policies, procedures) and governance culture (eg. behaviours, attitudes) are aligned.

Good governance goes hand in hand with effective risk management, with one strengthening the other. With proper risk management functions in place which are appropriately resourced, organisations can identify, mitigate and control their greatest risks – to an extent. Strong risk management can provide assurance that the right actions are being undertaken by the right people in the right way. It can provide the catalyst for further investigation if unsettling symptoms are identified. Through rigorous controls and regular audits, it is far easier to identify unusual behaviour than if you have no framework which states what the expected behaviours are.

Benefits of good governance

Most people focus on the negatives associated with governance and risk.  Bad governance can lead to organisations collapsing, directors being jailed, and employees and suppliers left out in the cold. While risk is often seen as no more than a tick and flick compliance mechanism which stops organisations from innovating.

Now more than ever, organisations need to focus on and invest in good governance and strong risk management, as a means of:

• motivating organisations and individuals to perform at their best
• structuring the organisation to undertake its activities as efficiently and effectively as possible
• identifying and acting on opportunities
• preparing for and meeting emerging challenges head-on.