Governance interests of all stakeholders are represented, which

Governance helps to secure community acceptance of policies and

-​ is defined as the way organizations are directed and decisions.
controlled to ensure that they are effective in achieving Direction
their objectives. -​ It involves establishing a clear vision and strategic
-​ In general, good governance is perceived as a planning necessary for guiding an organization or
normative principle of administrative law, which obliges government. This principle aligns the actions of
the State to perform its functions in a manner that stakeholders towards achieving common goals.
promotes the values of efficiency, non-corruptibility, and Performance
responsiveness to civil society. -​ This principle focuses on the effectiveness and
Government efficiency of governance systems. It assesses how well
-​ is not obliged to substantively deliver any public goods, policies and programs are implemented and evaluates
it must ensure that the processes for the identification the positive outcomes they produce for society
and delivery of such goods are concrete in terms of: Accountability
i) being responsive to public demands; -​ It ensures that leaders are responsible for their actions
ii) being transparent in the allocation of resources and; and decisions. It Involves mechanisms for oversight
iii) being equitable in the distribution of goods. and transparency, promoting integrity and trust within
Good governance issues differ from place to place and public institutions.
organization to organization. The solutions to governance Fairness
problems are tailored individually. -​ It emphasizes equity and justice in the distribution of
Five Principles of Good Governance resources and opportunities. It advocates for inclusivity
Legitimacy and Voice by addressing the needs of marginalized groups,
-​ This principle emphasizes the importance of ensuring they have equal access to rights and
participation in decision-making. It ensures that the services.
Characteristics of IMF Principles of Good Governance enough information is provided and that it is provided in
Participation easily understandable forms and media.
-​ Participation needs to be informed and organized. This Responsiveness
means freedom of association and expression on the -​ Good governance requires that institutions and
one hand and an organized civil society on the other processes try to serve all stakeholders within a
hand. reasonable timeframe
Consensus Oriented Effectiveness and Efficiency
-​ Good governance requires mediation of the different -​ Good governance means that processes and
interests in society to reach a broad consensus in institutions produce results that meet the needs of
society on what is in the best interest of the whole society while making the best use of resources at their
community and how this can be achieved. It also disposal.
requires a broad and long-term perspective on what is Equity and Inclusiveness
needed for sustainable human development and how -​ A society's well being depends on ensuring that all its
to achieve the goals of such development. members feel that they have a stake in it and don't feel
Accountability excluded from the mainstream of society
-​ Who is accountable to whom varies depending on Rule of Law
whether decisions or actions taken are internal or -​ Good governance requires fair legal frameworks that
external to an organization or institution. In general an are enforced impartially. It also requires full protection
organization or an institution is accountable to those of human rights, particularly those of minorities.
who will be affected by its decisions or actions Roles and Responsibilities of an Effective Board
Transparency Roles
-​ Means that information is freely available and directly -​ The board ensures the organization has a clear
accessible to those who will be affected by such strategic direction by participating in setting and
decisions and their enforcement. It also means that approving long-term goals. The board provides
 oversight to guarantee that the strategies align with the profitability in a manner consistent with its corporate
company’s mission and vision. (Strategic oversight) objectives and the long term best interests of its
-​ The strategic decisions of an organization are shareholders
influenced by the experiences and perspectives of its PRINCIPLE 2: Clear Responsibilities and Accountability
top executives, including board members. The decision -​ The fiduciary roles, responsibilities and accountabilities
making capabilities of the board significantly influence of the Board as provided under the law, the company's
the strategic outcomes of the organization. (Hambrick articles and by-laws, and other legal pronouncements
and Mason, 1984 - Upper Echelons Theory) and guidelines should be clearly made known to all
directors as well as to stockholders and other
●​ Setting the Vision and Strategy stakeholders
●​ Approving Major Decisions PRINCIPLE 3: Board Committees for Better Governance
●​ Monitoring Performance -​ Board committees should be set up to the extent
●​ Crisis Management possible to support the effective performance of the
●​ Setting Governance Standards Board's functions, particularly with respect to audit, risk
●​ Providing Leadership and Guidance management, related party transactions, and other key
●​ Communicating with Stakeholders corporate governance concerns, such as nomination
●​ Succession Plan and remuneration
The Board’s Governance Responsibilities PRINCIPLE 4: Directors Should Be Fully Committed
(16 PRINCIPLES) -​ To show full commitment to the company, the directors
Establishing Component Board should devote the time and attention necessary to
PRINCIPLE 1: Competent Board properly and effectively perform their duties and
-​ The company should be headed by a competent, responsibilities, including sufficient time to be familiar
working board to foster the long-term success of the with the corporation's business.
corporation, and to sustain its competitiveness and
Reinforcing Board Independence exercise effective oversight of the same to strengthen
PRINCIPLE 5: Objective atIndependent Judgment the external auditor's independence and enhance audit
-​ The Board should endeavor to exercise objective and quality.
independent judgment on all corporate affairs. PRINCIPLE 10: Transparency and Sustainability
PRINCIPLE 6: Regular Performance Evaluation -​ The company should ensure that material and
-​ The best measure of the Board's effectiveness is reportable non-financial and sustainability issues are
through an assessment process. The Board should disclosed.
regularly carry out evaluations to appraise its PRINCIPLE 11: Efficient & Accessible Communication
performance as a body, and assess whether it -​ The company should maintain a comprehensive and
possesses the right mix of backgrounds and cost efficient communication channel for disseminating
competencies. relevant information. This channel is crucial for
PRINCIPLE 7: High Ethical Standards informed decision-making by investors, stakeholders
-​ Members of the Board are duty-bound to apply high and other interested users.
ethical standards,taking into account the interests of all Internal Control System and Risk Management
stakeholders. PRINCIPLE 12: Strong Internal Control & Risk
Disclosure and Transparency Management
PRINCIPLE 8: Corporate Disclosure Policies -​ To ensure the integrity, transparency and proper
-​ The company should establish corporate disclosure governance in the conduct of its affairs, the company
policies and procedures that are practical and in should have a strong and effective internal control
accordance with best practices and regulatory system and enterprise risk management framework
expectations. Cultivating a Synergic Relationship with Shareholders
PRINCIPLE 9: High-Quality Auditing PRINCIPLE 13: Fair Treatment of Shareholders
-​ The company should establish standards for the
appropriate selection of an external auditor, and
 -​ The company should treat all shareholders fairly and Governance
equitably, and also recognize, protect and facilitate the Issues of Accountability of Management to a Board,
exercise of their rights. Private and Institutional Shareholders
Duties to Stakeholders Roles and Responsibilities of Management
PRINCIPLE 14: Respect For Stakeholder Rights -​ Management has fiduciary duty to act in the best
-​ The rights of stakeholders established by law, by interests of the company and shareholders.
contractual relations and through voluntary -​ Their key responsibilities include:
commitments must be respected. Where stakeholders ●​ Strategic decision-making
rights and interests are at stake, they should have the ●​ Operational oversight
opportunity to obtain effective redress for the violation ●​ Financial performance management
of their rights. ●​ Risk management
Encouraging Sustainability and Social Responsibility ●​ Regulatory and legal compliance
PRINCIPLE 15: Employee Participation in Governance Accountability to the Board of Directors
-​ A mechanism for employee participation should be -​ The board of directors ensures management acts in
developed to create a symbiotic environment, realize the company’s and shareholders’ best interests through
the company's goals and participate in its corporate transparency, ethical conduct, and mutual trust.
governance processes. -​ Main issues related in this area includes:
PRINCIPLE 16: Social Responsibility and Positive Impact ●​ Corporate decision-making
-​ The company should be socially responsible in all its ●​ Performance evaluation and its issues
dealings with the communities where it operates. It ●​ Ethical conduct and its issues
should ensure that its interactions serve its ●​ Risk management and its issues
environment and stakeholders in a positive and
progressive manner that is fully supportive of its
comprehensive and balanced development.
Accountability to Private and Institutional Shareholders Corporate Governance Frameworks
-​ Private and institutional shareholders have financial -​
stakes in the company and they expect transparency
and fair management.
-​ Main issues related in this area includes: Issues of Transparency
●​ Transparency and Disclosure Lack of Financial Transparency
●​ Protection of shareholders rights and its -​ Misrepresentation of Financial Statements
issues -​ Unclear Accounting Policies
●​ Dividend and ROI concerns/issues -​ Off-Balance Sheet Transactions
●​ Engagement and communication issues -​ Insider Trading and Unfair Information Advantage
Issues and Challenges in Accountability Weak Operational Transparency
●​ Conflict of Interest -​ Non-Disclosure of Business Strategies
●​ Excessive Executive Compensation -​ Hidden Supply Chain and Sourcing Practices
●​ Insufficient Board Oversight -​ Undisclosed Operational Risks
●​ Lack of Transparency Poor Corporate Governance Transparency
●​ Lack of Transparency and Accountability in -​ Opaque Board Decisions
Decision-Making -​ Undisclosed Related-Party Transactions
Governance Mechanisms to Strengthen Accountability -​ Failure to Report Executive Compensation Clearly
Independent Board Members Regulatory Non-compliance and Legal Issues
-​ -​ Non-compliance with Reporting Standards
-​ Selective Disclosure
-​ Lack of ESG (Environmental, Social, and Governance)
Audit Committees Disclosures
-​
Ethical and Reputation Risks Due to Transparency Issues 2 Types of Events:
-​ Loss of Investors and Public Trust Negative Events
-​ Fraud and Scandals -​ Classified as Risks
-​ Stock Price Manipulation Positive Events
Sustainable Long-Term Success -​ Classified as Opportunities
-​ Sustainable long-term success refers to an Risk may come from various sources
organization’s ability to remain profitable, competitive, -​ Including uncertainty in financial markets (equity
and resilient over time while maintaining ethical contributions or borrowings)
standards and effective governance. -​ Threats from project failures (at any phase in design,
-​ Key Factors for Sustainable Success development, production, sales, sustainability and/or
●​ Strong Corporate Governance growth), legal obligations, accidents, deliberate attack
●​ Effective Risk Management from an adversary, environmental or natural disasters,
●​ Financial Stability and Responsible or events of unpredictable root cause.
Management Risk Management
●​ Operational Efficiency and Internal Controls -​ Is the identification, evaluation and prioritization of risks
●​ Environmental, Social, and Governance (ESG) followed by coordinated and economical application of
Considerations resources to minimize, monitor and control the
●​ Adaptation, Innovation, and Competitive probability or impact of unfortunate events or to
Advantage. maximize the realization of opportunities.
Risk and Risk Management Ideal risk management minimizes spending of resources and
Risk minimizes the effects of risks.
-​ is the possibility of something bad happening Risk with the greatest loss (or impact) and the greatest
-​ It refers to the uncertainty surrounding an event that probability of occurring are handled first.
could lead to loss, harm, or an undesirable outcome.
Risk with lower probability of occurrence and lower loss are penalties, which can damage their financial
handled in descending order. stability
​ Marketing Risk (Failure in Market Engagement)
Uncertainty is the heart of Risk -​ Poor marketing strategy or failure to understand
customer preferences can lead to reputational
Business Risk damage
-​ is a future possibility that may prevent you from ​ Change Management Risk (Failure to Adapt to
achieving a business goal. Business Changes)
-​ It is generally impossible to achieve business gains -​ Business must evolve with technological
without taking on at least some risk. advancements, industry trends, and customer
-​ Therefore, the purpose of risk management is not to expectations. Failure to do so results in
completely eliminate risk inefficiency and loss of competitiveness.
-​ In most case, risk management seeks to optimize the ​ Program Risk (Project or Investment Failures)
risk-reward tolerance of your business -​ Companies invest in new projects or expansion
Risk Arising Externally or Internally and Relating to plans to grow their business. However, if these
Achievement of… projects fail, they result in wasted resources
Strategic Objectives and financial setbacks
Internal Risks External Risks
-​ Risks that originate inside the company, often due to -​ Risks that businesses cannot control but must be
poor management decisions prepare for
Liability Risk (Legal and Financial Obligations) Economic Risk (Financial Market Instability)
-​ Companies are expected to comply with laws, -​ Economic fluctuations such as recessions,
industry, regulations, and ethical standards. If inflation, or currency devaluation can weaken
they fail, they may face lawsuits, regulatory
 consumer spending and disrupt business Human Resource Issues
operations. ●​ Lack if proper training and development
​ Competitive Risk (Industry Disruptions and Market ●​ Employee disengagement and high turnover
Shifts) ●​ Resistance to change affecting productivity and quality
-​ New competitors with better technology, lower Technology Failures
prices, or superior services can threaten ●​ System breakdowns and downtime
established business. ●​ Outdated software and cybersecurity vulnerabilities
​ Regulatory and Compliance Risk (Government Laws ●​ Reduced service quality and operational disruptions
and Industry Standards) Financial Mismanagement
-​ Businesses must follow government,net ●​ Poor Budgeting and cost overruns
regulations, tax policies, and compliance rules ●​ Inefficient resource allocation
to avoid legal penalties or business shutdowns. ●​ Financial strain leading to reduced service quality
​ Technology Disruption Risk (Rapid Industry External Risk
Innovations) Market Fluctuations
-​ Businesses that fail to adapt to new ●​ Changes in consumer demand
technologies risk falling behind competitors. ●​ Price competition and cost-cutting pressures
Operational Efficiency and Effectiveness ●​ Economic downturns affecting revenue and
Internal Risk sustainability
Process Inefficiencies Regulatory Changes
●​ Poor workflow design ●​ New laws and compliance requirements
●​ Outdated procedures ●​ Risk of legal penalties and reputational damage
●​ Bottlenecks that slow down operation and reduce ●​ Increased costs for training, process updates, and
efficiency administration
Supply Chain Disruptions Weak Internal Controls
●​ Vendor failures and transportation delays ●​ Lack of proper checks and balances
●​ Global crises causing material shortages ●​ High fraud risk due to poor segregation of duties
●​ Increased costs for alternative suppliers and scarce ●​ Need for oversight, auditing, and accountability
resources. measures
Competitive Pressures Inconsistent Data Management
●​ New market entrants and disruptive innovations ●​ Use of multiple, poorly integrated tracking systems
●​ Aggressive pricing strategies from competitors ●​ Outdated or conflicting financial data
●​ Risk of obsolescence due to lack of innovation and ●​ Unreliable reports affecting decision-making and
efficiency financial transparency
Reliable Reporting External Risks
Internal Risks Regulatory Changes
Human Errors ●​ Updated in tax laws and accounting standards
●​ Mistakes in data entry and miscalculations ●​ Risk of non-compliance leading to penalties
●​ Inaccurate reports leading to poor business decisions ●​ Need for quick adjustments in financial reporting
●​ Misclassification of expenses causing financial practices
misrepresentation Cybersecurity Threats
Fraud or Manipulation ●​ Risk of data breaches and financial information theft
●​ International alteration of financial operational date ●​ Potential for altered or missing financial records
●​ Inflating revenue figures to deceive investors and ●​ Legal issues and loss of stakeholders trust due to
regulators cyberattacks
●​ Risk of financial scandals, fines, and loss of public trust
Third-party Data Reliance Lack of training and awareness
●​ Dependence on external suppliers, partners, or -​ Employees unintentionally violating laws due to
auditors insufficient compliance education
●​ Errors or delays in third-party financial data affecting Weak internal controls
reports -​ Poor monitoring and enforcement of compliance
●​ Risk of inaccurate inventory, revenue, or compliance policies, increasing the risk of fraud or misconduct
reporting Unethical leadership and culture
Market or Economic Instability -​ A workplace that prioritizes profits over compliance
●​ Impact of inflation and financial crises on financial may encourage rule-breaking
reporting External
●​ Challenges in valuing assets and making accurate Regulatory changes
forecasts -​ Governments and industry bodies frequently update
●​ Currency fluctuations affecting financial statements and regulations, requiring companies to adapt
projections Industry-specific compliance requirements
Legal, Regulatory and Ethical Compliance -​ Sectors like finance, healthcare, and technology face
-​ Refer to the potential threats a company faces when strict legal obligations
failing to follow laws, industry regulations, and ethical Legal actions and lawsuits
standards. These risks can lead to fines, lawsuits, -​ Non-compliance can lead to fines, sanctions or legal
reputational damage or even business closure if not disputes with stakeholders
managed properly Public and media scrutiny
Internal -​ Ethical lapses or regulatory failures can damage an
Non-adherence to internal policies organization’s reputation
-​ Employees or management failing to follow company
guidelines or ethical codes
Risk Management
Identify and Assess Risks
-​ Regularly analyze potential threats that may affect
operations, compliance, and strategy.
Implement Preventive Measures
-​ Develop strong internal policies, ensure compliance
with regulations, and improve processes to reduce
risks.
Monitor and Control
-​ Conduct audits, track financial and operational
activities, and adapt to new laws and industry changes.
Train and Raise Awareness
-​ Educate employees on ethical practices, legal
requirements, and risk prevention
Prepare for Contingencies
-​ Establish response plans for legal, reputational risks to
minimize impact