Corporate governance is not only the backbone of a company’s success, but also the center of relations with the public and shareholders.
Corporate governance, the multifaceted framework encompassing systems, principles, and processes, guides a company’s management and control.
It significantly impacts financial performance, shareholder value and risk management. But it goes beyond that.
A 2018 study by consulting firm, McKinsey, found that companies with strong governance saw a 30 per cent higher return on equity.
Additionally, Deloitte says in its 2023 report that companies with high governance ratings experienced a 22 per cent increase in market capitalization and reduced the likelihood of severe financial losses by 40 per cent.
Proper corporate systems also help improve regulatory compliance, with 80 per cent of firms noting it enhances better adherence to laws, and investor confidence, with 70 per cent of institutional investors prioritizing governance in their investment decisions, according to the EY Global Governance Report released in 2023.
Strong corporate governance has been the secret weapon that has enabled security companies to navigate uncharted waters, and weather storms enabling them to get to where they are today.
Corporate governance and risk management
On matters corporate governance, effective risk management is essential for navigating both expected and unexpected risks in any security firm.
In addition to responding to risks, leadership needs to cultivate a culture of risk awareness across the entire company. It is essential to note that we cannot completely do away with threats to companies, however, they can be anticipated and reduced.
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Beyond risk management, scenario planning and integration of new technology, fostering stakeholder engagement is also essential.
By prioritizing open communication and incorporating feedback from clients, employees, regulators, and communities, security firms can make informed decisions that align with their stakeholders’ needs and expectations.
This inclusive governance approach enhances trust, strengthens relationships, and ultimately improves the company’s overall performance. Frequent customer consultations allow the business to remain aware of its clients’ changing security requirements.
Ethical conduct is also another aspect that should be a company’s priority and it begins with a clear set of values and principles that define its operations.
These values must be communicated to all employees, from executives to frontline staff, ensuring a shared understanding of integrity, honesty, and fairness.
Ethical conduct
A commitment to ethics extends beyond internal policies to encompass interactions with clients, partners, and the public. This means engaging in mutual respect, providing clear and honest communication, maintaining confidentiality, and fulfilling promises without compromise.
In an industry where trust is crucial, ethical conduct is instrumental in building and sustaining long-lasting client relationships.
Another crucial component of building and maintaining trust is transparency and accountability. Transparency involves providing stakeholders with clear, accurate, and timely information about the company’s operations, decisions, and performance. This openness allows for careful examination of the company’s actions.
Accountability ensures that the company is answerable for its decisions and outcomes, including addressing mistakes openly and taking corrective actions to prevent recurrence.
By embedding these principles into its governance framework, the company is committed to continuous improvement and reassures stakeholders of its reliability and integrity.
This culture of transparency and accountability fosters confidence in the company’s ability to fulfill its promises.
Role of technology
Furthermore, the world is evolving, and technology is taking center stage and being integrated into every aspect of life. In corporate governance, technology can be used as an enhancement tool.
Technologies like advanced analytics, artificial intelligence, and blockchain can improve decision-making, risk management, and transparency.
They can be used to predict patterns, identify potential risks, optimize operations, and enhance accountability. This will consequently help in creating tailored solutions that can provide a higher level of security and peace of mind for clients.
While the benefits of strong corporate governance are clear, implementing and maintaining effective governance practices can be challenging. Factors such as regulatory changes, economic fluctuations, and technological advancements can introduce new complexities.
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Security companies have to be proactive and create robust corporate governance systems that promote innovation to address emerging challenges.
The future of governance
Looking ahead, the corporate field is evolving and so is corporate governance. Environmental Social and Governance (ESG) considerations have now become a key factor for prospective investors and stakeholders.
Security companies are expected to commit to ESG practices, promote diversity and inclusion within the leadership ranks, and develop corporate governance frameworks that address cybersecurity risks.
Embedding these factors will have great influence on how security firms approach corporate governance.
Corporate governance is a significant driver of any company’s success. A strong corporate governance is essential for security businesses to maintain their long-term viability and credibility.
Companies that adhere to these governance standards will not only protect their future but also forge stronger, more durable bonds with their stakeholders and clients as the security landscape changes.
Security companies should strengthen their governance frameworks now to make sure they are prepared to handle both the opportunities/challenges of the future and the demands of the present.
This article was written by SGA Group Chief Financial Officer, Joseph Thuku.
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