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Operational Efficiency

Effective Governance and Risk Management

Trudi Stevens from GC Business Growth Hub partner InPD explains how effective governance can reduce the risks facing SMEs

Effective governance is not easy or well understood. However, it is fundamental to the viability of any organisation because it encompasses the functions that underpin the very purpose of that organisation. Governance covers how decisions are made and by whom; how those decision makers report the process and how they are held accountable. Governance requires that all stakeholders are considered because they feel the impact of organisations’ activities.

The role that risk plays in governance is multi-faceted and based on the premise that all organisations and institutions face a myriad of risks continuously. Effective governance creates a framework whereby threats to the organisation are anticipated, competently assessed, and mitigated. The threat is significant if it poses a potential hazard to the organisation’s ability to be run legally, ethically, sustainably, successfully and for the benefit of all its stakeholders.

"Effective governance is key to an organisation's ability to operate legally, ethically, sustainably, and successfully for the benefit of all stakeholders."

Nick Brandwood, Manufacturing Business Adviser, Business Growth Hub

The quality of decision making is key to effective risk management and depends on the following aspects:

  1. Quality of data – not just timely and accurate, but also from diverse sources, cleared of inherent bias, analysed appropriately, and recognising that it is incomplete. Information needs to continuously flow into decision making which needs to adapt accordingly.
  2. Who is making the decision and why – how close are they to the problem? Do they have both authority and responsibility for the outcome? If not, why not? Do they have the skills, knowledge, and behaviours to make a competent decision? Can they be held accountable for their decision? Is the decision-making process transparent?
  3. Who will be impacted by the decision? – were they consulted? If not, why not? Has the indirect impact of the decision been fully analysed?
  4. By what means was the decision communicated? – To whom? How was it communicated? Was understanding confirmed?

If these points are not addressed, then the effectiveness and validity of governance claimed can be challenged.


In Professional Development


This article was written solely by the identified authors and/or organisations. The views and opinions expressed are those of the authors and/or organisation – not those of the #HereForBusiness campaign or GC Business Growth Hub.  

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