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The Importance of Corporate Governance

Corporate Governance

Most commentators agree that good corporate governance leads to enhanced organisational performance and profits through:

  • Managing compliance risks to minimise negative outcomes, in particular, the potential for very large fines (e.g., $10 million plus for breaches of the Competition and Consumer Act);

  • Increasing stakeholders’, financiers’ and regulators’ confidence in the company;

  • Reducing potential management distractions and interference from regulators;

  • Increasing competitive advantage, e.g. demonstrating a commitment to compliance and probity to win new business;

  • Enhancing the company's reputation in business and the wider community. Most well-managed companies have established guidelines which clearly set out the responsibilities of the Board and management. Frequently these also contain ethical guidelines for the Board and a code of conduct for management of the company. Those guidelines need to be bolstered by an effective risk management plan, policies, procedures and training as well as effective oversight processes.

Organisational Risk Management It is recognised that organisational risk management is fundamental to a sustainable business. A risk management plan typically involves the following:

  • Establish context – strategic objectives/business environment

  • Risk assessment process – identification and analysis

  • Risk evaluation and reporting

  • Development of strategies to mitigate risks

  • Continuous monitoring

  • Review (feedback and improvement) processes

There are a number of ways of going about this process; however, it is possible to set up a no-frills risk management plan. Our Road Map risk management tool can identify areas of critical (and less critical) vulnerability, and we can work with you to introduce measures that will help reduce and manage those areas of risk.


Directors’ Duties

Of course, implementation of corporate governance and risk management programs depend upon the people who are responsible for decision-making and management. The Board and senior management bear heavy responsibilities which are set out in various pieces of legislation, including the Corporations Act and ASX Listing Rules.


Board Reviews

In terms of the effectiveness of the Board and management, most companies now review the skill levels of the Board and undertake an assessment of how well the Board is functioning on an annual basis.


This can be a very informal process whereby the Chairman meets with individual directors to obtain feedback. It may also involve a self-assessment questionnaire with the results being collated together with any additional comments by the company secretary or an external reviewer. The most comprehensive analysis will involve an external person meeting with directors, attending a Board meeting or meetings and then providing a report to the Board.



Depending upon your needs, we offer multiple levels of service, including board reviews, risk management analyses, part-time on-site company secretarial services, and remote support.

We can provide you with simple materials that are accessible and easy to understand together with relevant training. Training is very important in raising awareness and helping to bring about necessary behavioural/cultural changes.

Above all, we are practical and commercial. We are flexible and will tailor a cost-effective solution to meet your requirements. For more information, please send an email to Richard Hobson at rhobson@linchpinlegal.com.au.