Corporate Governance is the system by which organizations are directed and controlled. It involves regulatory and market mechanisms, the relationships between an entity’s management, its board, its shareholders and other stakeholders, as well as the goals for which the entity is governed. Corporate Governance therefore is about strategy as well as Risk Management. Compliance is a core function within a broader definition of risk management and control. Governance, Risk and Compliance are very closely intertwined and are best presented in an integrated format in order to give business leaders the readily applicable tools to succeed.
The author is a member of the board of directors in a small bank, a large non-bank microfinance institution and in an emerging markets investment fund. In practice, we find that every governance level debate about strategy triggers a scenario analysis that brings out the connected risks and compliance issues. Every Risk Management Committee meeting in the end turns into a strategic discussion about what to do next, about how risk control and mitigation measures would interact with the organization’s strategic objectives.