Internal Governance Review
Good governance starts with an effective board, but it does not end there. Any internal governance system consists of multiple functions, policies and practices at all levels of the organization, each of which contributes to the overall effectiveness of the system. As with any complicated machine, it makes sense to test the internal governance regularly to ensure that all the parts are working and interacting as they should be and support the company’s strategic aspirations and operational needs. Doing so can provide reassurance not only to the board but also external stakeholders such as investors and regulators, reducing the cost of capital and supporting share price as well as improving effectiveness.
The Morrow Sodali Board & Governance team has considerable experience in undertaking internal governance reviews, including for companies preparing for listings, undergoing a strategic change, facing a change in ownership and seeking to reassure key internal or external stakeholders.
While each internal governance review is bespoke to the client we will typically assess:
- Leadership and organization - key responsibilities and functioning of the board and its committees, and their composition;
- Risk and control environment framework - organization and effectiveness of the risk management and internal control functions;
- Quality of information flows - information flows to the board, shareholders, the regulator and market and the board’s capacity to critically review information;
- Culture, incentives and alignment - corporate culture including ethics and conduct rules, remuneration and strategic HR issues; and
- Relationship with stakeholders - effectiveness of formal and informal interactions with key stakeholders.
Regular internal governance reviews are particularly important for regulated financial institutions. Many supervisors now set detailed, and often very specific, requirements for what they consider to be good internal governance.
For this reason, we also provide services specifically tailored to the needs of financial institutions, such as undertaking an independent ‘pre-audit’ of their internal governance arrangements in advance of a formal supervisory assessment.
For more information on our internal governance review services, please contact us: boardgovernance@morrowsodali.com