Governance Initiatives for SMEs
The primary focus for many small and medium sized businesses is on managing the day-to-day business to achieve profitability and dealing with challenges that arise. Corporate governance may not be first on the list of priorities.
Yet by implementing governance frameworks, SMEs can make their business more resilient and better able to anticipate risks and changing circumstances which, in turn, can help to generate real business benefits and improve performance.
There are a number of governance initiatives that can offer significant value for a business. It is not expected that all would be implemented at once, but rather as the needs of the business demand, enabling companies to start small, with minimal investment, and continue to build incrementally.
- Create a single document that outlines your company’s strategy
- Separate board meetings from management meetings
- Add a non-executive director to your board and formalise the role of chairperson
- Establish an audit committee and give it a formal role distinct from management. Under the Companies Act 2014, private companies meeting certain size criteria (turnover >€50m and total assets >€25m) are required to establish an audit committee
- Document the managing director’s key responsibilities, linking remuneration to long-term performance and ensuring there is a succession plan in place
- Put in place a risk management process that identifies, categorises and assigns responsibility for all major risks and review regularly
- Review management and financial information to assist with key decisions
- Create a flowchart for business processes, adding narrative explanations where appropriate; identify the risks related to the processes and the controls that mitigate those risks
- Implement an internal audit function to review critical processes and ensure internal controls
- Collate all company policies into a single policy database, making sure it is comprehensive, clear and properly communicated to all staff and stakeholders
The priority of each of these initiatives will be influenced by the size of the company – for a medium to larger sized company, the complexity and scale of business processes should increase the emphasis on risk, internal control and internal audit.