Last Updated on Thursday, 20 April, 2023 at 11:12 am by Andre Camilleri
Silvan Mifsud is director of Advisory at EMCS Tax & Advisory
Maybe it’s because we are in Spring, which is a period for renewal. Reading recent articles, it seems that there is a new momentum to change Malta’s economic model to a more sustainable one. Like any change management process it needs to rest on good governance for it to happen. One distinguishing aspect of good governance is that it has a long-term perspective, rather than being focused on short-term gains. To ensure this it needs a system of checks and balances.
Airmalta is yet another case in point on what happens when good governance is absent. If anyone thinks that good governance is expensive, the Airmalta case clearly shows that the lack of good governance comes with a much larger bill.
So, I hope that all these signals highlight once more the importance of Good Governance in any type of organisation. Thus, I feel it is important to highlight the main benefits of Good Governance.
Good Governance delivers efficiency and ensures consistency. An organisation needs to make sure that governance is repeatable – from the top and trickling all the way down. As a result, overall productivity and efficiency are boosted.
Good Governance ensures that transparency and visibility are a priority for an organisation, which enables the possibility to quickly identify errors and possible ways of improvement to boost the organisation. Good governance allows for different stakeholders (board members, managers, team members) to openly communicate and share opinions, experiences, and methods to enhance the organisation. By focusing on transparency and visibility the end result is a far more significant minimisation of error.
Good Governance enable operations to run smoother. By ensuring good governance, all stakeholders members can communicate and work together in unity, making it easier to have decisions taken by consensus. This ensures minimal time wastage and allowing more time for other, more pressing discussions to be had. As a result, it allows for operations to run smoother.
Good governance builds reputation. Practicing good governance naturally builds an organisation’s reputation. The output of good governance means putting the right output onto the market. In doing so, the organisation experiences an escalation of business performance.
Good Governance provides clarity. Organisations with a well put in place governance practice are able to tackle issues much more effortlessly. With a clearly formed mission, vision and core values, employees and stakeholders can easily align with the organisation’s fundamental culture.
Good Governance ensures financial sustainability. Good governance ensures a drastic reduction of any sort of safety, performance, or legal issues that may arise and affect the organisation. By practicing good governance, an organisation is able to focus on more of the organisation’s progressive needs rather than wasting on unnecessary expenses and that decisions are grounded on what makes commercial sense. By having financial sustainability, it also means that stakeholders are ensured of their own financial stability.
Good Governance ensures a stronger external environment response and a strategic mindset. The external environment is ever-changing and needs to be diligently studied. Strong leadership, commitment, resources and responsibility need to be enshrined within an organisation to effectively understand the external environment. Establishing good governance practices allows appropriate response patterns to quickly identify changes and adapt strategies.
As the ESG movement continues to gain momentum, I always feel that out of the three elements it is the “G” Governance that is the primary element that needs to be sorted. Without Good Governance it will be very difficult to register sensible progress on other elements.