Effective governance is crucial for any company operating in the UK but it can quickly become complex, particularly in the financial services sector where regulatory requirements are particularly stringent. In addition to complying with external regulatory obligations, companies must also consider internal policies and the needs and expectations of multiple stakeholders. Striking the right balance between control and flexibility can be a challenge, but a strong governance framework helps organisations to set direction and priorities, establish accountability and manage risks effectively.
In accordance with the UK’s Corporate Governance Code and the Companies Act, companies are required to have in place appropriate systems of internal control and risk management. This is especially important in the financial services sector, where the consequences of poor governance can be severe, including financial loss, reputational damage and legal liability. In addition, regulators such as the FCA have specific requirements for governance in regulated firms, including the need for robust risk management systems and effective board oversight.
Simplification of governance is not a one-time effort, but rather a continuous process that requires ongoing review and adaptation. This is especially important in today’s fast-changing business environment where organisations must be agile and adaptable to stay competitive. By regularly reviewing and updating their governance structures, organisations can ensure that these remain effective and aligned with their goals and objectives.
There are several reasons why any company may want to review its corporate governance framework.
By taking a proactive and collaborative approach to ongoing review and adaptation, organisations can ensure that their governance structures remain effective and aligned with their goals and objectives and that they are well-positioned to navigate an increasingly complex and dynamic business environment. One of the key benefits of simplifying governance is the improved efficiency and effectiveness of decision-making. When governance structures are streamlined and decision-making processes are clarified, organisations can respond more quickly and effectively to opportunities and challenges.
How we did it
I recently took charge of an organisational governance simplification project where we reviewed and streamlined the existing governance arrangements of Santander Asset Management UK. This included a series of workshops with key members and committee chairs. We also took the board through the project, where it was ultimately approved. I was very honoured to receive the award for Governance Project of the Year at the Chartered Governance Institute UK & Ireland Awards 2022.
One of the first steps in simplifying governance is to identify your organisation’s key goals and ensure that your governance structure aligns with these goals. This helps the organisation to focus on its core priorities and ensures that resources are used effectively. Our previous governance model was designed to meet regulatory standards but had some challenges, including too many overlapping committees and forums with different members. There were also heavy administrative burdens and high production volumes that reduced organisational efficiency and left management with less time to focus on strategic matters. The committee scope was also unclear.
We took advantage of the fact that our business had recently developed new strategic objectives and a revised target operating model, which provided an opportunity to carry out a deep dive into our existing arrangements and align the governance structure with the new model.
Here are some steps we took to simplify governance and improve efficiency and effectiveness.
Don’t stop there
In addition to the steps above, there are some considerations that organisations should also take into account when looking to simplify governance.
Implementing the above steps will simplify your organisation’s governance, improve its efficiency and effectiveness and allow your organisation to focus on delivering value to your customers and stakeholders. Taking a proactive approach to governance creates a strong foundation for long-term success and helps with meeting the challenges and opportunities of an ever-changing marketplace.
Reaping the benefits
Overall, the governance simplification project has been a success, resulting in a more efficient and effective governance structure that aligns with the organisation’s strategic objectives and better serves the needs of all stakeholders. By streamlining processes, clarifying roles and responsibilities and improving communication and transparency, we have been able to simplify governance and improve decision-making. We are confident that these changes will help us better navigate the complex and dynamic business environment in the financial services sector and continue to drive strong performance and value for all stakeholders.
In conclusion, simplifying governance can help organisations to become more efficient and effective, while still maintaining strong controls and risk management. By streamlining the decision-making process, clarifying roles and responsibilities and improving communication and transparency, organisations can create a governance structure that is more aligned with their goals and better able to adapt to changing circumstances. While the process of simplifying governance can be challenging, the rewards are well worth the effort.
Moving forward, it is important to continue reviewing and adapting the governance structure as needed to ensure that it remains effective and aligned with the organisation’s goals. This may involve ongoing simplification efforts, as well as regular communication and engagement with stakeholders to ensure that the governance structure is meeting the needs of the organisation. By taking a proactive and collaborative approach, organisations can build a governance framework that helps them to navigate an increasingly complex and dynamic business environment.