The Significance of Compliance in Corporate Governance
In today’s business landscape, it is crucial for companies to prioritize compliance in order to maintain their long-term sustainability. Profit-making is no longer the sole driving force for businesses, as they are now obligated to consider a wide range of stakeholders, including government, regulators, financiers, customers, employees, suppliers, and communities. This emphasizes the need for our company to establish robust policies that monitor their compliance with the interests of the stakeholders, partners, and clients.
To strike a balance between profitability and risk, responsible corporations implement a system of checks and balances that align profitability goals with competing ethical concerns and risks from stakeholders. In this context, a compliance-based approach is often employed for corporate governance.
Corporate governance provides the framework and management approach that guides our company’s direction and its fulfilment of both internal and external obligations. It encompasses a set of processes that control how our company is directed, administered, and controlled. On the other hand, corporate compliance ensures that businesses adhere to specific legal, regulatory, contractual, or policy requirements. While corporate governance and corporate compliance are distinct strategic initiatives, they are interdependent in terms of their role in safeguarding against risks and guiding our overall business direction.
It is important to note that non-compliance leads to inadequate corporate governance. This raises the question of whether mechanisms exist to promote risk awareness, address identified risks, facilitate compliance, and ultimately enable effective oversight.