CG for You
Many of the entrepreneurs we work with in the Middle East are surprised to learn about the extent to which effective corporate governance can have a direct and measurable effect on the success of the businesses they lead. As the structure of most smaller businesses is relatively simple, it’s understandable that the value of corporate governance is not always apparent, and many entrepreneurs we speak to see it as an issue to be handled later in the business lifecycle, if at all. However, in our experience, applying effective corporate governance to entrepreneur-led businesses at an early stage brings with it a broad set of benefits, which can have a significant impact.
While many entrepreneurs occupy several roles in the management and oversight of their business, it’s never too early to begin establishing a structure and separating out key roles. Appointing independent advisors helps make a distinction between the advisory and executive functions, in preparation for future growth. It’s vital that these appointments are based solely on merit. Prioritizing qualified and experienced candidates over those with professional or personal ties delivers greater strategic input, which allows you to better realize the long-term vision of your business.
Having proper corporate governance in place, even at an early stage, gives your business an advantage when seeking investment or credit. Many of the businesses we work with recognize the increasing necessity to look beyond the local region to raise capital, which brings with it the need to meet globally recognized standards. International lenders and investors have much greater confidence in businesses that demonstrate transparency and accountability in their decision-making processes, as having more insight into how the business is run allows them to better predict future performance.
Working with entrepreneurs across a wide range of sectors, we’re well aware that the ability to demonstrate good governance is a key element in building credibility, by offering external parties an accurate and transparent picture of the internal workings of the business. Without it, commercial opportunities may be severely limited, particularly when seeking to participate in tendering processes for new contracts, entering into partnerships or agreements with other businesses, or undergoing a due diligence process from a potential client.
Effective corporate governance is foundational, not aspirational.
Entrepreneurs and business owners in the Middle East who are looking to establish credibility within the market, confidence among potential investors or creditors, and opportunities for expansion should, therefore, consider the implementation of corporate governance as a key part of their strategy. Implementing a formal process to increase transparency and accountability at an early stage in the life of a business ultimately creates a competitive advantage and creates a framework for future growth. Adopting best practice as early as possible maximizes the potential rewards, and, in our experience, is far less disruptive than attempting to incorporate these standards once the business is already operating at scale. Simply put, effective corporate governance delivers greater benefits the sooner it is put in place.