‘Flexible governance holds ace to efficiency, survival of SMEs’

A NEW study by the Association of Chartered Certified Accountants (ACCA) has identified a flexible corporate governance framework as a boost to efficient performance and survival of small businesses.

In the report commissioned by the accounting body, it pointed out that there is no one-size-fits-all approach to corporate governance for Small and Medium Enterprises (SMEs) given that their needs are different from that of bigger corporations and environments.

The report, titled: “Governance For All: The Implementation Challenge for SMEs,” noted that while in larger organisations corporate governance is primarily tasked with ensuring that management acts as shareholders’ agents, for SMEs, it is mainly about improving business performance and managing risk.

Reacting to the report, the Chair of the Global Forum for SMEs, Rosanna Choi, said: “SMEs need to realise the potential benefits of implementing corporate governance within their businesses. But equally, governments, advisors and other stakeholders need to realise the challenge for SMEs is that established corporate governance frameworks have been developed with large, listed companies primarily in mind. Such frameworks and codes may not reflect the realities of running a small business.

“Governance issues are nevertheless of critical concern to small businesses, where owners may often be its managers as well, or where company ownership may be shared across family members. Sometimes the line between business and personal interest can be blurred.

“Corporate governance should establish clear roles and responsibilities for each individual and as such is relevant to businesses of all sizes.”

Other key findings of the report are that there should be clear reporting lines and clarity about how decisions are made and risks controlled, and about other matters that need to be brought to the board’s (or committee’s) attention for review or approval.