The Importance of Good Corporate Governance on Supply Chain!

Corporate Governance

Corporate governance has become increasingly important across the world of business but especially when it comes to creating and maintaining a supply chain. Even though the specific requirements will vary between companies, many will be universal. 

What is corporate governance?

Corporate governance is a broad system which encompasses a lot of different factors across all areas of a business. The Companies Act 2006 is the main piece of legislation that sets out the various levels to which businesses must comply.  Corporate governance is all about making better decisions and leading as a business, mainly in terms of financial decisions and business operations. 

Having a strong understanding of corporate governance can help you to protect stakeholders’ interests as well as make strong business decisions.  

The importance of good corporate governance

Having good corporate governance can help to ensure your business is as efficient and organised as possible. This helps lead to a successful business. 

Reduced costs are something that all businesses strive for. By using corporate governance to manage your processes, you may be able to find areas where you can streamline or update procedures. This could help to prevent errors or wastage which cost money and time to rectify.  

By implementing policies and procedures, you can mitigate some of the risks that working for your business entails. This also allows your shareholders and other interested parties that you are protecting their interests by minimising risk. 

Strong corporate governance also helps with your cash flow prospects. By keeping your stakeholders and bank happier, you will be able to get lines of credit more easily when your business needs it. Equally, good corporate governance minimises the cost of capital and of equity which results in optimal cash flow.

This is especially important for businesses that rely on external funding as it demonstrates the reliability and quality of the organisation and makes the business a lower-risk proposition for lenders. 

Ignoring your corporate governance responsibilities can have a massive impact on your business. Not only will you lose the trust of your stakeholders, but they may believe the business is not worth their time and jump ship. You may also find yourself being scrutinised by the government a lot more, as they will want to ensure you are fulfilling your legal responsibilities. Both of these factors, as well as others, can cause a business to fail rapidly. 

To ensure that you are fulfilling all of your legal requirements, it is worth getting an expert in corporate law on board. They will be able to guide you through the process of checking everything and help to keep you on track. 

Impact on supply chain

Supply chains can be an area of business that benefit most from corporate governance. Minimising risk is a great way to streamline this process, as is ensuring that your delivery system is working as well as it can. 

If you have delivery drivers, you may want to invest in tracking software so that customers can check on the progress of their parcels. This creates transparency and holds your company and its employees accountable, leading to increased trust and potentially creating a repeat customer. 

Article and permission to publish here provided by Iolanda Fernandes. Originally written for Supply Chain Game Changer and published on June 3, 2023.

Cover image by Mohamed Hassan from Pixabay