While the benefits of organisational governance may be plentiful, it does not mean achieving it is an easy feat. Attempting to implement anything on an enterprise level will always encounter its fair share of challenges. Here are the seven key challenges of organisational governance.
Challenge 1: Lack of clear strategy
As the foundational and guiding framework of the governance practice for the entire organisation, a lack of clear strategy for the organisation and how the information is to be communicated can lead to critical information gaps in stakeholders both internally and externally. Governance is not just about laying down rules for decision making, it is about letting people know why and how decisions should be made.
Ensuring there is a clear information policy, robust internal documentation processes that are aligned with key governance principles and classification of company information is critical to controlling and managing information and practices within the organisation. Strategic clarity and clear communication of said strategy are important as it allows stakeholders and employees to understand their role and value towards the organisation’s strategic success.
Challenge 2: Establishing the right board
As the representative board of the organisation and key decision-makers, making sure the board has the right balance of backgrounds and competencies is crucial to remaining inclusive and effective. Some nations have introduced minimum requirement quotas for female representation within board members in listed companies.
However, achieving this balance is no easy task. While the consensus on independent board members is conflicting in different regions of the world, ensuring that independent directors are not only relevant but competent is a challenge. For example, the board of the Lehman Brothers had very few directors with banking experience which could have potentially saved them from their oncoming downfall in early 2008.
At the same time, just having a diverse board is not the biggest challenge. The challenge lies in ingraining governance values and principles of participation, inclusions and fairness into the corporate culture to fully utilize the full capacity of the diverse and competent board. Sadly, many organisations comply with diversity measures only on paper but do little to encourage a genuine culture of inclusivity and open participation.
Challenge 3: Conflict of Interests
For organisational governance to truly be considered equitable and fair, its policies and protocols need to apply to all employees regardless of level, relations and background. Conflict of interest in organisation governance occurs when an officer or controlling member of an organisation has other financial interests that directly conflict with the objectives of the organisation.
This is a problem most often encountered by family-owned enterprises where personal and familial relationships can impact the objectiveness of decisions made. This lack of perceived objectivity can deteriorate the trust of shareholders, employees and the public while also leaving the organisation vulnerable to litigation.
Challenge 4: Succession plan and planning
In some cultures, founders and key directors are held synonymous with the organisation itself. With such influence, it can be difficult to properly acknowledge the need for proper succession planning. An effective board is open to frequent discussions on succession and succession planning. Without proper succession plans in place, board member shuffles can quickly become distracting and damaging, acting as a public sign of organisational governance incompetencies.
Challenge 5: Growing complexity in compliance and regulations
As the push for greater social and environmental responsibilities continue to grow, so does the complexity in keeping up with compliance and regulations. Organisations have to consistently meet the continual mix of strict legal regulations, conflicting geographical compliances and rules and ever-changing regulations.
This becomes a particularly challenging feat for multinational organisations that have to consider unique geographical and social contexts when crafting guidelines and protocols. They must consider the applicability of all ensuing practices against the compliance of local jurisdictions and the potential conflicting rules that may exist between different regions.
Additionally, climate change and sustainability efforts are becoming increasingly important to stakeholders and investors. Being able to properly implement sustainability strategies and report transparently on their progress is a vital necessity for effective organisational governance. To keep up with all these changes and increasing demand for transparency, many organisations are either hiring third-party services the ensure all compliances are met or are setting up their own task forces, like a Climate and ESG Task Force, that is focused on identifying gaps within an organisation’s climate change risk disclosures and practices.
Challenge 6: Organisational change aversion
Getting everyone on the same page is not easy, especially if they have certain practices, dynamics and cultures that have been ingrained in the organisations for an extensive amount of time. No one is a fan of change, so introducing big sweeping changes on an enterprise level is bound to ruffle feathers and lead to a certain degree of pushback.
Successful organisational governance implementation can take into account the pre-existing culture and context of the organisation and craft a strategy that can accommodate the need for change while also minimizing the resistance to change. Building trust and integrity in board members and governance committees are critical to securing full organisational buy-in to governance changes and activities.
Challenge 7: Growing cyber security risk
According to an IBM report, data breaches in 2020 were costing a global average cost of a data breach was nearly $4 million. The pandemic and the ensuing shift towards remote working has intensified cybersecurity concerns and has pushed organisations to have to reconsider their practices and cybersecurity strategies. Organisations are turning to the security of cloud-based technology to achieve both the flexibility and security they require to effectively manage information across geographically dispersed teams.
Custom-built cloud-based PPM solutions like pmo365 enable organisations to apply the security and governance policies they require based on their needs and capabilities. This means that updates and changes can be easily deployed as risks, compliances and organisational needs continue to grow without sacrificing security and connectivity. Pmo365’s solutions are built on IRAP-certified Microsoft Azure Datacenters that ensure the highest level of data security and integrity.
Overcome your governance challenges with pmo365
Overcoming these governance challenges on your own can be hard enough, let alone if you do not have an intuitive PPM software by your side. At pmo365, our experts know just how painstaking and tedious governance activities can be without the right system.
That’s why we have put a great amount of attention into making governance frameworks that can be customized and easily applied to your pre-existing stack. We help automate the majority of your governance activities, undertake deep analysis on your progress, integrate your process across your organisation and achieve full visibility over your projects. If you want to know more about how we can take your governance activities to the next level, make sure to read more here or book a free trial with our PPM experts to see our system in action!