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Governance Risk Compliance Nigerian Business

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Governance, Risk, Compliance and Corporate Responsibility – How prepared are Nigerian Businesses

With the continued rush for emerging market opportunities, it has become evident that for businesses to remain sustainability and possess the ability to woo foreign and institutional investment in Africa and Nigeria in particular there is the need for businesses to develop and manage strategies and operational qualities that will outlive many of the founding fathers.

Taking into cognizance the perception that businesses in Africa and Nigeria in particular aid or are aiding a perceived high level of corruption, both within the private and public sectors, the writer opines  that businesses across the African continent and Nigeria in particular will have to develop strong Corporate Governance, Risk Management and Compliance structure in addition to exhibiting, implementing and promoting transparent Corporate Responsibility strategies towards building a strong business future.

In line with text referenced from articles on Richard Bistrong’s blog – Why Sanctions alone are not enough – The Nigerian Model, in his question and answer session with Sven Bierman – a former Director of Anti-Corruption Projects at the HUMBOLDT-VIADRINA School of Governance in Berlin/Germany and a recognized leader, author and anti-corruption coach for business sector-related integrity measures, there are three major questions that arouses business leaders;The three major questions arise for businesses as it relates to ensuring good governance and anti-corruption programs are:

– Are companies getting active because they are required by law?

– Are they doing this because it is the right thing to do?

– Does it make good business sense? With regards to the above questions, it has been debated that the most effective way of ensuring company adherence to good governance and anti-corruption standards is by way of litigation. 

His research however goes to show that the best approach for companies putting up good governance, risk and compliance programs emanate from the combined theory of the carrot and stick approach.

A review of the write up goes to show that there are three practical arguments that will answer the questions above. These are arguments are based on the following – quoting the response of Sven Bierman

  • “Companies are not afraid of getting caught:Companies do not fear negative consequences for being corrupt because they simply don’t get caught.”
  • “Companies are not afraid of getting punished:Even when companies get caught, the consequences (e.g. legal and regulatory fines) are not dissuasive enough, so being corrupt is still perceived as more profitable.”
  • “There is no real business alternative to corruption (in the short term): Even if companies are afraid of getting caught and fear negative consequences, they may see no other way of surviving in a competitive environment.”

In view of the various school of thoughts, it becomes obvious that many a times, businesses believe that these are the only ways of carrying out their operations and in the process deprive the system the opportunities for growth which invariably creates fewer opportunities for the customer base which do not have the enabling environment to create new wealth for continued increase in purchasing power.

The question that comes to mind is where there are no enabling environment/facilities and there is no purchasing power, how sustainable will these businesses continue to be. This is considering the fact that their ability to employ more people and also grow the customer base is directly proportional to the ability of the enabling systems to create new opportunities and continued wealth for customer purchases.

So where sanctions and penalties are not deterrents to poor governance and increased corruption perception, what then is the answer? According to Sven Bierman, research has shown that a complementary “incentive approach”, to date, is often underestimated or even unknown to those seeking to advance good governance and anti-corruption.

He stated that a research conducted by his team in 2012 showed 92% of the respondents agreed that preferential treatment should apply to companies that demonstrate adherence to good governance and anti-corruption initiatives and principles and such companies are gradually increasing by numbers.

A good example of this is an approach that is being put in place in Nigeria which seeks to leverage on the financial markets for advancing good governance and anti-corruption practices by providing business advantages for companies listed on the Nigeria Stock Exchange.

According to the Chief Executive Officer of the NSE, Mr. Oscar Onyema:

“It is expected that companies will enjoy tangible business advantages from risk-oriented and/or ethically sensitive business partners and investors. In addition, competitors would be challenged to establish the same level of good governance by setting standards of excellence. Companies would not only set themselves apart from their peers, but also contribute to improving the climate for doing business in Nigeria.” 

In conclusion, these types of incentives will help differentiate businesses and make them more attractive to major institutional investors who are seeking greater opportunities and returns in emerging markets. Like the saying goes, the higher the risk the higher the returns, but for the businesses with  good governance, risk and compliance structures, they are better advantaged as this goes to show their abilities to deliver on  corporate responsibilities  and invariably becoming the anchor for the providers of funds and capital for business growth and expansion.

This paper seeks to comprehend the preparedness of the Nigerian market,  both public or private to tap into the opportunities for business sustainability.

Will the necessary structures needed to propel the change in status quo per governance be developed?

Is the market ready to put in place programs/ develop initiatives to drive sustainable business practices?

What are the odds?

References

Why sanctions alone are not enough: The Nigerian Model – Richard Bistrong Blog

Answers to questions on Why sanctions alone are not enough: The Nigerian Model – Sven Bierman (the former Director of Anti-Corruption Projects at the HUMBOLDT-VIADRINA School of Governance in Berlin/Germany and a recognized though leader, author and anti-corruption coach for business sector-related integrity measures.

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