Governance mechanisms have been created to combat administrative and financial corruption in any institution. They are effectively deployed by organisations and enterprises in supervisory operational processes.
Governance is the system by which the rights and responsibilities of an organisation are distributed among the various key shareholder in the way how they transaction their business, and also regulate the relationship with all their other stakeholders involved.
Banks are considered among the institutions that millions of individuals deal with in a personal capacity or as representatives of companies and commercial establishments. Now, the status of banks is measured through their success in their dealings — corruption-free —thanks to the application of various governance mechanisms.
Today, banks are among the most modern institutions that use the latest systems — knowledge and technology-based — to enable their customers to conduct transactions effectively and conveniently using e-banking services to transact with parties locally and internationally. These e-banking channels in the banking world are growing rapidly at a time when cyberattacks continue to give cause for confusion both for banks and their customers. Effective supervision, thus, such as ‘Know Your Customer’ procedures, is imperative to curb hacking and other cyberattacks by criminals.
Today, with electronic banking services becoming mainstream globally, banking governance has become even more critical in addressing any shortcomings that may result in a disruption of services. Regular audits of banking and governance processes are a must.
It’s clear that there is a strong relationship between the application of governance mechanisms and the responsibilities of individuals. This requires that the responsibilities of the board of directors and the executive management are clearly defined to ensure efficient oversight of internal controls and audit processes. The goal should be to enhance the quality of reporting and financial and accounting information within institutions.
The financial problems faced by some banking and non-banking institutions around the world in recent years have led to the need to establish a set of rules, regulations, and ethical and professional principles to boost confidence and credibility in the information furnished in the financial statements of these institutions, which is of critical importance to clients, brokers and dealers in securities.
Governance plays a major role in enhancing the confidence of investors and customers, and it works to stimulate investment and energise the financial market, in addition to improving the financial efficiency and economic management of companies and institutions. Effective governance also help in evaluating the performance of senior management, enhancing accountability and raising the level of confidence among all, besides preempting accounting and financial problems occurring between the partners.
The aim of governance is to support and stabilise the activities of operating companies and to drive economic progress by attracting foreign investments, in addition to supporting and developing banking and financial institutions in the countries.
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