When times are tough, the most mundane items often become the most important. Insurance only pays dividends when tragedy hits; savings show their true value once money is no longer coming in the door. For businesses, corporate governance is chief among those items whose value becomes most apparent during a crisis.
Of course, some corporate governance is table stakes, regulated by corporate law, securities law, and stock exchange rules. It is the other elements of corporate governance, the vast and overflowing bucket of non-prescribed governance “best” practices, that often get neglected. In our experience, many companies fall short in this area because establishing strong corporate governance practices may not, on its face, generate revenue, warm new leads, or develop products. There are always more exciting pursuits.
We believe, though, that good corporate governance emboldens stakeholder confidence, and indirectly enhances shareholder value. Companies proactively deploying strong governance practices will also find that it gives them a greater chance to mitigate some of the impacts of crises and better position their businesses to survive turbulent times. While good governance is a broad term that relates to ensuring business is conducted with integrity, in a crisis it means management teams closely engaging with their board to execute on plans for risk management and shareholder protection. And before a crisis, it boils down to management teams and boards having prepared themselves to respond to crises should they arise, and having laid a strong foundation for risk mitigation and stakeholder engagement.
Practically, good governance plays out in a variety of ways in a crisis, including a razor sharp focus on finances, particularly cash management. This can be achieved through checks and balances that aim to enhance accountability and transparency to all stakeholders. Board and management teams should be equally aware about the company’s financial position. Short- and long-term corporate financial planning should be regularly stress-tested in scenario planning sessions, and there should be open, consistent, and evolving dialogue on how different scenarios impact a company’s financial health, including how much liquidity a company has to lean on when times get tough.
It also plays out through an ability to manage crises through various functions of a company, including communications and stakeholder engagement. Every company has a variety of stakeholders—employees, vendors, shareholders, customers, and more—that rely on transparent communications during a crisis. Companies should provide these clearly and consistently, and ensure that stakeholders know what impacts a crisis might have, as well as what to expect from the company as it navigates through the beginning, middle, and end.
Finally, good governance means that, in advance of a crisis, a company understands the risks that it faces that could prevent it from achieving its business objectives. By convening key employees from various parts of the business (finance, legal, business development, communications, and others), companies can identify, assess, manage, and monitor the risks that it faces on an ongoing basis, and then take steps to properly mitigate them. If these risks arise, companies will not be caught flatfooted, enabling them to act more swiftly, and in some cases, diminish the impact when these risks crystallize.
While the best time to implement these practices is now, the backbone for these practices—strong board-management relationships, risk analysis, and stakeholder engagement—is built in times of stability. More than just a nicety, good governance is a competency that can help companies survive crises and thrive long term. We are seeing this play out now, where companies with good corporate governance are generally finding themselves better able to weather through the crisis than those playing catch up.
Crises like COVID-19 have highlighted the need for good corporate governance. While counterintuitive, it tends to fall by the wayside when business is stable and prosperous. Good governance, though, is a staple in crisis and risk management. While there will always be more exciting opportunities, the benefit that can be gained from good governance during a crisis cannot be understated.
This is not an offer to sell or a recommendation to trade in any securities. This information is provided as of the date hereof. This document contains data obtained from third parties that Canopy Rivers has not independently verified. This document also contains forward-looking information within the meaning of Canadian securities law, which is based on certain assumptions. While management believes these assumptions are reasonable based on information available as of the current date, they may prove to be incorrect. Many assumptions are based on factors outside of Canopy Rivers’ control and actual results may differ materially from current expectations. Forward-looking information involves risks, including, but not limited to, the risk factors set out in Canopy Rivers’ most recent Management’s Discussion and Analysis and Annual Information Form. You should not place undue reliance on forward-looking information. Except as required by applicable law, Canopy Rivers assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances.
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