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Role of IA in Enhancing
Good Corporate Governance
Vaibhav Sachdeva
Global Risk Management Institute
Governance is a two-pronged approach that
Understanding Corporate Governance guides an organisation’s direction and ensures
proper oversight. The strategic direction defines
Corporate governance is a framework that the business model, overall goals, acceptable
guides how a company’s board of directors directs risk levels, and ethical guidelines (code of
and oversees its operations to achieve strategic conduct). Oversight, where internal audit
goals. It encompasses the relationships among plays a key role, involves monitoring activities
management, the board, shareholders, and other like risk management, controls, and senior
stakeholders. At its core, corporate governance management actions. As the ultimate governing
defines a company’s objectives, outlines the body, the board sets the overall direction,
strategies to reach them, and monitors progress. holds management accountable, and identifies
stakeholder expectations. Within oversight, a risk
This system consists of two key components: committee plays a crucial role by pinpointing key
internal mechanisms—such as charters, bylaws, risks, connecting them to management processes,
and the internal audit department—that ensure assigning ownership, and ensuring risk tolerance
ethical and efficient operations, and external aligns with the organisation’s overall risk appetite.
mechanisms, which include laws and regulations This combined approach ensures that the
that hold the company accountable to the public. organisation operates effectively while managing
Together, these elements create a robust structure potential pitfalls.
for responsible corporate Governance is a continuous
conduct. cycle overseen by the
board and executed by
Effective leadership thinks senior management. Senior
about potential problems management translates board
when making strategic directives into actionable
plans for the organisation. plans, assigns specific risks
This means understanding to designated owners,
what could go wrong and and establishes reporting
how those risks might requirements for these
affect achieving goals. For owners. The board and senior
risk management to be management periodically
successful, it needs clear assess risk tolerance levels
direction and support from and governance expectations,
the top. potentially leading to
adjustments in risk management activities.
Good governance provides that framework, Internal audits act as watchdogs, evaluating and
ensuring risk management efforts are aligned with improving governance processes. Risk owners,
the overall strategy. Governance relies on internal meanwhile, take the reins on their assigned risks,
controls to put the risk management plan into ensuring the design and operation of effective risk
action. These controls are like safeguards that help management activities, establishing monitoring
prevent or minimise issues. Effective governance procedures, and guaranteeing the accuracy,
communicates how well the controls work to the timeliness, and accessibility of information
board of directors. This transparency allows for reported to senior management and the board. In
adjustments and ensures everyone is on the same short, governance functions smoothly through the
page about risk mitigation. collaboration of the board, senior management,
INTERNAL AUDIT TODAY STUDENTS' FORUM | 55
