Enterprise Governance

1
Enterprise Governance

• Definition
• Role of IFAC
• Why does it go wrong?
• A presentation to IFAC Board March 2003 by Bill
  Connell

2
Enterprise Governance

• A relatively new term it covers both Corporate
  Governance and the Performance Management of an
  Organisation
• CMA Canada address Strategic Performance
  Measurement
• CIMA address Strategic Enterprise Management
• ISACA (Information Systems Audit and Control
  Association) compare Corporate, Enterprise and IT
  Governance
• Many references in research work to Enterprise
  Risk Management

3
Enterprise Governance Definition

• The organisations entire accountability
  framework
• The set of responsibilities and practices
  exercised by the board and executive management
  with the goal of providing strategic direction,
  ensuring that objectives are achieved,
  ascertaining that risks are managed appropriately
  and verifying that the organisations resources
  are used responsibly.
• (Information Systems Audit and Control
  Foundation)

4
Let us look holistically at an organisation
ENTERPRISE GOVERNANCE
Board of Directors
Executive Team

• Much has been written about Boards and their
  Corporate Governance
• Enterprise Governance also addresses the
  Performance Management aspects with emphasis on
  strategy and forward direction

Source IS Control Journal, January 2003
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ENTERPRISE GOVERNANCE
Corporate Governance i.e. Conformance
Business Governance i.e. Performance
Accountability Assurance
Value Creation Resource Utilisation
6
ENTERPRISE GOVERNANCE
Board of Directors
Executive Management
Business Governance Processes
Corporate Governance Processes

• Chairman/CEO
• Non Executive Directors
• Audit Committee
• Resources and Remuneration Committee
• Risk Management
• Internal Audit

ACCOUNTABILITY ASSURANCE AUDIT
7
ENTERPRISE GOVERNANCE
Board of Directors
Executive Management
Business Governance Processes
Corporate Governance Processes

• Strategic Planning and Alignment
• Strategic Decision Making
• Strategic Risk Management
• Scorecards
• Strategic Enterprise Systems
• Continuous Improvement

VALUE CREATION RESOURCE UTILISATION
8
ENTERPRISE GOVERNANCE
Board of Directors
Executive Management
Corporate Governance
Performance
AUDIT COMMITTEE
STRATEGIC SCORECARD

• Audit Committees are well established
• Strategic Scorecard to be introduced for Board
  Performance Reporting
• OFR (Operational and Financial Review) seeks to
  address some of these issues

9
What is the Role of the Accountant in Enterprise
Governance?
FMAC has issued IMAPs1 and defined the Finance
Function role.
FINANCE FUNCTION
MANAGEMENT
GOVERNANCE
Operational Responsibilities
Oversight Responsibilities
MANAGEMENT ACCOUNTING FUNCTION
COMPLIANCE
VALUE CREATION
RESOURCE USE
REPORTING
ASSURANCE
EFFECTIVE DEPLOYMENT
INTEGRITY COMPLETENESS
Extract from FMAC Competency Publication
10
What is IFACs Role in Enterprise Governance?

• Establish an agreed definition
• Promote the integrated model and approach
• Embrace the full functionality of the Accounting
  Profession Governance and Management
• Develop Strategic Scorecard
• Issue Best Practice Statements on Performance
  Measurement

Proposal is to produce recommendations for next
IFAC Board Meeting
11
Why does Governance go wrong?orWhat must they
do to get it right?
CORPORATE GOVERNANCE
PERFORMANCE MANAGEMENT
e.g. US Failures - Enron/Worldcom
e.g. UK - Marconi/Strategic Failure

• A recent survey identified that the greatest risk
  to share price was strategic risk factors
• More work required

Proposal is to produce recommendations for next
IFAC Board Meeting
12
I would like to acknowledge the work done on this
project by Technical
Staff. Bill Connell - March 2003