CGF ARTICLES, OPINIONS & EDITORIALS
Combined Assurance-Double checks business reporting (2012-06-01)
February 19,
2015 3619 3619 
Considering the heightened awareness of governance reporting and the increased accountability attached to directors; so much has changed for business leaders since the collapse of Enron and WorldCom in the United States, the HIH Insurance Group in Australia and Parmalat in Italy. Unsurprisingly, South Africa has also had its fair share of corporate failures, most notably those found in the cases of Aurora Mining company, Macmed, Leisurenet, Fidentia and Regal Bank.
In most instances of corporate failures; these could be prevented -- or at least the damages reduced -- if good governance measures and early warning signs and reporting systems were in place. Increasingly, shareholders and the organisation’s key stakeholders need more assurance that its leaders are properly equipped, skilled and experienced not only to lead the organisation, but also to protect it in the widest possible terms. This is one of the main reasons why these leaders were appointed in the first place; to protect, to serve and to deliver.
As many shareholders (and stakeholders) have drawn some hard learnt lessons through corporate failures – and often accompanied with massive personal financial losses – so they have begun to insist upon more assured, detailed and accurate business reporting from those who lead the organisation. Inadequate reporting and ‘blind trust’, based upon the ‘gut feel’ of these leaders is no longer acceptable to informed stakeholders; particularly considering the exorbitant packages earned by some of these leaders and whose responsibilities appear somewhat detached from the significant losses suffered through their inept leadership.
In an ideal world, it would have been reassuring if the organisation’s stakeholders could simply take the Board’s and CEO’s word at face value, believing that all their governance and risk matters were correctly managed. Clearly this thinking has become rather naive, considering that many business leaders have proved that they cannot be trusted as they cheat to make their numbers, or they allow materialism and short-term gains to cloud their business judgement.
Accordingly, most of the larger organisations have been compelled -- driven by recommendations such as the King Report on Governance for South Africa 2009 (King III) -- to produce integrated reports that cover financial and non-financial matters; the latter specifically addressing the manner in which the organisation has dealt with social and environmental issues. In this regard, stakeholders -- but more specifically shareholders -- have become more circumspect in receiving one-sided reporting from a CEO or even the Board of directors. Since the release of King III, organisations are required to provide its stakeholders a Combined Assurance report that covers a more comprehensive, independently assured position that the organisation and its leaders have effectively and efficiently mitigated all the existing / known risks the organisation may face.
