Page 40 - IRMSA Risk Report 2021

3.2
CONTINUING PRIVATE AND PUBLIC GOVERNANCE

FAILURE
Ineffective governing bodies contribute to governance failure and even to corporate and country failure. A well-governed country,
institutions, and organisations are essential for the economy to thrive to meet the country’s fiscal needs, to build resilience, and
to secure the hopes of future generations

SCENARIOS FLAGS SUCCESS STORIES
COUNTRY FLAGS C F Just google “bad governance” and the
OWNING OUR FUTURE
1. LEADERSHIP results are overwhelming. Google “good
governance” and the results are few and
2. INSTITUTIONAL CAPACITY far between. A noteworthy success story
3. POLITICS is that of the President of Malawi who
has demonstrated that less power and
4. SOCIAL COHESION more governance can help to transform
a nation. South Africa’s public and private
5. NATIONAL POLICY
organisations can do the same. This
6. SERVICE DELIVERY report highlights some of the threats
and opportunities that may contribute
7. INEQUALITY to the prevention of further governance
8. ECONOMY failures and the leveraging of the benefits
PERPETUAL FAKE IT UNTIL WE 9. GLOBAL TRENDS from strong governance and risk-based
HANGOVER MAKE IT, OR NOT decision-making.
10. CLIMATE Malawi’s Governance Transformation
C – CURRENT (2020/21) F – FUTURE (2030)
Governance failures continue in national, provincial, and local government and in public and private institutions, bodies, and organisations.
Even amid the Covid-19 pandemic, governance failures allowed corruption to prevail, steal life-sustaining aid from vulnerable people and
prevent personal protective equipment from reaching those who need it most. This risk must be resolved if we are to prevent failing as a
country and a nation.

TOP 5 CHALLENGES TO ACHIEVING TOP 5 RISK TREATMENT OPTIONS AND
TARGETS OPPORTUNITIES
1. Lack of consequences for corruption and unethical 1. Capacitate law enforcement and have specialised courts to
behaviour. deal with cases of corruption.
2. Not appointing the right directors with the right 2. Ensure that individual directors have the right knowledge,
competencies. skills and experience and that, taken as a whole, governing
bodies have requisite diversity of skills and experience to
direct and exercise oversight of the organisations.
3. Sub-optimal or no alignment between governance, 3. Introduce minimum competency-based qualifications for
strategy setting and risk management. directors.
4. Treating governance as a compliance instead of a 4. Increase the depth of individual director performance
performance issue. evaluation during independent board evaluations.
5. Not seeing or appreciating the value of good governance. 5. Empower directors in the use of the business judgment
rule to improve the quality of decisions and hold directors
appropriately to account when they fail in their fiduciary
and governance duties.

FACTS AND FIGURES
• The AG Report on Municipalities 2019/20 showed 46 had
regressed and 33 improved, 92% had qualified audits, 52%
did not have quality financial statements, 67% had findings
on performance reports, 91% had findings regarding non- SECURITY & SCORE/100 RANK/54 TREND
RULE OF LAW
compliance with legislation, and irregular expenditure rose 2020 IIAG Scores, Ranks & Trends - South Africa 2019 2019
to R32.06 billion. OVERALL SECURITY & RULE OF LAW
• The Harvard Law School Forum on Corporate Governance GOVERNANCE FOUNDATIONS FOR SCORE/100 RANK/54 TREND
ECONOMIC OPPORTUNITY
2019
2019
identified the following global governance trends: 1. A FOUNDATIONS FOR ECONOMIC OPPORTUNITY
greater focus on the E&S of Environmental, Social, and 2019 SCORE/100 2019 RANK/54 Lorem ipsum
th
Corporate Governance (ESG); 2. The increasing importance PARTICIPATION, RIGHTS SCORE/100 RANK/54 TREND
& INCLUSION
2019
2019
of corporate purpose; 3. Better board oversight of corporate TREND CLASSIFICATION KEY PARTICIPATION, RIGHTS & INCLUSION
culture and Human Capital Management; 4. A more Increasing Improvement Slowing Improvement Bouncing Back HUMAN SCORE/100 RANK/54 TREND
expansive view of board diversity, that includes ethnicity Warning Signs Slowing Deterioration Increasing Deterioration DEVELOPMENT 2019 2019
and race; 5. Companies are facing wider forms of activism. No Change Not Classi ed HUMAN DEVELOPMENT
• Although SA is still ranked 6 on the Overall Governance
th
Index, SA’s score of 65.8/100 has decreased by 0.9.
The “warning signs” trend in Foundations for Economic
Opportunity is of concern.
Source: 1. Auditor-General of South Africa: Municipal Audit Report, Media Release, 1 July 2020. 2. https://corpgov.law.harvard.edu/2020/01/18/2020-global-and-regional-corpo-
rate-governance-trends. 3. 2020 Ibrahim Index of African Governance (IIAG).
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