Newsletter | Volume 1

Issue I
Issue II
Issue III
Issue IV
Issue V
Issue VI
Issue VII
Issue VIII
Issue IX
Issue X
Issue XI
Issue XII
Issue XIII
Issue XIV
Issue XV
Issue XVI
Issue XVII
Issue XIX
Issue XX
Issue XXI
Issue XXII
Issue XXIV
Issue XXV
Issue XXVI
Issue XXIX
Issue XXX
Issue XXXI
Issue XXXV

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Regulatory (direction) and supervisory functions (controls) of the Board of Directors

As a result of the added emphasis on Good Governance and Risk Management post the financial crisis, there seems to be a need to clarify and distinguish the processes involving the regulatory function from the supervisory function of the board of directors and managers.

Like the governing or the oversight authorities (regulator) the Board of directors must set the rules and regulations within which management is obliged to operate within. As the supervisor on the other hand, the Board oversees the actions of management that ensures compliance with those rules and regulations. The same procedure applies to the processes that determine the success in the relationship between the Board/management and stakeholders. These structures ensure that the set objectives of the organization are effectively monitored and the economic performance is under control.

When these structures and processes function optimally the operation is safe and secure. The integrity and ethics part of management for the good of all stakeholders can then contribute to effective governance of the regulatory and supervisory functions.

Without the right checks and balances on the power and rights any deviation from the above can lead to disaster because governance is not a fixed set of guidelines and procedures. It is an ongoing process by which the choices and decisions of the people are scrutinized, management and supervision is strengthened and streamlined, appropriate cultures are established and reinforced, and management is continually supported and assessed.

The depth, breadth, speed, and consequences of how the board and management addresses these deviations will determine that management teams and boards of directors are not caught by surprise and stunned at the disastrous results that affect the regulators, supervisors and stakeholders.
  1. Large, global macroeconomic imbalances
  2. An increase in the company’s involvement in risky activities
  3. Tone at the Top and highly qualified staff to address adversity
  4. Unfavorable environmental influences
  5. Failure to manage operational risks
  6. Lack of focus and strategy
  7. Inadequate capital buffers
  8. Misplaced reliance, complex or ineffective IT systems and reliable data
These above eight issues/causes are often a reason for general failure of Board of directors to provide governance at all management levels.