Corporate Governance - A Tool For Risk Monitoring

Rist has many dimensions. Good corporate governance framework helps companies to undertake the risks in a controlled environment. PARA points out the principles of corporate governance laid by SECP for non-listed companies.

Family owned and controlled businesses are unique. Their core strength lies in the fact that the shareholders are closely involved in operational activities. Their passion and will to nurture their business drive the entire company. However, as size increases, the need to delegate and involve professionals bere necessity. This also leads family-owned companies to the challenge of long-term sustainability. Few family businesses continue to create shareholder value through generations. The main reason cited is relatively weaker governance standards.

The Securities & Exchange Commission of Pakistan (SECP) has been working on development of a robust Corporate Governance (CG) framework for entities, specifically to address such issues.

In this regard, SECP updated its existing CG rules for listed companies in 2012, and then issued CG rules for Public Sector Entities. In a recent initiative, SECP has introduced a set of voluntary principles for non-listed companies (NLCs). These principles are aimed at introducing a basic governance framework at NLCs.

The Pakistan Credit Rating Agency, a knowledge-based organization and a key player in capital markets, has jotted down key factors of this framework. This should help improve corporate governance awareness of key and potential businesses and capital market participants. Adoption of these principles is not a destination rather a journey towards best practices.