In a recent Aberdeen Asset Management study conducted among 300 global financial decision-makers, governance was found to be an integral factor when selecting and analysing investments. Almost 90 per cent of respondents considered effective governance to be a critical driver of investment performance.
That governance should lie at the heart of investment decision-making is not new. Less clear is what defines good governance in today’s rapidly evolving world. Governance is not simply a box-ticking exercise of correct policies and procedures. Rather it is a living, breathing process.
Good governance involves a qualitative, rather than mechanical, evaluation of corporate practices and of the people carrying them forward. It evaluates complex issues as broad as the quality of management to effective risk management. It is more of an art than a science. While improvements in technology, communication and management information have aided the governance process, they are only useful when quality people utilise this information effectively.