As the UAE celebrates its Year of Sustainability, the country’s spotlight on the environmental, social and governance (ESG) framework grows exponentially. While the environmental and social pillars of ESG bring to light the business and human interactions with the environment, and the pressing need to end poverty, the governance pillar is equally important to ensure ethical business practices and continuity. This pillar is also crucial to managing risks effectively, creating long-term value and sustainable growth, and enhancing stakeholder trust and smooth business administration.
Effective governance traditionally safeguards the interests of stakeholders, but an important factor that is forgotten is that it also helps maintain a competitive edge in an ever-changing global marketplace. In the context of the Middle East, where the business landscape continues to experience significant growth and transformation at a rapid pace, the need for robust governance practices becomes even more crucial.
Governance plays a pivotal role in addressing risks and ensuring compliance with regulations. The appointment of experts specialising in areas such as risk management, compliance, and cyber security demonstrates a proactive approach to addressing emerging threats.
In an era marked by rapid technological advancement and increasing cybersecurity concerns, businesses must be equipped with the necessary expertise to safeguard their operations and protect sensitive data. The inclusion of these specialised roles in the board of any organisation underscores a commitment to staying ahead of the curve in an increasingly interconnected world.
One of the key regulations governing publicly listed organisations in the UAE is the Governance Guide for Public Joint-Stock Companies attached to the SCA Board Chairman’s Decision No. 3 which regulates corporate affairs for UAE listed entities. The Guide’s clauses apply to all public joint stock companies, and is overseen, applied, and regulated by the Securities and Commodities Authority (SCA).
To strengthen corporate governance, the Guide provides regulations and best practices in areas such as board composition, independence, disclosure, and internal controls, following international standards to determine responsibilities of board members, directors, and the executive management of a listed company.
Beyond safeguarding the interests of stakeholders and managing risks, good governance also fosters a culture of innovation and strategic thinking. Establishing a framework that encourages open dialogue, independent thinking, and long-term planning is crucial to sustainable growing business with value creation.
Bringing together professionals with diverse backgrounds, skill sets, and perspectives, especially in the board, can help address complex challenges and seize emerging opportunities. Furthermore, it is imperative that board members are selected through a robust governance process, with clear criteria for skill sets, experience, and the value each candidate brings to the collective board.
The Middle East is a region that has witnessed tremendous economic growth with one of the youngest populations on earth. It continues to attract global investment and foster entrepreneurship. To continue this, sustainable growth journeys and to ensure stakeholder trust and confidence, organisations must adopt a strong governance framework that adapts to evolving challenges.
Smooth leadership transitions during changes, guided by well-defined governance practices to enable continuity, allows for fresh perspectives and ideas to shape the organisation’s future trajectory.
KPMG in the LG has grown and expanded, doubling in the past five years, and for this reason, has taken a number of steps to keep pace, among those has been to adopt best practices in corporate governance, board composition and oversight. With a board election process overseen by an international law firm, the composition of the new KPMG Lower Gulf board reflects a commitment to diversity and inclusivity, values that are increasingly recognised as vital for effective decision-making and overall business performance.
As businesses in the Middle East and beyond strive to thrive in a rapidly changing world, they must embrace governance as a strategic imperative. By nurturing diversity, ensuring compliance, managing risks, and fostering innovation, businesses can build a solid foundation that supports their growth, enhances their reputation, and secures the trust of stakeholders. This recognition of the importance of governance drives sustainable business practices, and it should inspire other organisations to prioritise governance as a cornerstone of their operations.