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SME's Governance

The majority of efforts took place by governments and regulators globally in order to establish sound corporate governance and best practice were meant in the first place to be implemented by large size companies that are publicly listed in stock exchange markets. This ideology is primarily set in order to protect the rights and interests of shareholders. Unlisted private companies including SMEs, that remarkably contributing to our economies, in terms of value and employment were left without suitable or standard regulations to support their governance in order to avoid unnecessary costs, weak performance, possible fraud and perhaps failure.

There are some governance directions & guidelines issued for SMEs by international research institutions and professional bodies. However, sufficient guidance has not been offered in the form of a unified model that can easily be installed and positioned by SMEs to reduce challenges and achieve sustainable success.

Corporate governance is not only a group of rules to be implemented by an SME, but it is a culture to be sourced out of the company. It represents a methodology to discipline the relationship between owners, board members, employees and other stakeholders of a company.

 

Some of the important advantages of implementing governance rules are:

  1. To protect the rights of owners, employees, customers, creditors, suppliers, local authorities and the society as a whole.
  2. To improve the company’s performance, support internal control, avoid risk and achieve sustainability.
  3. The advantage of securing the necessary financing at preferential rates to reduce cost.
  4. To limit the effect of risks and negative exposure to financial crisis.
  5. To prevent fraud and avoid corruption.
  6. To establish transparency environment when preferring business with various stakeholders.