Effective corporate governance for SMEs

by Gary Pan & Evelyn Gay for The Business Times, August 25th, 2010.

The firms face increasing fraud risks if they don’t enact sound corporate governance.

In May this year, the Singapore Corporate Awards were given to a few outstanding companies in recognition of their effective governance practices. Given the mounting cases of corporate fraud in the last few years, such recognition could not have come at a better time.

While most would agree that effective governance ought to be enacted in both large as well as small and medium enterprises (SMEs), the truth is many SMEs place little emphasis on sound corporate governance.

This may be attributed to SMEs’ limited financial resources and the owners’ misconceptions that they are answerable to no one except themselves.

This article calls for SMEs’ immediate action in the light of the Singapore government’s latest push for effective corporate governance.

Without swift action, SMEs face increasing fraud risks. A good example is that of a local pub operator, Gaelic Inns, where over-reliance on its group finance manager resulted in theft from 2001 to 2004, incurring a huge loss of about S$1 million to the company.

The first step to sound governance is for SMEs to recognise and assess their governance needs. This is followed by exploration into a series of effective governance policies and practices.

As most SME owners are put off by the complex governance assessment exercises, a quick and easy-to-use diagnostic tool is proposed here to alleviate their concerns. (continue reading… )

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