In the maze of activity and information, it is sometimes easy to forget the core purpose of running an enterprise- add value to the world in an ethical manner, grow the world by growing oneself. This is the first of a series of 3 blogs which explores Ethics in the contemporary scenario with respect to ESG (Environmental, Social & Governance) Framework. How important is Ethics to the company brand and what is the role of ESG in risk management?
Ethics, Governance, Brand and Risk Management
G stands for Governance, as in Corporate Governance.
Corporate Governance is concerned with management of relationship between the directors, managers and other stakeholders of an organization. It specifically strives to achieve the set values, and vision and create visibility of the organizational functioning.
Brand Equity represents the total value of a brand as a separable asset, a measure of the strength of consumer’s attachment to a brand and a description of the associations and beliefs of the consumer about the brand. Companies with a positive brand image have higher market value, own a market value premium and generate an intangible asset vis-à-viz industry peers.
Brand is normally associated with marketing and Governance is associated with compliance. However both are intimately connected. An enterprise exists to add value and customers as well as other stakeholders have confidence in both the product and the company people. They trust the company to best utilize the resources they are entrusted with in a manner such that society as a whole gains when the company thrives. Lack of governance leads to scandals and the first victim on any scandal is the company brand. A brand takes decades to build but seconds to destroy. To preserve Brand Equity, corporate governance is essential to maintain stakeholder confidence in the company.
CIMA & ACCA , along with many other top global finance qualifications, stress on ethics, governance and brand equity preservation. Enterprise Risk Management models take this very seriously, incorporating brand risk as part of risk measurement and risk management.
Common components’ of good governance include the Top Management commitment to Risk Management, Linked Performance and Awards criteria, integrating Risk with Vision, Mission, Core Values, Strategy, Business Objectives and Enhanced Performance at all levels of the enterprise. This complements a robust system of internal control, that ensures both external Compliance and internal efficiency on a pathway of organizational growth and stake-owner management. Such an integrated robust system will ensure that there is good governance and even in any crisis facing the company or the industry, they can clearly communicate their resolution strategy with the stakeholders.
A confidence in the governance of an organization includes commitment to ethics and integrity by default and the mechanisms to ensure that. Without integrity, a company can never sustain itself over a long time. This is precisely the solid structure that gives the company a rock solid brand equity.
Hence, Ethics, Governance, ERM and Brand Equity are truly multiple sides of the same coin.