By Erika founder of Beyond Governance
Fintechs are innovative by nature, often growing quickly and responding rapidly to evolving technologies and customer demands – which is why governance is key. Without good governance, the business weakens and struggles to survive in the long-term.
A lack of governance in financial organisations is bad news for everyone – the company, employees and customers alike. This is because of the multiple knock-on consequences of bad governance, which range from talented staff resigning and poor decisions being made to risks going undetected.
Why Does Governance Matter For Fintechs?
Fintechs are technology-based financial organisations that create technology to improve and simplify how financial services are delivered and used. They include companies like payments platform PayPal and the personal finance app Mint.
Governance is how the business is run – its processes, systems and frameworks, how decisions are made and who makes them, how risks are managed and how staff are protected and supported in their roles.
How fintech firms manage risk will determine how successful they are – and governance is at the core of risk management.
With Good Governance
Good governance means having effective risk management processes in place that staff respect, understanding why they’re there and identifying and monitoring potential risks. By identifying risk factors, any issues can be dealt with quickly and efficiently, ensuring the business complies with regulations and customers are looked after.
Investors judge a company’s sustainability on governance as it is a sign the business is in safe hands. This matters for fintechs and financial organisations. With robust governance, internal and external stakeholders know the right measures are in place for growth and for risk management, indicating that decisions will be made for the right reasons – as well as content investors, this leads to happy staff who are productive, accountable and empowered.
You can expand the company when you want to, too, as happy staff are capable and engaged and able to grow with the business.
With Bad Governance
Poor governance leads to a lack of accountability, mistakes being made, poor decisions, reduced investor trust, data protection issues, and fraud outbreaks. If leaders aren’t willing to take responsibility for their work, the wrong decisions are made and staff aren’t supported, creating a toxic culture that causes good employees to resign and investors to lose trust.
Staff won’t enjoy working for the organisation as they won’t feel supported in their role due to the lack of leadership and processes in place. Mistakes are far more likely to happen due to a lack of engagement together with insufficient monitoring and controls in place to identify issues and risks – and the company becomes vulnerable to fraud. The lack of safety measures and committed staff make it easier for individuals to commit fraud, both from within and outside the business.
To ensure the ongoing and long-term well-being of the business, fintechs need to have good governance. Having a thorough understanding of your company and how it operates and having in place all the frameworks and processes needed to function, will provide the support and protection staff need to fulfil their duties well and in the most efficient, regulation-friendly way too.
Erika founded Beyond Governance having fast-tracked her career to become one of the UK’s youngest FTSE 250 board governance advisers at 32.
She was Group Company Secretary at Low & Bonar plc (FTSE SmallCap engineering company) and prior to that Group Company Secretary at The Restaurant Group plc (FTSE 250 hospitality company). Previously she worked at InterContinental Hotels Group plc (FTSE 100 dual-listed in New York), Premier Foods plc (FTSE 250), ICAP plc (FTSE100 financial services) and KPMG.
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