Good corporate governance is the difference between being on the front foot or the back in a dispute.

Is your organisation "Dispute Ready"? Is it prepared to deal with a dispute in a manner that will maximise the best outcome for the organisation in every respect?

Legal disputes are an inevitable part of business. Unfortunately they come at great cost to an organisation, both in time and money. Not only are disputes expensive but often they distract an organisation's personnel from its core business. More often than not, an imminent or threatened dispute leaves an unprepared organisation scrambling for cover. This is the case regardless of whether the organisation instigated the dispute or is on the receiving end of it. However, with careful planning and the right preparation and groundwork, it is possible to minimise the impact of the dispute on the business. In some cases, it is possible to avoid the dispute altogether.

There are numerous and varied options available to an organisation to ensure that it is Dispute Ready.

In our experience, there are three key areas in which organisations often fall down when it comes to being Dispute Ready:

  1. good corporate governance;
  2. a sound document management system; and
  3. strong relationships with stakeholders.

First and foremost, good corporate governance is a critical element to being Dispute Ready.

Part 1 in this series will examine the role of good corporate governance and its importance in ensuring that an organisation is Dispute Ready.

Corporate governance defined

What is corporate governance?

There are many and varied definitions as to what corporate governance is.

In broad terms, corporate governance refers to:

  1. the way in which an organisation is directed, administered and controlled;
  2. the interrelationship between internal and external stakeholders within an organisation;
  3. the framework that governs that interrelationship; and
  4. the practical application of that framework.

But what does "good corporate governance" mean?

While there are some basic principles underlying the concept of corporate governance, what constitutes "good corporate governance" will differ from one organisation to the next.

Good corporate governance is ensuring that the organisation:

  • has regard to the needs and interests of all stakeholders; and
  • does so in a balanced and transparent manner.

Some organisations are of the view that this is simply about having the right policies and procedures. This however is not the case. It is imperative that this concept be imbedded into the culture of an organisation. How does this occur? From the top down.

Is there a link between "good corporate governance" and being Dispute Ready

There is no doubt that "good corporate governance" contributes significantly to the success of an organisation and its business. Good corporate governance is essential for the long-term prospects of any organisation.

Good corporate governance helps in both good and bad times. The impact of good corporate governance is clear when the economy is trending upwards. Good corporate governance also assists an organisation to weather a storm, be it caused by an economic downturn or by the onset of a significant dispute.

Good corporate governance:   

  • means the difference between being on the front foot or the back in a dispute.
  • ensures maximisation of resources so that the organisation can continue to focus on its core business.
  • results in cost savings both internally and externally.
  • can be the difference between winning or losing the dispute or reaching a resolution to the satisfaction of the organisation.

Six steps towards good corporate governance

An organisation wanting to implement good corporate governance to ensure that it is Dispute Ready can take six simple and immediate steps.

  • Step 1: Identify by reference to historical (and current disputes) risk areas for the organisation. Consider also other risk areas posed by the organisations operations such as key contracts etc. Create a risk register that records and analyses prior disputes. How did the disputes arise? Could they have been avoided? How was the dispute managed? Consider lessons learned, recommendations and strategies to avoid the disputes recurring and addressing other identified risk areas going forward.
  • Step 2: Document (and record in a manner that is accessible/retrievable) all important company information. This extends to not only more mundane matters such as an up to date organisational chart, but also notices of meetings; minutes of meetings; resolutions; appointments etc.
  • Step 3: Ensure that the organisation has a policy manual (or individual policies) that covers employee guidelines, personnel procedures, organisational rules, standards of action and behaviour. Check that the manual is up to date, that there is a training programme in place within the organisation to ensure that all employees are familiar with it. There should also be a system of audit to ensure compliance with the manual.
  • Step 4: Review all insurance policies to ensure adequate insurance and levels of cover for the types of risks faced by the organisation. To the extent that there are gaps in the insurance, these should be covered off. A legal review of the cover is the best way to do this.
  • Step 5: Does your organisation have a contract/agreement manager or someone that performs this function? If not, one should be appointed. This person should be responsible for creating a register that lists all of the contracts/agreement to which the organisation is a party; collating executed copies of all of the contracts/ agreement; identifying key dates and recording them in a central bring up system.
  • Steps 6: Ensure that company personnel understand the organisation's key compliance obligations. The design, implementation and management of a compliance program will differ for each organisation depending on its size and the nature and complexity of its business. Does the organisation have a compliance officer or someone that performs and champions this function? If not, someone should be appointed.

Conclusion

The examples provided above are by no means exhaustive. However, they are the immediate steps that we recommend an organisation takes if it wants to be Dispute Ready.