Risk management, governance key to succession

08-Feb-2016

By Elizabeth Somerville

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Robust risk management and governance processes are cornerstones for financial planning practices seeking to develop and fulfil a succession plan for their businesses.

Speaking at the Succession Planning Day 2016 in Sydney, jointly hosted by Succession Plus and financialobserver, Succession Plus New South Wales partner David Cambridge said the most successful enterprises had and followed set processes.

“The best businesses are those that have processes installed, even around some of the minor things in the business,” Cambridge said.

“Find something that’s not documented, look at your business and start developing actual processes [around this] and implement those processes.”

The aim was to establish and build processes that anyone who came into the business would be able to run, he said.

“I’m not saying that processes [remove] the role of intellect, but they do de-risk the business,” he said.

“You can’t replace intellect, you can’t always replace good decision-making and good processes, but when you bring the two together, you’re in a much stronger position.”

The more systemised a business was, the more predictable it would be, which would hold it in good stead for any unexpected events it had to weather, he said.

“If we put a system in place, chances are we’re going to have predictable outcomes,” he said.

“But if a risk doesn’t eventuate, you’ve still got systems in place to deal with it [in the future].

“And if your business is acquired, that’s something that an incoming purchaser is going to pay a fair bit of attention to – it will make your business more attractive to buyers.”

In addition, he said research showed transparency in corporate governance structures was linked to better-performing and more valuable businesses.

Therefore, it was beneficial to the business if everyone was aware who was authorised to make what decisions and what the requirements were for them to make those decisions, he said.

“When people in your organisation are aware of the structures and the authority levels and accountability and who has the responsibility, it makes it much easier for them to cooperate,” he said.

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