The rapid outbreak of the COVID-19 pandemic presents an alarming health crisis that the world is still grappling with. In addition to the human impact, there is also significant economic, business and commercial effects being felt globally.
As viruses know no borders, the impacts will continue to spread.
In fact, an internationally respected accounting firm (KPMG) estimated that “94 per cent of the Fortune 1000 across the globe, and businesses in Nigeria have been impacted and are already seeing COVID-19 disruptions”. It is expected that the COVID-19 threat will eventually fade, as the Ebola, Zika, and Severe Acute Respiratory Syndrome (SARS) viruses have in recent years.
However, the social-economic impact (which includes corporate governance) will still be felt long after virus fades. Of course, running a business in the midst of a pandemic is an unprecedented challenge for business leaders worldwide.
The current scenario should thus act as a stark reminder on the importance of having adequate strategic management processes capable of identifying potential threats, advance planning and the safeguarding of critical business functions in the event of a disruption. Obviously, the restrictions imposed by many governments all over the world in handling the COVID-19 outbreak raises significant challenges as regards corporate governance.
Corporate governance refers to the system through which organizations are directed and controlled. Corporate governance is also seen as encompassing the combination of laws, regulations, listening rules and voluntary private-sector practices that enable the company to attract capital, perform efficiently, generate profit and meet other legal obligations and general societal expectations.
Nigeria follows developed countries such as UK, US, Canada, France, and Germany, to introduce a corporate governance code. Nigerian corporate governance is concerned with the process of direction, supervision, controlling, self-regulation, policy compliance and leadership to be in line with the status and jurisdiction of the Federal Republic of Nigeria.
Readers may at this junction wish to know the main regulators and enforcers of corporate governance in Nigeria. I will gladly provide the answer. The Financial Reporting Council (FRC) is the government agency responsible for corporate governance.
Other regulatory agencies for corporate governance are the Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (which register all incorporated companies). In addition, the Companies Allied Matter (CAMA), Act 1990 and the Investment Securities Act provides basic guidelines on company listing and more detailed regulations are covered in the Nigerian Stock Exchange (NSE) listing rules.
Also, the Banks and other Financial Institution Act 1991 as subsequently amended, the act empowered the Central Bank of Nigeria (CBN) to register and regulate banks and other financial institutions. Moreover, there is the Insurance Act of 2003 for regulation of insurance companies through the National Insurance Commission (NAICOM. Furthermore, other institutions such as the Institute of Chartered Accountant of Nigeria (ICAN), the Association of Accountant of Nigeria (ANAN), and Institute of Directors (IoD) play various roles in promoting effective corporate governance systems in Nigeria. This occurs by enlightening their members through conferences, seminars and symposiums on compliance with the code of corporate governance practices of listed firms.
Despite the desirability of corporate governance in Nigeria, its implementation faces a lot of challenges. For instance, companies use foreign company legislation, because legislations in Nigeria have failed to address the company’s law problems that were peculiar to Nigerian’s social-cultural and political environment, and did not address the rapid economic and commercial developments of the Nigerian country. In addition, most of the problems with these inherited laws are Foreign Multinational Corporation laws that dominate and control the activities of business enterprises along with their economic interest brought in. However, the various measures taken by the Federal Government of Nigeria to improve the investment climate in the country are commendable and could help to attract foreign investors into the country. Nevertheless, there are corporate governance implications that cannot be overlooked.
I will at this point state key actions to consider in a post COVID-19 world. We all know that the COVID-19 situation is no different from previous economic crisis, hence it is significant to highlight various actions that businesses should consider in preparing and adapting to a post-COVID-19 reality to ensure business continuity and strengthen long-term competitiveness. Of course, creativity is needed to weather the eye of the storm in capital search just as we must separate the signal from the noise for portfolio optimization to thrive. Corporations must be agile and proactive in order to maximize value. Indubitably, like everything under the sun, discipline remains key to creating real value. Businesses must look up and down to reimagine their supply chain and also do the next right thing to protect their license to trade.
I won’t conclude this piece without highlighting the top 10 considerations for business assurance leaders to prioritize in the review of their strategy during and beyond this COVID-19 pandemic. These are health and safety, business continuity & crisis response, cash flow management, cost optimization, cybersecurity & data privacy and fraud. Others are digitalization, foreign exchange management, credit management and financial reporting.
In conclusion, I surmise that investor confidence in Nigeria will be strengthened if steps are taken to address the issues of poor and ineffective corporate governance in Nigeria. They should also identify opportunities for improving the business continuity plan. Given the rapidly changing economic circumstances arising from COVID-19, the 2020 cash flow budgets and forecasts prepared in 2019 by organizations may now be of limited relevance and, therefore, requires a revision. It is advisable for organizations to start reducing their cost in order to ensure survival and profitability of their business. Indeed, there is need to perform a risk assessment of the organization’s information technology, general and application controls with reference to leading practices and provide process improvement recommendations. Finally, it is imperative to raise periodic awareness on fraud within the organization as well as a warning of the heightened risk of COVID-19 themed phishing attacks.
Dasuki Ibrahim Arabi, Director-General of the Bureau of Public Service Reforms writes from Abuja ([email protected])
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