Corporate governance combines the processes, policies, laws, and controls that effect the way a company operates. The governance guides the company’s decision-making and administrative processes. The corporate governance, as shown in FIGURE 15-1, is complex and involves people, processes, systems, and more.
A strategy is a plan of action designed to achieve one or more particular goals. A business strategy, therefore, consists of the plans upon which a company executes to achieve business goals which may include the following:
Maximize shareholder value
Reduce or manage costs to maximize profits
Provide a quality work environment which attracts and retains employees
Maintain a high degree of customer satisfaction
Support environmentally friendly operations
Develop a sustainable, competitive advantage
Provide accurate reporting of company operations
After a business defines its strategic plans, the company must determine ways to measure each goal. The initial measurement will establish a baseline for the company’s current level of operations and future measurements will establish the company’s level of improvement.
After a company defines its business goals and metrics, the company must inspect the underlying factors that drive the business result. In other words, rather than take the company financials at face value, the company should examine the sources from which the values come to ensure each is accurate and free from fraud. The inspection process is also known as auditing.
The auditing process can be internal (done by the company) or external (done by a third-party company), as shown in FIGURE 15-3.
The auditing process will identify key stages within processes which the auditor should frequently inspect. To support the process, the company should put in place its own internal controls (policies and procedures) at each of these key stages, as shown in FIGURE 15-4.