Local companies are some of the best governed in the world ACCORDING TO Mervyn King, Unisa professor, author of the King Committee Report on corporate governance and former judge of the Supreme Court of SA, local companies are some of the best governed in the world.

Speaking at the ITWeb Risk Management Conference on 11 September at Gallagher Estate, King explained to delegates that as people with pension funds, "we are the great shareholders of the world" and, as a result, good governance affects us all, and not just on a corporate level."

He believes the secret to taking risks lies in how governance and business judgment are combined. "If you practise good governance but make a bad business judgement, that is still ok. If, however, you practise bad governance and make a bad business judgment, you have a recipe for corporate scandal."

According to King, the four characteristics of a good director (or a good "corporate citizen") are good faith, care, skill and diligence.

THE LOCAL ECONOMY

King also said the reason we have such remarkable capital gains in the country is largely due to the fact that our JSE-listed companies adhere to these characteristics.

Dr Azar Jammine, director and chief economist at Econometrix, explained that since the economic recession between 1991 and 1993, the country has been on an upward spiral which echoes global trends. He noted a 13% real growth that was adjusted for inflation last year.

He said, however, that despite this growth, employment has only grown by 2.2%. "This is disappointing given the apparent buoyancy of the overall economy," he added.

Jammine articulated a couple of reasons for this. Firstly, a lot of the incoming capital is going straight into the stock and bond market and leaving the country quickly through these means. Second, the rand depreciation has caused problems with boosting exports, and has caused an increase in trade deficit. As a result, we are currently importing much more than we are exporting, and are, in effect, creating jobs for manufacturers overseas.

REGULATION AND LAWS

Dr Neil Dodgson, director of risk and compliance solutions: EMEA financial services at Oracle believes that when it comes to regulation, IT is the most challenging area of a business. Citing a recent survey by CIO Insight, Dodgson says that of the 1 000 executives polled, 50% of them thought that IT was the most challenging area in achieving Sarbanes Oxley compliance.

He explained that when risk and compliance officers were asked what keeps them awake at night, the main fears the same across the board. While their first fear was prison as a result of not adhering to that latest laws and regulations, a close second was data and all the complexities that come with it.

His advice for corporations is to ensure a comprehensive governance, risk and compliance (GRC) framework to control costs, to ensure a secure GRC infrastructure that protects resources, and to ensure that integrated business insight enforces accountability.

DEVICE INTELLIGENCE

Jon Martin Karl, founder of iOvation, believes there is a solution to prevent online fraud and abusive behaviour. "Most current fraud tools are identity based," he said, "and fraudsters hide behind multiple identities."

He stands by the belief that reputation needs to be shared and that device intelligence is the ultimate weapon to secure transactions. "Device is an important indicator of account or transaction relationships that may otherwise go unseen," he stated. "Device can expose information about past behaviour which is important for evaluating the risk associated with a transaction." He believes sharing device reputation will effectively limit the effectiveness of online criminals.

All the speakers agreed that while governance, risk, and compliance are major issues that have caught many organisations by surprise, effective integration of risk management into enterprise and operational practices can create value for the organisation.