Governance gap analyses; a must-have for progressive firms

A better understanding ensures effective and efficient operations


Kuwait City, January 4, 2012: The imminent EU zone financial crises could spill over to the MENA region and have a limited impact on the regional economies. Regardless of a slacking EU zone economy and a decline in crude demand, the Gulf would be relatively insulated from the turmoil as the OPEC members have taken measures to offset the crises.

Though the local banks have limited exposure to non-performing loans in the EU banks, many institutional investors, including SWFs and investment banks, have investments locked up in distressed European assets. As the situation is still beset with uncertainty, monitoring how the events unfold globally and maintaining internal flexibility would be the key.

Mr. Tarek Shashaah, Partner, Grant Thornton Al Aiban & Al Qatami Co., opines “Though the economy locally could suffer, the possible slump in the future would further necessitate the implementation of corporate governance in company’s management and operations. In every aspect of financial industry, the regulatory environment is becoming increasingly demanding, dynamic and complex”.

Kuwait’s Capital Market Authority (“CMA”) bylaws were launched in Kuwait’s official gazette Alkuwait Alyoum, on 13th March 2011, bringing the law in effect to regulate the securities activities carried out by firms. The law will play a vital role in regulating market activity, promote accountability & governance, educate the masses and enable fairness by acting as an independent body

Referring to the stringent Central Bank of Kuwait regulations and recent slew of laws and bylaws laid down by the Capital Market Authority, he emphasizes the importance of management initiatives in the collective effort to ensure proper governance system are in place. As increased levels of diligence in governance and policy implementation are built as a result of CMA & CBK regulations, on top of current enterprise compliance foundations, the discipline of governance gap analysis has gained significant importance. When executed properly, effective governance gap analysis will create corporate value and make existing policies more efficient and effective at addressing risks and responding to crisis. With the advent of these regulations and the related guidance, additional focus has been placed on the design and effectiveness of corporate governance in all companies. Management and the Board of Directors are much more cognizant of the need for an effective system of internal control.

Governance gap analysis focuses on current corporate governance policies and processes (as well as the technology that supports them) and benchmarks the existing governance modus operandi to industry best practices as per local laws and with companies that are similar in organizational structure, assets, liabilities and business objectives within the regulatory framework the companies operate in. Given the recent CMA regulations, this gap analysis practice will give an enterprise a clear understanding of as-is realities from which weaknesses and strengths in the governance framework can be assessed.

Ultimately, stakeholders can be provided with a platform for effectuating a robust action plan of rectification and improvement.

At Grant Thornton | Al Aiban & Al Qatami Co., we provide a host of CMA mandate and business process improvement services by conducting risk assessment, control reviews, process level control reviews across all functional domains (including IT, HR, Operations, Finance, Accounting etc.), COSO based internal control testing and policies and procedure development. Our business process solutions team uses state-of-the-art tools to provide companies with a participative framework for developing a risk based governance gap analyses plan and generate a risk aware culture within your organization.