The COVID-19 crisis has highlighted the importance strong corporate governance plays in business success and survival, especially for small and medium-sized enterprises (SMEs).
According to audit and financial advisory professional, Ernest Yoong CPA (Aust.), SMEs with robust corporate governance practices had a head start in handling the crisis compared to those without such policies and procedures.
"When disruption happens, it is helpful for businesses to have structured guidelines or processes to support the company in such circumstances," says Mr Yoong, Partner, Assurance, Ernst & Young Vietnam Limited with 30 years of experience across Singapore and Vietnam.
A member of the CPA Australia South Vietnam Advisory Committee since 2019, Yoong leads the Quality & Risk team and is the EY Indochina Assurance Quality Enablement Leader, Risk Management Leader and Independence Leader.
He explains that a corporate governance framework supports risk assessment, decision-making protocols, business contingency plans, and the accountability of individual roles and responsibilities within an organization.
"Typically, risk assessment analysis is part of the corporate governance requirement whereby each business can identify the higher risk areas applicable to their type of business or industry."
"Hopefully, such an assessment exercise will provide the business with certain levels of preparation to deal with disruptions as and when they arise."
He says businesses have faced unprecedented challenges during the pandemic, with the crisis severely testing the resilience and flexibility of organizations. However, robust corporate governance structures would have enabled them to deal quickly with disruptions and adapt to the circumstances.
"For companies with existing corporate governance in place before the pandemic, they would be adding in relevant areas or changing whatever necessary to address such disruptions."
"In comparison, businesses without governance would have been starting from scratch, making it a more extensive effort to achieve the required level of structure and processes."
Growth requires structure
The COVID-19 crisis hit Vietnam's small business sector at a time of healthy growth. The SME Support Law, issued in 2018, has created fertile ground for businesses, with many seeking expansion funding from banks, venture capital and initial public offerings.
Mr Yoong says businesses seeking to capitalize on the increasingly favorable policy and regulatory conditions should review their corporate governance efforts and consider implementing stronger measures.
He says many small businesses make the mistake of delaying the implementation of corporate governance measures or believe such steps are irrelevant to their business.
"Most corporate governance guidelines and practices are established for larger corporations such as public listed companies. Commonly, SMEs see these guidelines and practices as too complicated and unsuitable for SMEs to adopt."
But he says smart SME owners and managers are beginning to recognize the benefits of strong corporate governance in their businesses, especially in attracting funding.
"Good corporate governance is applicable for private companies and SMEs too as it is about establishing a framework of company processes and an attitude that will add value to the business, help to enhance its reputation and ensure its long-term continuity and success."
"Good governance is also key to attracting funding opportunities as the business advances to a certain level that requires expansion. Investors often analyze the governance practices of companies to evaluate their risk exposure and determine a proper value to the shares of the companies."
Putting the proper structure in place
SMEs play an increasingly vital role in Vietnam's economy. However, these businesses risk poor performance, fraud, and business failures by not taking corporate governance seriously, says Mr Yoong, especially as they mature and grow.
One of the issues SMEs commonly face is that they lack the human resources and skills to identify, assess and implement the corporate governance policies and procedures that will work for them.
"Like all businesses, SMEs need to survive and grow. Therefore, they also need to be properly governed."
He says SMEs often start as family businesses and usually operate with less-formal structures, policies and processes than larger enterprises.
"Key personnel in SMEs often wear multiple hats and are involved in many tasks and responsibilities."
Accounting and finance professionals play an essential role in supporting businesses in developing the appropriate strategies for success in corporate governance. SMEs don't always have ready access to this kind of professional advice.
Mr Yoong says CPA Australia provides education options and resources designed to prepare accountancy professionals for the complex tasks of corporate governance. Accessing these resources is one way that SMEs can prepare the pathway for better corporate governance. Educating leaders and employees is especially crucial for SMEs as they seek to grow and prosper beyond the COVID-19 crisis.
How CPA Australia can help
CPA Australia helps accountancy and audit professionals succeed through continual support and education, providing members with internationally recognized qualifications through its highly regarded courses and programs.
For Mr Yoong, the CPA Australia designation has opened doors to a highly successful career.
"It provided me with the base qualification which enabled me to subsequently attain my qualification in Singapore and Vietnam. The CPA Australia designation is also widely recognized in markets where I worked, and this provided me with the confidence to apply my knowledge and skill-set in these markets."
Offering various learning resources in multiple channels and through its Micro-Credentials short courses, organizations can also utilize CPA Australia's Corporate Learning Solutions to identify their team's strengths and bridge capability gaps.
Please feel free to contact the Hanoi or Ho Chi Minh City teams for more information:
Hanoi: email@example.com or 024 6263 4320
Ho Chi Minh City: firstname.lastname@example.org or 028 3520 8338
This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organization cannot accept responsibility for loss to any person relying on this article.