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> Posted by Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI

The extent of the reciprocal relationship of trust between an employer and employee may be hard to measure, but it may be more indispensable to good governance than a variety of risk management tools. In fact, there are organizations that forego some traditional risk management mechanisms, instead emphasizing the power of trust. One example, according to Andrew Ross Sorkin, writing in DealBook, is Berkshire Hathaway, the American multinational conglomerate that’s currently the fifth-largest company in the United States.

The normative route to good governance encompasses a host of practices including risk management functions, internal auditing, and board committees. A MIX project examining the practices of over 150 MFIs across 57 countries found a positive correlation among institutional governance indicators, suggesting that good governance practices don’t exist in isolation. Putting such watch-dog measures into place, however costly, is increasingly standard practice at institutions both public and private around the world. Without these, who knows what some employees might be tempted to do. It is the price of doing business. Or at least that is the common school of thought.

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