What is the role of governance in financial management?

The role of governance in financial management is fundamentally about ensuring accountability and transparency in financial decision-making. Good governance practices establish frameworks that guide the financial activities of an organization, setting expectations for ethical behavior, compliance with laws, and adherence to robust financial standards.

This involves creating policies that ensure financial processes are handled consistently and transparently, allowing stakeholders to have trust and confidence in how financial resources are managed. It also means having mechanisms in place for oversight, which helps to mitigate risks associated with financial mismanagement or fraud. When governance is strong, it promotes better decision-making, as all financial actions are subject to scrutiny and evaluation.

In contrast, maximizing profits regardless of risks overlooks important ethical and legal considerations, which can lead to unsustainable practices. Coordinating financial audits is certainly a function under governance, but it is just one aspect of the broader responsibility of maintaining accountability and transparency. While providing training for financial staff is essential for developing skills and competencies, it does not encompass the overarching role governance plays in ensuring all financial processes align with ethical standards and regulatory requirements.