The importance of governance is an essential element to ensure transparency, improve institutional performance, and enhance investor and stakeholder confidence in any organization. In the rapidly changing business world, whether in the public or private sector, implementing effective governance practices contributes to improving management decisions, enhancing operational efficiency, and achieving strategic objectives..

In this article, we review the role of governance, its most important statistics, the importance of governance, and the best solutions to enhance it in modern institutions.

MWhat is the importance of governance in institutions?

The importance of governance is one of the basic pillars that ensure the success and sustainability of institutions, whether they are private companies, government agencies, or non-profit organizations. Governance is not just a set of laws, but rather an integrated system that aims to achieve transparency, enhance accountability, and ensure efficient decision-making.

In the modern business environment, governance has become an essential element for attracting investments, reducing risks, and achieving sustainable development. In light of rapid economic developments, governments and institutions around the world have realized the importance of governance as a tool to ensure adherence to ethical standards, improve financial performance, and protect the rights of shareholders and stakeholders.

For example, the Kingdom of Saudi Arabia attaches great importance to governance practices, as it is one of the main axes of Vision 2030, which seeks to build an economy based on transparency and efficiency.

Statistics show the importance of governance in improving institutional performance

Studies show that organizations that effectively implement governance practices achieve better financial performance and enjoy greater stability in the markets. According to a World Bank report, companies that adopt advanced governance systems achieve annual growth that exceeds their peers by 15%.

As a study by the Organization for Economic Co-operation and Development (OECD) showed,(OECD) found that institutions that follow governance principles attract 30% more investment than those that lack transparency.

On the other hand, research revealed thatPwC: Organizations that adopt the importance of governance as a key strategy achieve a 20% higher return on investment and are less vulnerable to financial crises and operational risks.

In Saudi Arabia, the Capital Market Authority has issued reports showing that companies that apply governance standards achieve superior growth rates and financial performance compared to other companies, which enhances confidence in the local business environment.

The evolution of the importance of governance and the most important digital solutions to support it

As governance becomes more important, its systems and legislation have evolved significantly, moving from traditional methods to advanced digital solutions that help improve compliance and transparency. In the past, governance relied on paper reports and traditional documents, which led to complexities in information management and decision-making.

Today, technology has contributed to the development of integrated systems that enhance e-governance, such as the “Ifsah” system in the Kingdom of Saudi Arabia, which facilitates the financial disclosure of companies listed on the stock exchange, thus increasing transparency.

In addition, there are advanced digital solutions such as DocSuite, which enables organizations to automate governance processes, document decisions, and monitor compliance with local and international standards.

Digital systems are a powerful tool for efficiently achieving the importance of governance, as they help manage documents, track administrative processes, and provide analytical reports that contribute to improving institutional performance and reducing potential risks.

Challenges Facing the Implementation of Governance in Institutions

Despite the recognition of the importance of governance in achieving institutional success, there are many challenges facing its implementation, including:

internal resistance to changeSome institutions rely on traditional administrative systems, which makes the transition to modern governance difficult without training and qualification of personnel.

High costsDeveloping strong governance systems requires significant investments in technology infrastructure, and the appointment of compliance and internal control experts.

Legal ChallengesGovernance laws and regulations vary between countries, making it difficult for multinational organizations to achieve full compliance with local and international regulations.

Cyber ​​SecurityWith the digital transformation of governance, cyber threats targeting sensitive data are increasing, requiring robust protection systems.

These challenges can be overcome by adopting integrated solutions such as DocSuite and , which provide advanced capabilities to ensure compliance, enhance transparency, and improve the efficiency of administrative processes, making organizations more capable of facing risks and achieving their strategic goals.

The importance of governance in achieving transparency, enhancing efficiency, and ensuring the long-term sustainability of institutions cannot be denied. Whether in the public or private sectors, implementing governance practices has become a necessity, not just an option, as it contributes to improving financial performance, reducing risks, and enhancing confidence among investors and stakeholders.

Types and importance of governance in different sectors

Governance is not a unified concept, but rather varies according to the type of institution and the sector to which it belongs. Governance can be classified into several main types, including:

Corporate Governance: It relates to the internal management of companies, and regulates the relationship between the board of directors, executives, and shareholders, to ensure transparency and operational efficiency.

Government Governance: Focuses on managing government agencies, ensuring compliance with laws, improving public services, and combating corruption.

Family Business GovernanceIt aims to enhance the sustainability of family businesses by establishing clear systems for administrative transition, distribution of roles, and conflict resolution.

Environmental and Social Governance (ESG)ESG)It is concerned with measuring the extent of institutions’ commitment to social responsibility and environmental protection, which affects the decisions of investors and consumers.

Case studies on the importance of governance

Practical experience has shown that the presence of effective governance systems can lead to sustainable growth, while weak governance can cause the collapse of companies and institutions. Here are two real-life cases that directly illustrate the importance of governance and its impact:

Saudi Aramco's success is due to strong governance

Saudi Aramco is one of the world's largest energy companies, and much of its success is due to its integrated governance system. Governance at Aramco is characterized by high transparency, strict accountability, and effective risk management.

Through regular financial disclosure and applying the highest standards in management, the company was able to achieve the confidence of investors globally, which helped it to list its shares on the Saudi Stock Exchange (Tadawul) and attract huge investments. Adopting good governance has made Aramco a global model in financial and administrative sustainability.

Enron Failed Due to Poor Governance

In contrast, the Enron case is one of the most prominent examples of the danger of weak governance. Enron was one of the largest energy companies in the United States, but due to the lack of oversight and transparency, it became involved in a huge financial scandal that included manipulating financial accounts to hide losses.

This led to the company's collapse in 2001, causing huge financial losses to investors, and sparking a global debate about the importance of governance in protecting institutions from corruption. This case prompted governments to tighten regulatory systems, such as the Sarbanes-Oxley Act, to ensure compliance with financial standards and limit manipulation.

Governance as a tool to achieve Vision 2030

Saudi Arabia’s Vision 2030 seeks to achieve a comprehensive economic transformation based on diversification, transparency, and effective governance to ensure sustainable development. The importance of governance has been exploited in many government and private initiatives to achieve the strategic objectives of the vision, including:

1. Promoting transparency and accountability

One of the main axes of Vision 2030 is to raise the level of transparency in the government and private sectors, which enhances the confidence of investors and society.

2. Supporting digital transformation and e-governance

Technology has enabled governance through automation and data analysis, which is in line with Vision 2030, which aims to transform the Kingdom into an integrated digital economy.

3. Stimulating investment and attracting capital

The vision is based on improving the business environment and attracting foreign investments, which cannot be achieved without exploiting the importance of governance that ensures clarity of laws, protects investors’ rights, and reduces bureaucracy. Therefore, the National Transformation Program was launched (NTP), which aims to develop legislation and improve the efficiency of government institutions to achieve a competitive business environment.

4. Improving government sector performance

By applying governance standards, the vision seeks to raise the efficiency of government institutions and ensure the provision of more transparent, faster and higher quality services to citizens and investors.

The relationship between the importance of governance and risk management

Governance plays a key role in managing risks within organizations, contributing to reducing exposure to financial, operational, and legal crises by setting clear policies and enhancing transparency in decision-making. Successful companies rely on governance as a tool to control risks by:

Identify potential risks in advanceThrough internal audit systems and continuous monitoring of operations.

Compliance Policies Application: To ensure compliance with local and international laws, reducing the possibility of penalties and fines.

Achieving greater financial stabilityGovernance ensures the clarity of financial reports, which reassures investors and enhances confidence in the company.

In this context, systems such as DocSuite can contribute significantly to risk management, by providing advanced digital solutions, such as smart archiving of documents, tracking administrative decisions, and creating analytical reports to monitor performance. As economic and legislative challenges continue to evolve, exploiting the importance of governance and relying on it becomes an indispensable tool to protect institutions from potential risks and ensure their long-term sustainability.