Most listed companies have a structured system for the board’s accountability as per the Corporate Governance Code. However, for small and medium-sized enterprises, the Code is not mandatory. Although, for the business to be successful, it must follow a system of accountability to manage risks.

For public sector companies and non-profit organisations, too, accountability is critical. It not only increases transparency but is also an attempt to reduce risk.

The first question here is, how does a company assure accountability? The answer is transparency.

Not all business decisions are meant to be shared with the public and outsiders. However, effective communication of strategy, threats, and results can set the right tone for all stakeholders.

The board’s decisions must be clearly communicated to the stakeholders to shape their understanding. Ideally, the decision-making process includes understanding the responsibility, identifying challenges, and formulating a plan to address them.

When investors are informed, they can weigh risks to formulate their own judgement. Ill-informed investors tend to overreact to most events and disrupt the entity’s operations.

An open, honest, and absolutely clear reporting system within an entity falls under transparency. Nurturing this key component of accountability helps build a strong relationship with all stakeholders – customers, investors, and employees. It also helps earn more capital and the stakeholder’s trust. More capital may be in any form – supplier working capital, investments, and even commitment of employees.

Transparency in the reporting system also includes the board communicating the entity’s annual financial statements and performance assessment. However, not all companies can easily demonstrate transparency. Most of them are only good at explaining their actions and not providing details.