Creativity and Corporate GovernanceAlternative control solutions for the TMT industry |
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In the area of Corporate Governance the Technology, Media and Telecommunications (TMT) industry is facing some interesting challenges that they will have to address. One of these is caused by the complexity of their organizations. Another is caused by the nature of their business. According to Piet Hein Meeter, Deloitte TMT industry leader in the Netherlands, the TMT industry can be characterized as a fast, technologically-complex, flexible, creative, innovative environment driven by an entrepreneurial spirit. The organizational structures typically adopted in this industry feature high empowerment, decentralized decision-making, and informal and highly flexible communications and procedures.
In their efforts to comply with new and strenuous Corporate Governance codes and requirements, these companies have all adopted the universally-accepted conceptual framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO), which provides integrated principles, common terminology and implementation guidance to support entities’ programs to develop or benchmark their enterprise risk management processes. Furthermore, to reduce the cost of compliance, centralized and standardized processes and controls are likely to be introduced.
Now if the characteristics of the TMT industry are being mirrored by the enforced developments of internal control, characterized by a more centralized, formal, less flexible and rules-based approach towards internal control, an interesting paradox arises:
“how do we remain in control without losing the flexibility, creativity and innovation needed to survive and grow in the TMT industry?”
This calls for new requirements within the compliance function, which needs to mitigate risks to an acceptable level without impacting an organizational culture characterized by innovation and creativity. So the challenge companies in the TMT industry are facing is how to remain compliant with relevant Corporate Governance requirements in an organization that is flexible, creative and innovative. Their challenge is to create ‘a sound blend of creativity and control’. And to successfully create this balanced control environment, a highly suitable control model is required. Now given the facts that we have discussed, the question is whether the COSO-framework provides the solution. Deloitte has some alternative control solutions for the TMT industry to consider.