Global Governance And Its Impact On Businesses

Discussion

The report looks to take into account how global governance plays a role in the world of business through ensuring political cooperation among transnational actors aimed for negotiating responses to problems which affect the smooth functioning of running a business in different countries across different regions. Global Governance mainly managed by institutions like The United Nations, World Bank and The International Criminal Court. These institutions carry with themselves the authority to enforce rules on compliance. In business world, the organizational style and processes through which decisions are made about technologies and resources needed to carry out the activities in an effective and efficient manner is what governance tends to provide. There are examples of different organizations where the importance of governance has been highlighted through various situations and certain other organizations would be discussed through which a clear idea could be framed on, what impact does lack of governance has on organizations. The report would conclude by highlighting the importance which global governance has on the world of business and cite out the benefits which they help create on organizations across different regions, so as to enable them to tackle tricky situations arising from operating their businesses in the most appropriate manner.

Global Governance is a key concept in tackling global problems and the recognition is more so in case of business world. The meaning of global governance stems from the fact that this is a phenomenon through which global affairs are managed. There is no such global government to govern the affairs which take place on a global level. Hence, the global governance mainly revolves around set of players, including states along with regional and international organizations. Nowadays, Global Governance is more of an international process of forming consensus which generates guidelines and agreements that has direct impact on national governments and international agencies. There are three areas of governance, which get looked into and applicable to IT outsourcing. Those refer to Corporate Governance, Project Governance and IT Governance.

Corporate Governance – This is concerned with making the right decision in a transparent manner by clearly defining responsibilities and the accountabilities for line management, take full account of the interests of shareholders and stakeholders and also seek to address issues related to risk, including compliance and information security. For any business willing to seek for success on global front, all these aspects need to be taken care of.

Project Governance – This mainly addresses the development, implementation and conclusion of projects, the importance of which increases further when the global scenario is taken into consideration. This involves definite the highest level of leadership, clear project plan by setting up different milestones, identifying the resources required, distinctly defining the lines of responsibility and how the employees would be held accountable for reporting purpose and communication and also adopt a specific method for getting the project implemented. These specific details need to be considered with the highest priority, when any organization, who has global presence, is looking to start a new venture or carry out their existing business in an effective manner.

Role of Governance in Outsourcing

IT Governance – Businesses are evolving on a day to day basis and with the improvements coming up through in the form of advancement in technology, upgraded skills and machinery; organizations are expanding their businesses through wider reach by going across borders and boundaries. Complying with the governance rules and regulations from global perspective is a necessity for organizations to conduct their businesses on a wide scale. This march of globalization makes governance in IT very important. The Information Technology related decision-making becomes more widespread among the leader of IT, business leader and also end users, governance would be the most important aspect. The dynamism in businesses which is coming through in different organizations for being competitive, IT governance must adapt to the changing circumstances. Though governance might seem to be an idea, only suitable for interest to senior management or board of directors’ level of players but the effects can get down to regular tasks done in the field of Information Technology. Managing security issues is a tough ask and thus global businesses are finding the importance of effective governance, which seems to be the ideal approach in spending appropriate resources on a problem which could be never-ending.  

For any global organization, risk-awareness is essential in taking care of any security vulnerabilities which might arise in other regions. Standard Chartered is a good example in this regard, where their group head of information security, John Meakin once opined that for them, the stakes are always very high, due to their huge and complex interconnections to the outside world, there is need to carry out effective patching of security. The bank’s main aim is to achieve the right security level through framing appropriate strategy to counter any kind of risk, which they might come across from different levels. So in order to achieve the objective of developing the level of security needed to avert any kind of risk or counter them in a desired manner, a definite and accurate understanding of the situation should be made. This understanding would be based on what loopholes need to be taken care of and also ensure that they do get effectively patched.

A clear picture of where the risks lied in software patching was the need of the hour for Standard Chartered. Qualys, which is a provider of compliance, cloud security and all other related services meant for businesses of all sizes, assisted the bank with vulnerability management software. This enabled the bank to get a clear picture of their risk exposure with the prevalent standards worldwide and the remedy which they could use on a priority basis. Whereas, prior to the introduction of vulnerability management system, the configurations of the system along with Bank’s network topology were unknown. The assistance was provided through some software tools through getting their systems scanned by local teams from time to time. Through the implementation of comprehensive vulnerability management software, the bank could meet up the requirements for a stringent financial compliance.

Governance has a significant role to play in terms of getting services outsourced from different regions and with the passage of time, companies have begun to outsource like never before. With businesses all around the world getting competitive day by day, the need to get an edge over the competitors has become an important aspect. Thus, companies get both their purposes served not only by carrying out operations in different regions but also through availing the best resources in terms of labor and technology.   

Standard Chartered during the year 1996, had outsourced the management of their major datacenters to Sema Group, Schlumberger’s IT subsidiary, as a part of a 7 year IT outsourcing deal. The outsourcing advisory firm Equa Terra, which was incorporating Morgan Chambers, had created a financial model in a structured manner by defining the costs associated with each of the domains and countries who are considered for outsourcing. The advisory firm had gone on to create a well structured and organized financial model by specifying the costs associated with each and every domain and countries which were considered for getting their services outsourced.

Atos Origin went on to buy Sema, then they offered Standard Chartered with savings of up to 32% of IT costs from the very first day of a renewed contract. The advisory firm, Equa Terra helped Standard Chartered in choosing their IT service supplier in a controlled manner by applying the best practices of the industry to deliver value for money and alignment with business strategies. This had helped to design and implement some appropriate governance mechanisms for ensuring continued business alignment, measurement, accountability and value for money.

Companies tend to assign smaller and shorter contracts for outsourcing firms, along with specialized deals having single process. This allows providers, who are taking the contract to oblige for competing more often so as to achieve the same level of business. Complying with the rules and regulations applied across regions for outsourcing is important for businesses to achieve the same kind of efficiency. So, this gives a clear picture as to how important a role, governance plays in getting services outsourced for global organizations, thus enabling them to streamline their businesses

Business has gone truly global. With the advancement of technology and innovation from all corners, where on one hand, organizations have the opportunity to touch upon new avenues and widen their horizon, on the other hand, complying with the rules and regulations related to global governance has become a major challenge. Governments across the world, nowadays feel the urge to seek for foreign investment, advanced technology and managerial expertise, whereas on earlier occasions, they used to go ahead and nationalize foreign firms. One of the significant reasons why businesses go global, is to seek for opportunities in terms of getting better and more efficient workforce apart from access to upgraded technology, lower cost of operations, relaxation of Government rules and regulations. With businesses having the opportunity to avail these benefits, which would contribute to their idea of expansion and get themselves set in different regions, ensuring compliance with the rules regarding global governance is a necessity, without which the whole purpose of the organization would go haywire.

The United Nations used to receive calls on frequent basis, for getting approval for international regulation of all those multinational organizations, who deal in doing all illegal activities. Now the United Nations implores businesses to join with them in a Global Compact to ensure respect for internationally agreed environmental, labor and human rights standards. A major surge in the transportation and communications technologies in the last few decades has provided enough encouragement to firms in crossing regional boundaries and borders. Taking into consideration the period of 1990s, close to 35000 parent multinational corporations had around 170000 foreign affiliates. Nearly 60000 parent organizations had over 500000 foreign affiliates, which had accounted for one-fourth of the global output in the latter half of 1990s. 

Globalization is a continuous process and businesses are also evolving with the passage of time. Having the necessity to be responsible in the world of business, goes a long way in ensuring global governance all around. Lack of business responsibility has resulted in growth without conscience, which is basically an unsustainable growth, that cannot lead to progress in the long run. After the case of Enron, the organization which was gravely affected due to lack of corporate governance, the importance of businesses to comply with the rules and regulations related to global governance has gained paramount importance. The case showed that just making right decision is not enough but the explicit processes should be in place for businesses for making those decisions and act accordingly. 

For each and every organization, governance is playing a crucial role to help enhance the value which Information Technology provides in a globalized world. With firms seeking to reach out to new horizons across the world, there has been a spike in mergers and acquisitions due to which an effective governance of Information Technology becomes a necessity.

Conclusion

The report concludes that for any kind of organization, which is looking to expand their business far and wide, maintaining the proper rules and regulations related to global governance is required. Global Governance as a whole takes care of the three integral parts, Corporate Governance, Project Governance and IT Governance, which are essential elements for organizations to consider and hence allow them to integrate those effectively in their quest for development. The success of a business, intending to expand their operations across different regions, is totally dependent on how well they manage the aspects of governance applicable in different places. Governance would help connect political organizations of society to globalization and make them establish a democratic legitimacy on each and every level, national, regional and global. The need for global governance is immense in the world of business because in modern generation, businesses are going out of their way to reach out to different groups of customers staying in different regions, thus helping them to meet up their needs and demands.

Davis, K. E., Kingsbury, B., & Merry, S. E. (2012). Indicators as a technology of global governance. Law & Society Review, 46(1), 71-104.

In the context of global governance, the production and usage of indicators have been increasing on a rapid pace. The users include international-development agencies such as the World Bank and the United Nations, global businesses and other investors. The agencies influence the businesses to a great extent

Dermine, J. (2013). Bank corporate governance, beyond the global banking crisis. Financial Markets, Institutions & Instruments, 22(5), 259-281.

The author through the study primarily focused on the avoidance of risk along with some guidance on how to define an acceptable level of risk. The author, by drawing on the insights from finance and economics, through his paper tried to contribute to the debate on bank’s corporate governance.

Haan, J., & Vlahu, R. (2016). Corporate governance of banks: A survey. Journal of Economic Surveys, 30(2), 228-277.

The authors through this survey tried to review the empirical literature on the corporate governance of banks. They emphasize on the three main characteristics of banks, which make them special. Those are regulation, the capital structure and the complex nature of business and structure.

Hill, C. W., Cronk, T., & Wickramasekera, R. (2013). Global business today. McGraw-Hill Education (Australia).

The authors stress on the need for businesses to integrate the right kind of technology for going ahead in their attempt to go global. Businesses need to understand the governance issues related to the IT infrastructure for enabling effective implementation of plans and processes. The same has been seen in case of Standard Chartered Bank.

Kim, Y. J., Lee, J. M., Koo, C., & Nam, K. (2013). The role of governance effectiveness in explaining IT outsourcing performance. International Journal of Information Management, 33(5), 850-860.

Authors have discussed about the issues, opportunities and challenges which get confronted while trying to align information technology more closely with an organization and thereby effectively govern and manage an organization’s IT investments, resources, major initiatives and uninterrupted service, which are becoming a major concern.

Mattli, W., & Seddon, J. (2015). New organizational leadership: Nonstate actors in global economic governance. Global Policy, 6(3), 266-276.

The authors have focused on the fact that states and international organizations have found irresistible cause in a globalizing world to opt for nonstate actors for managing the numerous problems which arise under different mandates and resources. Hiring of different experts by way of providing the businesses with necessary expertise to fulfill the common goals is a necessity.

Pearl-Kumah, S., Sare, Y. A., & Bernard, B. (2014). Corporate governance and risk management in the banking sector of Ghana. European Journal of Accounting Auditing and Finance Research, 2(2), 1-17.

The authors through this research have examined the extent to which banks in Ghana use risk management practices and the aspect of corporate governance while dealing with different types of risks. Corporate Governance in a global context has a significant influence on firm’s performance level in crisis situations and suggest how the negative effect is greater on firms, where the shareholders have greater incentives and means to grab resources.

Rasche, A., & Gilbert, D. U. (2012). Institutionalizing global governance: the role of the United Nations Global Compact. Business Ethics: A European Review, 21(1), 100-114.

The authors review suggested that United Nations Global Compact, by advocating ten principles in the areas of labor standards, environmental protection, areas of human rights, has turned into the world’s largest corporate responsibility initiative. The authors suggested new governance rules in the wake of globalization by adopting multilevel, multiactor and network-based approach.

Ruggie, J. G. (2014). Global governance and “new governance theory”: Lessons from business and human rights. Global Governance, 20(1), 5-17.

Author John Gerard Ruggie through his “new governance theory” described Governance as system of authoritative norms, practices, rules and institutions through which any sort of collectivity from local to global gets to manage common affairs. Global Governance refers to the kind of governance taking place in the absence of actual government.

Schoenmaker, D. (2013). Governance of international banking: The financial trilemma. Oxford University Press.

The author out here talks of how the business model of international banks in the aftermath of financial crisis, was under severe pressure, hence restrictions were imposed on cross-border banking. The coordination failure was talked of, where regulators had failed to provide people with financial stability.   

Scott-Quinn, B. (2012). Commercial and Investment Banking and the International Credit and Capital Markets: A Guide to the Global Finance Industry and Its Governance. Palgrave Macmillan.

The author has expressed his views on governance of some nation states and regarding the eurozone grouping of nation states, not going as was intended and the impact of their failure getting seeped into the markets and banks. According to the author, understanding of the global industry as a whole is extremely important.

Smith, M. H. (2013). The natural advantage of nations: business opportunities, innovation and governance in the 21st century. Earthscan.

The author presents a bold vision for the future and demonstrate how businesses can get there by drawing conclusions from lessons on competitive advantage theory and on the latest aspects of sustainability, innovation, economics, business and governance theories.

Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and practices. Oxford University Press, USA.

Here the authors have talked about how corporate governance has become the talking point in 21^st century and the way advanced as well as progressing economies have introduced corporate governance codes or have enforced new company laws and regulations, as has been done by the United States after the debacle of Enron.

Voegtlin, C., & Pless, N. M. (2014). Global governance: CSR and the role of the UN Global Compact. Journal of Business Ethics, 122(2), 179-191.

Here, the authors talked about the role of United Nations Global Compact in the emerging global corporate social responsibility infrastructure. They have evaluated the debate around how effective and legitimate UNGC is, alongside putting up the arguments of the supporters and critics.

Weiss, T. G. (2016). Global Governance: Why? What? Whither?. John Wiley & Sons.

Through this book, the author has provided clear cut, easy-to-use and remarkably sophisticated way to think about the policy problems which companies confront on a global level, along with the nature of global governance which exists to deal with those problems and the ways in which they could be improved.

Weiss, T. G., & Wilkinson, R. (2014). Rethinking global governance? Complexity, authority, power, change. International Studies Quarterly, 58(1), 207-215.

The authors have put emphasis on some of the aspects of Global Governance, which help in highlighting few core and critical questions related to the topic. A deep understanding of the topic would allow them to learn the nature of contemporary phenomenon as well as look into the past and the future.