Are Governance Practices Regularly Reviewed to Ensure They Remain Relevant and Effective?

Governance is the backbone of any successful organisation, particularly for startups and scaling businesses. In the rapidly evolving world of technology, leadership, and market dynamics, maintaining an effective governance framework is critical. The question I often hear is: Are governance practices regularly reviewed to ensure they remain relevant and effective?

The answer should be an unequivocal “yes”, but in reality, many businesses, especially growing startups, can struggle with this. Governance isn’t just about ticking boxes; it is about creating structures and processes that ensure accountability, transparency, and alignment with the business’s evolving goals. This article dives deep into why governance reviews are vital, how to approach them, and the consequences of letting these practices become outdated.

The Importance of Regular Governance Reviews

In the world of scaling startups, governance can often take a back seat to the pressing need for innovation and rapid growth. However, strong governance ensures that the leadership maintains a clear focus on sustainable development, accountability, and risk management. Without it, companies risk misalignment between their strategic objectives and the operational or technological practices they employ.

When governance practices are not regularly reviewed, businesses risk operating with outdated policies and structures that may no longer serve the current environment. In sectors such as healthtech, fintech, and SaaS, where regulatory landscapes frequently shift, especially regarding data protection, security, and compliance, a governance structure that was fit for purpose two years ago may no longer be adequate. Additionally, as companies grow, governance needs to scale alongside it—what works for a 20-person team might be woefully ineffective for a 100-person organisation.

Consider a startup in its growth phase: in the early days, governance may have focused on operational oversight and securing early investments. However, as the company scales, the emphasis shifts to ensuring a robust technology strategy, compliance with more stringent regulatory requirements, and preparing for potential public offerings or further funding rounds. These transitions necessitate a continuous reassessment of governance frameworks.

Aligning Governance with Business Strategy

One of the key reasons governance must be regularly reviewed is to ensure it aligns with the organisation’s business goals. As I mentioned in a previous analysis, there is a significant risk when technology development becomes decoupled from overall business objectives​. The same can be said for governance practices—if they are not regularly evaluated and aligned with the strategic direction of the company, it can lead to resource misallocation and missed opportunities.

A governance framework should not be static. It must be agile, evolving alongside the company’s mission, market conditions, and technological advancements. A regular review of governance structures ensures that the leadership has the necessary oversight mechanisms to manage risks effectively, whether that’s cybersecurity threats, regulatory compliance, or the strategic use of emerging technologies like AI or blockchain.

For instance, a fintech company that initially focused on acquiring users and building a user-friendly platform might, in later stages, shift towards enhancing security measures as their customer base expands and regulatory scrutiny increases. Governance must evolve in tandem, ensuring there are systems in place to manage these new risks.

Reviewing Governance: A Practical Approach

So, how often should governance be reviewed? In my experience, the frequency of governance reviews can depend on the organisation’s size, industry, and growth stage. However, there are a few key moments when a governance review becomes critical:

Post-Funding Rounds: After securing a significant funding round, the expectations from stakeholders, particularly investors, change. A robust governance structure that ensures financial transparency, strategic alignment, and operational efficiency becomes paramount. This is the moment to reassess the company's governance framework to ensure it supports not just current operations but also the planned growth trajectory.

Regulatory Changes: For businesses operating in heavily regulated industries like fintech or healthtech, regulatory changes can be a governance game changer. For example, new data protection laws may require stricter data governance policies, while financial regulations may demand more detailed reporting or audit practices.

Rapid Growth or Scaling: As a company grows, the complexity of its operations, team dynamics, and market presence increase. Governance practices that worked well when the company had 20 employees might break down when that number reaches 100. For instance, communication channels that were previously informal may now require more structured oversight to ensure consistency and clarity across departments.

Technology Integration: Startups frequently find themselves integrating more sophisticated technologies as they grow. These integrations, whether they involve AI, blockchain, or cloud services, bring new risks and compliance challenges. Governance reviews ensure that these technological advancements are properly managed and aligned with broader business goals.

Crisis or Failure Events: Major crises—whether financial, technological, or operational—can expose weaknesses in an organisation's governance. Following such events, it’s critical to conduct a thorough governance review to identify what went wrong and how the framework can be improved to prevent future occurrences.

Key Areas of Governance to Review

In a governance review, several key areas require attention to ensure the framework remains effective:

1. Board Composition and Functionality

The board of directors plays a critical role in governance. However, as the company grows and its objectives evolve, the board's composition may need to change. Startups often begin with a board made up of founders and early investors, but as the company matures, it may need to bring in independent directors with specific expertise—such as technology, compliance, or international business.

Regular governance reviews should assess whether the current board is fit for purpose. Do the board members have the skills and experience necessary to provide strategic oversight? Are they adequately informed about the company’s operations, risks, and growth strategy? This is particularly important in the tech space, where having a board member with deep technological expertise can be invaluable.

2. Risk Management

Risk is an inherent part of any business, but as companies grow, the types of risks they face can change significantly. Governance practices should include a robust risk management framework that is regularly reviewed to ensure it covers new areas such as data security, regulatory compliance, and operational risks.

For instance, a healthtech startup may initially focus on clinical risk and patient data privacy. However, as the business scales, new risks may arise, such as intellectual property protection, competition from larger incumbents, and ensuring compliance with international regulations. Governance reviews should assess whether the company’s risk management practices are still comprehensive and relevant.

3. Compliance and Legal Governance

Startups are often so focused on growth that they neglect their legal and compliance obligations. A regular governance review should include a deep dive into whether the company is up-to-date with its regulatory requirements. This is particularly crucial in industries like fintech, where failing to comply with regulations can result in heavy fines and loss of customer trust.

Startups need to ensure they have the right legal frameworks in place to protect their business interests. This includes intellectual property protection, employment contracts, and customer agreements. As the business evolves, so too should these legal frameworks.

4. Technology Governance

With technology being a central pillar for most scaling businesses, especially in SaaS, healthtech, and fintech, regular reviews of technology governance practices are essential. Are the IT systems secure and scalable? Is the company following best practices for data governance and cybersecurity? Is there a clear technology roadmap that aligns with business goals?

One of the key pain points I’ve seen is when tech teams lack visibility and seniority in the boardroom, leading to misaligned business and tech strategies​. Governance reviews must ensure that technology leaders are included in strategic decision-making processes, enabling the company to leverage technology as a competitive advantage.

Consequences of Outdated Governance

The consequences of not reviewing governance practices can be severe. Outdated governance frameworks can lead to regulatory non-compliance, financial mismanagement, and operational inefficiencies. These issues can, in turn, result in damaged reputations, financial penalties, and even the collapse of the business.

Startups that do not regularly review their governance risk becoming investor-unready. Investors look for companies that have strong governance in place because it signals that the leadership is competent, the company is well-managed, and the risks are understood and controlled​. Companies that fail to update their governance practices often struggle to raise further funding or scale effectively.

Conclusion

In today’s fast-paced, tech-driven business landscape, regularly reviewing governance practices is not just a best practice; it is essential for long-term success. Governance must be dynamic, evolving alongside the company’s goals, regulatory landscape, and market conditions.

Leaders need to prioritise governance reviews to ensure their structures remain relevant and effective, particularly as their companies scale. Whether it’s aligning governance with business strategy, reviewing board composition, or strengthening risk management, these practices provide the foundation for sustainable growth.

Regular governance reviews are an opportunity to ensure the business is not only compliant but also strategically positioned for future success. For scaling startups, where the stakes are high, ensuring governance remains up-to-date can make the difference between thriving and merely surviving.