For a business success there must be some kind of controls.  We know that a family prospers because of some guardianship controls and family values, a business of a company is no different.  A company follows the same rules.  It is like a family.  In many instances, we can find that the successful businessmen have successful families.  From sociological viewpoint, wherever people are involved, we have same rules.  Even to remain healthy, on personal level we have to control our lifestyle.

Control Yourself. Control Your Business. Create Business Intelligence for Business Success.

Therefore, to avert business failure, we must adopt a culture of good governance in standardized control systems.  There are many studies in this regard.  For example, according to McMahon and Ivancevich, an organization implies control.  Tannenbaum (Allen Robert Tannenbaum an American/Israeli researcher on robust control with the solution of the gain margin and phase margin problems, an award winner from American Automatic Control Council) claims that an organization without some form of control is impossible.

Business success hinges on robust internal control systems of the business organization that safeguard the business from internal and external threats.

A control system is defined as the constantly done interactions within the company aiming at correcting inefficiencies to promote and sustain the efficient business processes run by ethically strong people.  For a company’s internal control system and corporate governance, there are sources of prescribed control systems, such as: The Companies Act 1994 via the Memorandum and Articles of Association of a company; Bangladesh Securities and Exchange Commission (BSEC) on Corporate Governance Guidelines based on OECD and COSO framework; Bangladesh Bank’s Guidelines on Internal Credit Risk rating Systems for Bank, NGO Affairs Bureau’s Internal Control guidelines, The Institute of Chartered Accountants of Bangladesh (ICAB)’s audit standards to assess the control system of a company under audit are worth mentioning.

The essence of all guidelines is that control system is not a mechanical process; it is mainly intellectual.  It is to be constantly monitored.  Everybody in business has his own interest.  Agency costs, distrust, market competition, unmotivated people, free-riding problem, government regulations etc are within and outside the boundaries of a company’s business.  A robust control system can blend those interests for business success keeping all parties happy in the process.  The control system can be a deterrent to undue opportunistic behavior.  It can act as a disciplining device.

Darwin (1871) observed that the struggle between two organizations was as active as they were analogous.  Therefore, there is a tremendous opportunity of cooperation between the parties at opposite poles in a company.  Since Darwin pointed out that organisms prosper more when they differ more, both the differing parties can reap benefits by being different but blended in a functional Internal Control System.  There is study finding that a company performs better in a standard control system.

Generally a company has some controlled good sides as well as less than good sides.  On less than good sides, a company tends to be disorganized, lack operating procedures (key strength of a business), and be highly geared where debt service is almost a daily concern and cost of finance is too high to yield any return for the shareholders.  In such a company, daily cash transactions are prevalent in a lifeless work environment where absence of standardized operating procedures and management information system (MIS) and non-compliances with salient business regulations drag its business on the verge of collapse.  This sorry state can easily be averted by installing a business control system focusing on the following areas:

CORPORATE CULTURE AND THE BOD’S VALUES

BUSINESS DOCUMENTATIONS

GOALS, PRIMARY AIMS AND VISION

ORGANISATION STRUCTURE AND HUMAN RESOURCE MANAGEMENT STRATEGY

INTERNAL CONTROL SYSTEM AND FINANCIAL REPORTING PROCESS

MANAGEMENT INFORMATION SYSTEM (MIS); AND

SALES & MARKETING STRATEGY.

These warrant immediate attention of the owner and management of the company for profitability and business perpetuity by giving due emphasis on the following key processes of a business:

About the writer of this Article:

Tofazzul Hussain FCA, CMC- Lead Consultant & Chairman of HUSSAINS Business Consultants Ltd, a business & tax advisory firm.  tofazzul@hussainsbd.com; +88 01714132212