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King III Report on Corporate Governance
One of the best principles of the King III Code is that the board is responsible for the process of risk management. When a large listed company applies this principle, it may require the establishment of a risk committee, a chief risk officer and several other process changes to achieve this principle. A small one-man concern should also apply this principles, however as the person who "is the board", this person may want to consider and note the top ten risks facing the entity and consider the applicable controls necessary to mitigate these risks.
One of the subtle changes in the King III Report is the shift from "comply or explain" to "apply or explain". The new code applies to all companies, public entities, private companies and all other forms of businesses. The aim of this objective is to ensure that all forms of business apply the basic principles of good governance in South Africa. This decision clearly resulted in the question of how a small company could comply with the principles of good governance, the same as what was expected of a large listed company. The King committee decided to draft the principles on an "apply or explain" basis to prevent the cost implications to smaller companies and to ensure that the focus in on "application" versus "compliance".
The "apply or explain" basis allows every organisation to apply all the principes of the code as it best meets the objectives of the entity and to focus on the substance rather than on the form of application.
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