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Corporate governance trends in the Baltics - Andris Grafs

News - September 22, 2019

Andris Grafs, Director, Vice President Latvia, Baltic Institute of Corporate Governance

There is a tendency in all the Baltic States that corporate governance becomes an increasingly important issue of the agenda. There are several reasons for that.

First of all, responsible business culture are more present in the business environment, as entrepreneurs think more about sustainability, efficiency and growth of their business. If the company is ambitious and plans to grow not by ten percent a year but ten times a year, then efficient corporate governance becomes an integral factor that allows achieving that.

Second, crisis of other companies and corporate disputes makes one to reconsider principles how the strategic decisions are made and risks managed, how the cooperation between the company shareholders, supervisory council and managing board takes place etc.

Third, a “pressure” is increasing from investors and banks to organise the corporate governance. Bank is granting credit rating to every company requiring financing and this rating determines financing provisions. Summarizing the experience of five Latvian banks, including the Baltic International Bank, we can conclude that aspects related to corporate governance impact up to 25% from the credit rating bank assigns to the company: bank assess the owners of the company, operation experience and reputation, how professional is the management of the company, making of strategic decisions, risk management, transparency, what is the quality of information it provides and other aspects. In line with the above-mentioned we can anticipate that in the following years both companies, as well as banks and investors will focus more on these issues.

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