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Corporate Governance and Financial Reporting

June 18, 2015


Elderly woman counts money. China

© Curt Carnemark / World Bank


Corporate governance and financial reporting (CGFR) are key building blocks of a well-functioning market economy. Sound reporting, controls, auditing and corporate governance reduce the risks of investments and lending, thus shaping the conditions for sustainable and equitable private sector-led growth. State-owned enterprises (SOEs) play a key role in many countries. By embracing transparent and modern governance, countries can improve their service delivery performance and reduce the fiscal burden SOEs impose on national budgets. The CGFR Global Solutions Group (GSG) brings together the World Bank Group’s (WBG) knowledge and expertise in these key policy areas to ensure project teams and clients have access to relevant global good practices and effective tools for project design and implementation. 


Our goal is to support WBG teams and clients in addressing two key policy areas:

a) Building effective systems of corporate financial reporting and auditing

Transparent corporate financial reporting and effective audit practices are essential to protect the interests of investors, creditors, employees, public authorities, and other stakeholders and enable them to make informed decisions. They are critical for the integrity of financial markets, help develop access to finance for local enterprises (particularly SMEs), and contribute to a better business climate, furthering the integration of local companies in the world economy. They also contribute to financial stability by supporting a reliable information infrastructure for banks  and  other  lenders.  The quality of corporate financial  reporting  and  audit practices depends primarily on the robustness of the institutional environment supporting them. This includes legal requirements, education systems, professional accountancy organizations, monitoring and enforcement mechanisms, the infrastructure for disseminating financial information, and the demand for quality financial reporting.

b) Improving the governance of SOEs

In many partner countries, the SOE sector provides essential goods and services to citizens and local businesses and are a significant source of employment as well as productive investment (or GDP).  When SOEs have low accountability, poor controls, ineffective boards and inadequate governance, they tend to perform poorly in delivering goods and services to citizens, create space for political patronage and corruption, and can pose a serious fiscal risk to the country. Improving SOE governance is a complex process involving a multi-pronged approach to strengthen transparency and controls; promote active and effective boards; and build the State’s capacity to act as a responsible owner, a monitor of performance and fiscal risks, and other key roles (see below). 

A multidisciplinary group

The GSG combines the experience and skills of specialists in financial management, corporate reporting, public sector reform, procurement and fiscal risks.  We aim to bring together all the Bank’s global experience on the management and infrastructure of corporate entities (including SOEs) to provide a source of knowledge, advice, tools and relevant training for teams and clients.

Our support takes the form of:

a) Just-in-time support, policy and capacity building advice to clients or country/task teams;

b) Knowledge activities and global learning programs for clients and staff; and

c) Training staff to use diagnostic tools and tackle complex governance issues. 


Regional Programs Supporting the Development of Financial Reporting Frameworks                               

The WBG supports partner countries in building corporate financial reporting systems through a range of regional programs which offer knowledge and convening services; peer exchange and communities of practice; policy advice; and technical assistance for reform implementation. Regional engagments include EU-REPARIS for six Western Balkan countries aiming to join the European Union; Connecting Voices of MENA; the Organization for the Harmonization of Corporate Law in 17 francophone African countries (OHADA); and CReCER, a flagship learning initiative for Latin America and the Caribbean. Our GSG supports and seeks to create synergies and cross-fertilization between these initiatives.

Accountancy Development for Results (ADR)       

ADR is a Bank-led engagement with the accountancy profession worldwide that furthers their contribution to economic development in their countries. There is enormous diversity in the skills, training and role of accountants. ADR encourages talent development, harnesses technology, improves public/private interchange and supports reform in these cross-cutting issues. An ADR event in 2014 brought together 200 accountancy leaders from 60 countries. Regional activities include cooperation with the Pan African Federation of Accountants (PAFA) and the Financial Reporting for Economic Development (FRED) initiative in Asia. 

Promoting Modern SOE Governance in Uzbekistan   

Uzbekistan has sought out the Bank’s expertise to help build institutional capacity for SOE governance and private sector participation. Beginning in 2016, an integrated approach combining policy advice with technical support will aim to capitalize on the momentum for reform. Activities include the creation of a center of excellence on corporate governance, the development of a clear policy framework for SOE governance and identification of factors to be considered at institutional, state and entity levels.