Poor corporate governance major cause of business failures – Felix Addo
Poor corporate governance remains one of the major causes of business failures and corporate distress in Ghana, the Founder and President of the Chartered Institute of Restructuring and Insolvency Practitioners, Ghana (CIRIP-Ghana), Mr Felix Addo, has said. He said weak governance structures, undisclosed conflicts of interest, poor internal controls and inadequate professional oversight continued…
Felix Addo, Founder and President of CIRIP-Ghana, stated that poor corporate governance is a significant cause of business failures in Ghana. He highlighted weak governance structures, undisclosed conflicts of interest, inadequate internal controls, and insufficient professional oversight as ongoing issues that expose businesses to financial and operational difficulties.
Addo emphasized that corporate governance extends beyond the boardroom, encompassing a company's institutional framework, charter, control systems, culture, and reputation management.
He expressed concern over instances where directors failed to disclose conflicts of interest, taking decisions that prioritize their personal interests over those of the company. Additionally, weak internal audit and control systems were identified as major challenges, with many businesses viewing audits and professional consultancy services as burdensome.
Beyond governance shortcomings, external shocks such as foreign exchange volatility, drought, the COVID-19 pandemic, and disruptions to international supply routes also contributed to business distress. Companies heavily reliant on imported inputs are particularly vulnerable to exchange rate fluctuations, which can inflate costs beyond budgeted amounts.
Addo urged businesses to seek professional assistance promptly when signs of financial distress emerge, rather than waiting until creditors and legal demands accumulate. Early warning signs include persistent cash-flow difficulties, delayed salary payments, and creditor demand notes. He stressed that early detection allows for easier remediation, while neglecting these signs can lead to unmanageable situations.
Regarding restructuring, Addo pointed out the lack of commencement financing for distressed companies entering administration as a significant challenge. Businesses often require fresh working capital to revive their operations, but existing prudential rules make it difficult for non-performing loan companies to secure additional financing from banks. CIRIP-Ghana is working with relevant stakeholders to establish a framework that enables viable distressed businesses to access financing while protecting lenders.
Finally, Addo called for stronger collaboration between restructuring professionals and the media, describing journalists as invaluable partners in educating businesses and the public about insolvency, restructuring, and the importance of seeking help early.
Written by urgent.news from Ghanaian Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
