Strategic Business Leader · Enabling success: performance excellence

Governance, Risk and Ethics in Achieving Performance

Updated 11 October 2026 · Fact-checked

Governance, risk management and ethics are the control and values framework that lets an organisation pursue performance without destroying it. Governance sets direction and accountability, risk management protects objectives, and ethics builds trust. In SBL, link each to performance, then apply it to the case facts.

Understand Governance, Risk and Ethics in Achieving Performance

Performance excellence means delivering results that last, not just good results this year. Strong profit built on weak controls, pressure to hit targets or a poor culture often ends in scandal, fines or lost trust. This topic asks you to see governance, risk and ethics as part of performance, not as a separate compliance chore.

Corporate governance is the system by which an organisation is directed and controlled. It covers the board, its committees, accountability to owners and other stakeholders, and the checks on management power. Good governance supports performance by improving decisions, deterring misuse of resources and reassuring investors and lenders. Weak governance shows up as a dominant chief executive, a passive board, poor oversight of pay and unreliable reporting.

Risk management is how an organisation identifies, assesses, responds to and monitors uncertainty that could affect its objectives. Risk is not only negative. Taking well-judged risk is how organisations grow. Performance suffers when risk appetite is not clear, when targets push staff to take hidden risks, or when no one owns a risk. A good risk culture links risk to strategy and to performance measures.

Ethics concerns what is right and wrong in behaviour. Organisational ethics shows in culture, codes, incentives and what leaders tolerate. For professional accountants, ethics also means the fundamental principles: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Ethical lapses damage reputation, employee morale and customer loyalty, and these in turn damage performance. Ethical conduct also supports it by building trust with stakeholders.

The three are linked. Governance sets the tone and structure. Risk management turns objectives into controlled action. Ethics decides whether people follow the spirit as well as the letter of the rules. Performance measures and rewards sit across all three. Badly designed incentives can push people to cut corners, so the measures themselves are a governance and ethics issue.

Key rules to remember

Performance link: Sustained performance = strategy delivered + risks controlled + trust maintained; A memory aid, not a calculation. Use it to structure your analysis.
Fundamental principles: Integrity, Objectivity, Professional competence and due care, Confidentiality, Professional behaviour; Name the principle that is threatened, then explain how.
Risk responses (TARA): Transfer, Avoid, Reduce, Accept; Match the response to the likelihood and impact of the risk.
Risk assessment: Risk priority = likelihood × impact; A qualitative guide. Rate each factor, do not treat it as exact.
Ethical threats: Self-interest, Self-review, Advocacy, Familiarity, Intimidation; Use them to classify a threat before suggesting safeguards.

How to solve Governance, Risk and Ethics in Achieving Performance questions

Use this method for any SBL question on governance, risk or ethics and performance. It keeps your answer on the requirement and gains professional skills marks.

1Read the requirement and note the role you are in, the audience and the format (report, briefing, memo).
2Identify the performance issue in the case: which objective, measure or stakeholder is affected.
3Find the governance, risk or ethics weakness in the facts. Look for board imbalance, unclear risk ownership, aggressive targets, pressure on staff or ignored warnings.
4Explain the link to performance. Say how the weakness could damage results, reputation, cost or stakeholder trust.
5Apply a relevant model or principle briefly, such as TARA, an ethical threat or a governance feature, and tie it to named facts.
6Recommend practical actions with owners, such as board changes, risk reporting, a code of conduct, whistleblowing routes or redesigned incentives.
7Weigh the actions: cost, practicality and stakeholder reaction. Give a clear conclusion.
8Check the tone and format for the stated audience. Show scepticism and commercial awareness.

Quickest way: Issue, link, fix

When to use it: Use when time is short, for example a 10 to 12 mark requirement or a final task.

Underline the requirement words and the role.
List three case facts that show a governance, risk or ethics problem.
For each, write one line on how it harms performance.
Add one practical fix per issue.
Finish with a one-line conclusion that answers the requirement directly.

Common mistakes in Governance, Risk and Ethics in Achieving Performance

Listing governance rules without linking them to performance
Students recall code provisions from study and write them out as a list.
Fix: After each point, add a sentence starting 'This affects performance because...' and use case facts.
Treating risk as only a threat
Many notes focus on loss and controls.
Fix: Mention that risk is also opportunity and that appetite should match strategy. Say when accepting risk is reasonable.
Giving generic ethics theory with no application
Students feel safe reproducing definitions.
Fix: Name the specific person, pressure and principle at stake in the scenario, then give a decision and reasoning.
Ignoring incentives and targets as a cause
Performance measures feel like a management accounting matter, not an ethics one.
Fix: Ask whether targets or bonuses encourage short-term or unethical behaviour, and suggest balanced measures.
Weak professional skills: no scepticism or audience awareness
Students focus on technical content and write in a textbook style.
Fix: Question the evidence, consider the reader's needs, write in the required format and make a clear recommendation.
Recommending dramatic action without weighing it
Students want to show decisiveness.
Fix: Compare options, note costs and stakeholder reactions and prioritise. Evaluation earns marks.

Worked examples

Example 1

Kavya Foods is a listed manufacturer. Its chief executive, who is also chair, has set a bonus-linked target of 20% annual sales growth. Sales staff have started offering extended credit to weak customers, and bad debts are rising. The finance director raised concerns, but the board, mostly the chief executive's long-standing friends, took no action. Explain how governance, risk and ethics issues threaten Kavya's performance. (10 marks)

Show the solution

Identify the governance weakness: one person is chair and chief executive, and the board lacks independence. There is little challenge, so the finance director's warning was ignored.
Link to performance: weak oversight allows high-risk growth to continue, so sales may rise while cash flow and profit fall.
Identify the risk issue: credit risk has increased because the growth target has no risk limit. Risk appetite appears unclear and no one owns credit risk.
Identify the ethics and incentive issue: the bonus rewards sales only, so staff are encouraged to cut corners. Sales may be booked at the cost of the company's long-term interests.
Apply a response: reduce credit risk with customer credit checks and limits, and report credit exposure to the board regularly.
Recommend governance fixes: split chair and chief executive roles, appoint independent non-executives, form a risk committee and give the finance director a direct route to the board or audit committee.
Recommend incentive changes: add cash collection, bad debt and profit measures to the bonus scheme.
Conclude: the growth target without checks creates a risk of lasting damage, so the board should act first on independence and incentives.

Answer: Kavya's performance is threatened because a dominant chief executive and a weak board have allowed an aggressive, poorly controlled sales target to drive credit risk upwards. Separating chair and chief executive, adding independent challenge, setting credit limits and rebalancing the bonus scheme would protect sustainable performance.

Example 2

You are a management accountant at Meridian Tech. Your finance director asks you to adjust the forecast so that the division meets its target and the divisional manager receives a bonus. The adjustment is not supported by evidence. Explain the ethical issues and what you should do. (8 marks)

Show the solution

Identify the threats: intimidation, since your director is senior and may affect your position, and self-interest if you fear for your job. There may also be a conflict with the bonus incentive.
Identify the principles at risk: integrity, since you would be part of misleading information, and objectivity, since pressure is influencing your judgement. Professional behaviour is also at stake, as misstated forecasts could breach laws or regulations.
Explain the performance link: false forecasts mislead the board and investors, hide real problems and lead to poor decisions, so long-term performance suffers.
Decide: do not make the unsupported adjustment.
Actions: document the request and your reasoning, ask for the evidence in writing, and discuss the concern with the director, explaining the professional duties.
Escalate if unresolved: follow internal procedures, such as the audit committee, internal audit or whistleblowing route, and consider seeking advice from ACCA or legal counsel. Confidentiality still applies, except where disclosure is permitted or required.
Conclude: the long-term cost of a misstated forecast is greater than the short-term gain, so keep the forecast factual.

Answer: Refuse to make the unsupported adjustment because it would breach integrity and objectivity. Record the request, raise it with the director, and escalate through internal channels if needed. Honest forecasts protect decision quality and the company's long-term performance.

Exam tips

Always tie governance, risk and ethics to a performance consequence. A point without a consequence earns few marks.
Pick out the exact facts that show the issue, such as combined roles, ignored warnings or target pressure, and quote them.
Use the stated role and format. If you are an adviser, write recommendations; if you are an accountant under pressure, state your professional position.
For ethics requirements, name the principle and the threat, then give a decision and next steps.
Spend the last minute on a clear conclusion that answers the requirement.

Practice questions from Enabling success: performance excellence

Governance, Risk and Ethics in Achieving Performance: frequently asked questions

How does corporate governance affect organisational performance?

Good governance improves oversight, decision quality and accountability, and builds investor trust. Weak governance allows poor decisions and misuse of resources. In SBL, always link the governance feature in the case to a specific performance effect.

How does ethics affect performance in ACCA SBL answers?

Ethical behaviour builds trust with customers, staff and investors and reduces the risk of fines and reputational damage. Unethical behaviour may bring short-term gains but long-term harm. Use case facts to show the link.

How do I score professional skills marks on a governance and risk question?

Answer the exact requirement, apply points to the scenario, show scepticism about the evidence and make clear, practical recommendations. Use the format and tone the reader needs. Weigh options rather than just listing them.

Is risk always bad for performance?

No. Organisations need to take risk to create value. Performance suffers when risk is unmanaged, unknown or out of line with appetite. Show that you can balance risk and reward.