Good governance
Good corporate governance helps to build an environment of trust, transparency and accountability, necessary for long-term investment, financial stability and business integrity. Hg recognises that good governance is a foundational building block and key material topic for Hg and our stakeholders, which is why we have not featured it in our Materiality Matrix, but have it as a given and prerequisite for doing business. Effective compliance processes and robust legal functions are pivotal to our growth, value and risk mitigation.
Hg seeks to promote strong oversight, transparency and risk management at all levels of the organisation and is committed to good governance through relevant metrics and procedures including, but not limited to, management structures, decision making processes, compensation structures, audit & risk controls, values & code of ethics, as well as compliance with applicable laws and regulations. Hg’s Board monitors our firm’s activities and our portfolio companies’ boards monitor the activities of their businesses. Hg’s Board oversees our business activities and that these are compatible with our ESG commitments.
Managing risks across our firm
Hg’s Board and its subcommittee, the Audit and Risk Committee, develop processes which are applied across Hg to mitigate risk and ensure the highest level of governance. An example of this is the comprehensive Risk Management Framework which is used to assess the principal and emerging risks facing Hg.
The Head of Compliance and Risk reports directly to the Hg Board, and is responsible for:
- establishing, implementing and maintaining adequate risk management policies and procedures;
- implementing strategies and practices for identifying, measuring, managing, monitoring, mitigating and reporting risks to which Hg is or may be exposed;
- reviewing: i) the effectiveness of Hg’s risk management policies and procedures; ii) the level of compliance of Hg and Hg Staff with arrangements to manage risks, and ensuring adequate risk training is delivered to Hg Staff and the Hg Boards; and iii) the adequacy and effectiveness of measures taken to address any deficiencies in the relevant policies, procedures, arrangements, processes and mechanisms; and
- overseeing and validating Hg’s external reporting of risk, where relevant.
Hg’s Risk Management Framework is reviewed on an annual basis by the Hg Board. Quarterly meetings are held by the Risk Management Function with senior members of Hg Staff responsible for the various business areas to identify any new risks and monitor progress on the mitigation of existing risks.
Hg’s Audit & Risk Committee
The Risk Management Function reports on risk matters (including the outcomes of the regular risk meetings referenced above) to the Audit and Risk Committee (‘ARC’), which meets on at least a quarterly basis, and will warn the ARC of any specific risk issues or developments which affect or may affect Hg. The ARC is a committee of the Board, and the ARC papers also form part of the quarterly Board papers.
The ARC is responsible for reviewing and approving Hg’s Risk Management Framework at least annually, to ensure it adequately identifies the risks to which Hg is, or may be, exposed.
Hg ensures that members of the ARC have the necessary knowledge, skills and expertise, and have adequate access to information on the risk profile of Hg (including, where necessary, external expert advice and support on any risk issue).
Enhancing good governance across our portfolio
Hg’s experienced in-house legal team empowers legal and compliance professionals within our portfolio, offering comprehensive, hands-on support throughout their journey with Hg – from acting as a sounding board on key strategic issues from the beginning of their journey with Hg, to providing ongoing support and assistance on material risk and value creating topics including antitrust, M&A, data privacy and Generative AI, and supporting through to exit. During 2023/24, the team continued to develop Hg’s Board Compliance Toolkit and focused on helping Hg and portfolio companies to keep pace with, and benefit from, the fast developments in Generative AI.
Being a responsible corporate citizen
Hg has a role to play in upholding good business practices and fostering structures and a culture that support:
• The ten Principles of the UN Global Compact which reflect a business’ fundamental responsibilities to operate in ways that, at a minimum, seek to address key areas such as human rights, labour rights, environment and anti-corruption.
• The Organisation for Economic Cooperation and Development Guidelines for Multinational Enterprises which reflects the expectation from governments to businesses on how to act responsibly and covers all key areas of business responsibility, including human rights, labour rights, environment, bribery, consumer interests, as well as information disclosure, fair competition and taxation.
• The UN Guiding Principles on Business and Human Rights which seeks to identify, prevent and mitigate adverse human rights impacts across a business’ operations and engage in remediation where required.
Portfolio board ESG sponsors
Board oversight and accountability for ESG is increasingly demanded by regulators and other stakeholders, but it is also important so that the Board understands any ESG risks or opportunities impacting a business.
In early 2023, we introduced an ESG Board sponsor program, asking portfolio companies to designate a Board-level ESG sponsor. This sponsor serves as an advocate for ESG, facilitating regular discussions on ESG topics and providing the Board with appropriate oversight of the business’ ESG strategy and policies.
To support the ESG sponsors, we have created a Board ESG guidance that outlines essential elements of strong ESG management at the Board-level.
We consider the role of a Board ‘ESG Sponsor’ to include:
Strategy & Policy
Being the sponsor of the ESG policy and ESG Strategy.
Risk
Understanding how material ESG topics, stakeholders demands, and emerging issue impact the business.
Oversight
Making sure material ESG topics are considered at Board level at least twice per year.
Competencies
Making sure there are enough and appropriate resources assigned to material ESG topics across the business and the Board.
