By Peter Droussiotis

As Cyprus seeks to re-emerge from the financial and economic crisis currently afflicting the island, it is important for Cypriot businesses to take steps in order to remove obstacles to the return of investor confidence which will be essential to the recovery of the economy.

Although government policy and action, public sector reform and the development of a legislative framework which encourages enterprise and investment are all of pivotal significance to economic regeneration and success in any country, there are specific things that businesses themselves can do in order to change the business climate on the island for the better.

There is no doubt that Cyprus's image outside the island has been tarnished as a result of the financial crisis which unfolded at the beginning of 2013. It is true that it can take years if not decades to build a reputation but only a few days or even moments to lose it.

financial-mirror-aricle-by-peter-droussiotisBusinesses can reverse the adverse effects of the financial crisis on the image of Cyprus as an investment destination by focusing on changes which demonstrate to the outside world that business transparency, good corporate governance and independent oversight are at the centre of everything that Cypriot businesses do.

In discussions I have had with potential investors in relation to Cyprus, the theme that returns again and again is a lack of confidence that Cypriot business people and company owners are as committed to these principles as they should be. In fact, investors often point out that the causes of financial failure and economic malaise can often be attributed to corporate governance and risk management shortcomings, lack of forward strategic thinking, ineffective corporate checks and balances and the absence of independent non-executive oversight and challenge at board level in the business and financial worlds.

Many investors I speak to currently tend to identify such weaknesses with the nature of the Cypriot economy. I am confident that this perception can change but this will not happen unless and until the Cypriot business world makes transparency and corporate governance a strategic priority.

The value of independent non-executive directors (NEDs) on the boards of SMEs, as well as larger companies, has increasingly been recognised in all major economies and a strong non-executive board presence is a key characteristic of the corporate regime in all economically successful countries.

I stress the independence of nonexecutives because this is probably the most essential quality underlying the contribution that a NED can make to any business. The mentality often observed in Cyprus of appointing one's mates to perform this or a similar role, sometimes without any regard to the skills or gravitas of the person appointed, is counterproductive and creates only an illusion that transparency, independent judgment and corporate discipline characterise corporate decisionmaking.

Truly independent and competent NEDs ideally with international or cross-border experience and connections are likely to be an asset to any Cypriot business. Not only will such persons be able to challenge the norm and act with integrity while serving on the board of a company, they will also be well-placed to perform a useful ambassadorial role on behalf of the organisation with a range of stakeholders including clients, employees, shareholders, suppliers, regulators and, of course, potential investors and partners.

Peter-Droussiotis-photoPeter Droussiotis is founder chairman of PGD
Strategy Limited, a specialist corporate finance
and management consulting firm headquartered in
London. He also serves as a Non-Executive
Director on the board of HgCapital-owned Sequel
Business Solutions, a City-based provider of
software and business solutions to the insurance
industry in the UK and internationally.
Peter is also Chairman of the UK-Cyprus Enterprise Council.

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Original published in The Financial Mirror newspaper on 13th November 2014