What’s Happening at the Japan Volleyball Association?
The Japan Volleyball Association is facing a serious governance crisis. A top female athlete missed out on the Olympics due to an association error, and suspicions have surfaced regarding the speaking fees of Chairman Junichi Kawai. This has escalated into a situation where major sponsors are withdrawing one after another.
At first glance, this seems like a problem for a large sports organization. However, I find this news highly insightful when viewed through the lens of “SME governance.”
What’s particularly noteworthy is the phenomenon of “sponsor withdrawal.” This illustrates a scenario where business partners and customers evaluate the “quality of governance” and choose to walk away. For SMEs, this perspective is extremely important.
“Invisible Governance” Drives Away Business Partners
What’s interesting about the Japan Volleyball Association case is not so much the scandals themselves, but the subsequent “sponsor reactions.”
Major sponsors cited the association’s governance failures as the reason for their withdrawal. This shows that when an organization’s internal controls and compliance systems are inadequate, business partners perceive it as a risk.
To all SME owners: your business partners are evaluating your company’s governance “invisibly.”
Specifically, they are looking at the following points:
- Are internal rules established and followed?
- Is there a lack of arbitrary decision-making by management?
- Is information disclosure handled appropriately?
- Are there any transactions suspected of ties with antisocial forces?
These factors don’t appear in direct transaction terms. However, your partners’ credit management and compliance departments are rigorously checking this “invisible governance.”
Why Does Governance Failure Lead to Sponsor Withdrawal?
Sponsoring companies prioritize the governance of their partners to protect their own brand value.
If a scandal occurs, the sponsor also risks being criticized for “supporting such an organization.”
The same applies to SMEs. If your company falls into governance failure, your business partners may decide that “continuing to deal with this company will damage our reputation” and scale back or stop transactions.
This can have a far more serious impact than worsening direct transaction terms. Rebuilding lost trust takes an enormous amount of time and money.
Specific Actions SMEs Should Take
So, how can SME owners strengthen their “invisible governance”?
You don’t need the complex internal control systems of large corporations. Try implementing these three actions.
1. Establish “Three Checkpoints”
To prevent arbitrary decision-making by management, set up these three checkpoints:
- Signing important contracts: Require approval from a responsible person other than the owner (e.g., department head or admin manager).
- Large expenditures: Make it a rule to have dual approval from the accounting manager and the owner.
- Selecting new business partners: Have someone other than the owner handle credit screening, including anti-social force checks.
These can be achieved by changing internal rules, without introducing special systems.
2. “Make Internal Rules Visible”
Even if rules exist, they are meaningless if not shared within the company.
Clearly document the following points and make them accessible to all employees:
- Work regulations
- Expense reimbursement rules
- Information management rules
- Basic compliance policy
The key is not to stop after creating the rules. Regular reviews and adaptation to change are essential.
3. Incorporate “Third-Party Checks”
Governance that is confined within the company has its limits. Regularly seek checks from third parties.
- Advice from external experts (lawyers, CPAs, tax accountants, etc.)
- Surveys and interviews with business partners
- Evaluations from advisors and financial institutions
It’s important to sincerely accept this feedback and use it for improvement.
Governance is an “Invisible Asset”
The case of the Japan Volleyball Association shows how governance failure can erode an organization in a “visible way.”
Conversely, proper governance serves as an “invisible asset” that earns trust from business partners.
SMEs, in particular, should actively build this “invisible asset.” You don’t need complex systems like large corporations. Start by having the owner themselves practice simple, effective rules.
Your business partners are always evaluating your company’s “invisible governance.”
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