Navigating Governance from Both Sides of the Table

As COO at Tenacious Ventures Group, I often focus on building governance frameworks that can withstand the complexities of compliance, risk, and succession planning. At Sandford Capital, Tenacious’s Australian Financial Services License (AFSL) provider, I observed governance from both sides—as client and observer—gaining unique insights into how decisions resonate across ecosystems.

Sandford operates as an AFSL holder while Tenacious is one of its Corporate Authorized Representatives (CARs). This structure means that the governance decisions I observed at Sanford weren’t just theoretical—they directly impacted our operations at Tenacious. These dual perspectives reinforced the importance of proactive, intentional governance to build resilient and adaptable organizations.

Compliance as a Two-Way Street

Compliance isn’t simply about enforcing standards—it’s about fostering trust and aligning accountability across stakeholders at all organizational levels.

Sandford’s governance framework balances holding CARs accountable, with equipping them with the resources to meet regulatory obligations. This collaborative approach creates consistency across its client base while reinforcing trust between Sandford and its CARs.

For Tenacious, compliance involves meeting Sandford’s standards, but Sandford’s board also takes an active role beyond oversight. By building relationships with CARs and understanding their operational realities, Sandford demonstrates how compliance could be both a regulatory requirement and a strategic tool. My own observership is a testament to this, as Sandford’s board directly contributed to building CAR capability, which in turn strengthens the likelihood of compliance.

Risk Management: The Value of Diverse Perspectives

Risk management is central to effective governance, but my observations at Sandford highlighted how the same risk can look vastly different depending on your role in the ecosystem.

For example, in the context of CAR fund underperformance, Sandford’s board focused on reputational risks and potential regulatory scrutiny (e.g., misrepresentation of past performance). From a CAR’s perspective, however, the primary concern might be investor trust and its impact on future fundraising, which could ultimately affect financial viability.

Effective boards don’t just identify risks—they understand how different stakeholders perceive and address them, better equipping them to manage immediate threats and long-term impacts.

Learning from Emerging Risks

Another area where Sandford’s board excelled was in identifying and managing emerging risks—particularly those outside their direct control. 

One such issue was the regulatory fallout from the Lanterne judgment, which had significant implications for AFSL holders. In this case, the Federal Court penalized Lanterne Fund Services Pty Ltd, AFSL holder, $1.25 million for failing to oversee CARs properly. Lanterne’s shortcomings—insufficient compliance and risk systems, inadequate training, and lack of resources—served as a stark reminder of the consequences of neglecting governance responsibilities.

Rather than dismiss this as irrelevant, Sandford used it as a catalyst to review its own governance practices and risk management frameworks, identify potential vulnerabilities, and strengthen oversight. This proactive approach turned an external challenge into actionable improvements, demonstrating how foresight and preparation can build organizational resilience.

The board also discussed other regulatory shifts, such as the tightening of criteria for classifying investors as “wholesale” by raising the qualification thresholds (investor qualifies based on either income, net assets, or certain certifications). This change posed challenges for CARs and Sandford alike. For CARs, this change would reduce the pool of eligible investors, creating barriers to raising capital and making fundraising more challenging. For Sandford, the risk was systemic: fewer wholesale investors would create barriers to raising funds, and could destabilize CAR viability, increasing oversight demands and straining Sandford’s resources.

These discussions reinforced that governance is not only about managing today’s risks but about positioning organizations to navigate future uncertainties. Boards that proactively address emerging risks strengthen not only their own resilience but also the broader ecosystems that they participate in.

The Investor-Director Parallel

Observing Sandford’s board reminded me of the parallels between AFSL holders supporting CARs and investor-directors guiding founders. Both dynamics require a two-way conversation where accountability flows down, and operational realities and feedback flow up to inform better decisions.

Like Sandford adapting to regulatory changes, investor-directors must remain attuned to market realities affecting portfolio companies.

Take fundraising, for example. In today’s economic climate, raising capital takes longer, and the bar for investment is higher. 

Startups focused solely on delivering for customers might overlook the urgency of adapting their fundraising strategy to this reality, leading to a cash crunch or delayed scaling plans if they aren’t prepared for a longer fundraising timeline, reduced valuations, or resource constraints. 

For investors, the stakes are equally as high. A struggling portfolio company impacts liquidity, fund commitments, and future strategy, and limited partner confidence—particularly in tough fundraising environments. 

And for investor-directors, this dynamic means having to balance the fiduciary duty to the portfolio company boards they sit on, with their limited partners expectations of a return on capital. This highlights the interconnected nature of governance and the need for dynamic risk assessment through multiple lenses.

Final Reflections on Governance from Multiple Perspectives

Serving as both a client and observer at Sandford Capital provided a rare opportunity to see governance in action from multiple perspectives. It reinforced the importance of proactive governance, clear accountability, and structured processes that integrate compliance, risk management, and succession planning into a cohesive framework.

For startups, founders, and investors, the lesson is clear: effective governance isn’t a top-down directive—it’s a shared responsibility and understanding of risk from both sides of the table.