📈 Sri Lanka Corporate Governance: The Accountability Illusion

A critical analysis of the "accountability illusion" within Sri Lankan corporate governance, highlighting how overlapping oversight often masks a lack of genuine ownership, particularly following recent failures in the banking sector. • Core Governance Failure The report identifies that failures (e.g., recent fraud at NDB) occur not due to missing frameworks, but because of diffused accountability. When multiple layers—management, boards, auditors, and regulators—are involved, responsibility becomes negotiable rather than explicitly owned. • Sectoral Weaknesses Banking & Finance: Despite strict Central Bank of Sri Lanka (CBSL) directions and CSE Listing Rules, structural presence often substitutes for active vigilance. Audit & Assurance: A "dangerous gap" exists where boards assume auditors will detect fraud, while auditors (under ISA 240) view prevention as a management responsibility. Board Dynamics: Independent directors often default to "alignment without interrogation," relying on filtered information from executive directors. • Key Strategic Recommendations Board Ownership: Boards must move beyond formal reviews to collective, unequivocal ownership of risk. Constructive Friction: Independence must translate into "intellectual friction" rather than procedural neutrality. Explicit Accountability: For every material risk, ownership must be named, not assumed, to prevent issues from drifting in "the spaces in between." _Note: Based on current analysis of Sri Lankan regulatory frameworks and recent corporate events as of May 2026._