IFC’s approach to improving a company’s corporate governance practices begins with an evaluation of whether corporate governance poses a special risk to investment or an opportunity for IFC to improve a client’s governance.

Risks. One type of risk is investment risk, where the returns on IFC's investment are jeopardized by poor performance (in the extreme case, corporate failure) or mistreatment of IFC and other investors. Another type of risk for IFC is reputational risk, where, although IFC's own investment is protected, corporate governance abuses threaten other shareholders and stakeholders in the company, or even undermine the integrity of local capital markets.

Opportunity. There are at least two aspects of opportunity. First, the client company's commitment to achieving good corporate governance is fundamental, which is why this is the first of the five key areas in which IFC evaluates the governance of companies. If governance improvements are imposed by IFC on an unwilling client, then any corporate governance improvement program is likely to be little more than an artificial compliance exercise. The second aspect of opportunity is that some countries and markets have moved further than others in carrying out legal and regulatory reforms that encourage good corporate governance. In these countries and markets, IFC's crucial contribution is to give meaning to these reforms by implementing improved governance practices at the company level.