King V for SMEs: Strategy Is a Governance Requirement
- Afzul Soobedaar
- 18/05/2026
- 15:40
- 0 comments
As of 1 January 2026, the King V Code on Corporate Governance formally replaces King IV in South Africa.
Launched on 31 October 2025 by the Institute of Directors in South Africa and the King Committee, King V introduces an updated “apply and explain” regime supported by a new King V Disclosure Framework. Organisations that encouraged early adoption are already aligning their governance practices. For those that have not yet begun, the current financial cycle is the point at which that expectation becomes increasingly difficult to ignore.
King V applies to SMEs too
For many SMEs, that may sound like something aimed at listed companies and large corporate boards.
It is not.
King V for SMEs is not a separate or simplified version of the Code. It is the same Code, applied proportionally to the size and complexity of the business.
What changes is not whether the principles matter, but how they are applied.
For many business owners, that represents an important shift in how strategy should be understood. Under King V, strategy is no longer treated as an occasional planning exercise. It is now part of governance.
Most SMEs already know where they want to go. The issue is usually not the absence of ambition. It is whether the business is being led in a sufficiently deliberate and disciplined way to get there consistently.
That distinction matters.
Strategy is no longer optional. It is a governance responsibility
Under Principle 3 of the King V Code, the governing body must ensure that the organisation’s purpose, strategy and business model support performance that creates sustainable value within its economic, social and environmental context.
That wording matters.
It does not say that businesses should have a strategy. It assumes that leadership has already established purpose, connected it to a strategy, aligned the business model to that strategy, and is actively monitoring performance against it.
The expectation is not simply that a business has a strategy document. It is that strategic thinking is visible in how the business is led, monitored and directed.
For many SMEs, that is a significant shift.
Strategy in the South African SME context has traditionally been informal. An annual planning session held off-site. A document produced for a funding application. A set of priorities held in the owner’s head.
These approaches are common. Under King V, however, they are no longer sufficient as governance practice.
What this means for the owner who is also the board
The King V Guidance Note for SMEs, published by the Institute of Directors in South Africa in October 2025, addresses this context directly. It acknowledges that SMEs operate differently from large corporates and that implementation must be proportional to size and complexity. But it does not dilute the underlying responsibility.
In early-stage SMEs, the owner effectively functions as the board. Strategic direction, approval of plans, oversight of execution and accountability for outcomes often sit with one or two people.
King V recognises that reality. It does not, however, treat it as an excuse for informal governance.
As a business grows and a leadership team develops, the responsibility does not disappear. It distributes.
When the leadership team grows
For businesses that have moved beyond the single owner-operator stage, the challenge shifts. It is no longer about one person holding the strategy in their head. It becomes about ensuring that the leadership team is operating from a shared strategic direction.
When that shared direction is absent or unclear, teams work hard in different directions. Decisions get made locally that should be made collectively. The business fragments without anyone intending it to.
What the Guidance Note makes clear is that governance in an SME must still be deliberate at every stage of growth. The structures can be simple. The processes can be proportionate. But the thinking must be disciplined and the accountability must be real.
Practically, this means an SME needs a written strategy, not as a document for a bank or funder, but as the reference point against which important decisions are made.
It also means regularly reviewing whether the business is executing against that strategy.
Leadership must understand which risks could affect the plan and think carefully about how those risks will be managed.
Above all, someone in the business should always be able to answer three questions clearly:
- Where are we going?
- How are we going to get there?
- How do we know whether it is working?
These are not complex requirements. But they do require deliberate effort.
For most SMEs, a quarterly strategic review, even a structured two-hour leadership conversation, is often enough to maintain that discipline.
The issue is not how formal the process is. The issue is whether it is happening consistently and whether decisions are being made against a clear strategic direction.
If you would like to assess how your business currently aligns with these expectations, the Perispec Strategy Governance Check is a short diagnostic designed for SME owners and leadership teams.
The governance gap King V is trying to close
The King V Guidance Note identifies a pattern that many growing businesses will recognise.
Governance structures and leadership discipline often fail to evolve as the business grows.
The business outgrows the informal approach that worked during its earlier stages. But the discipline of strategy, the clarity of direction and the rhythm of review do not always grow with it.
The result is familiar.
Decisions become reactive.
Teams work hard but lose alignment on what matters most.
Resources become spread across competing priorities.
The business becomes busy without becoming more strategic.
King V frames this not simply as a management issue, but as a governance issue.
Leadership is responsible for the long-term sustainability of the organisation. When strategic direction becomes weak or unclear, that responsibility is not being fulfilled, regardless of how active leadership may be in day-to-day operations.
Governance that is proportional is still governance
The principle of proportionality in King V is important.
It does not mean that SMEs are exempt from governance responsibilities. It means they are not expected to build the same structures as large listed corporations.
Most SMEs do not need large boards, multiple governance committees, complex reporting structures or extensive compliance departments.
But they do still need the substance of good governance.
That means clarity of direction, agreed priorities, accountability, monitoring and disciplined decision-making.
An SME that consistently does these things, even in simple form, is often practising stronger governance than much larger organisations that have formal structures but weak strategic discipline.
In practice, governance-aligned strategy in an SME does not need to be complicated.
A clear direction. Agreed priorities. Measurable objectives. Regular review conversations. Awareness of the major risks facing the business.
None of this is particularly sophisticated. But it does require discipline.
Someone in the business must be paying attention to whether the strategy is working, whether priorities remain aligned, and whether the business is slowly drifting off course.
Structured strategic planning, beginning with a clear situational analysis, working through purpose and strategic priorities, aligning plans and resources, and maintaining regular strategic review, is not an administrative exercise. It is governance through strategy in practice. It is also closely aligned with the governance discipline King V expects.
What King V for SMEs ultimately asks of business owners
The deeper message behind King V for SMEs is that businesses do not lose their way overnight.
Usually, the drift happens slowly.
Priorities multiply. Decisions become reactive. Teams become busy but less aligned. Resources get spread too thinly. Important conversations happen less often.
Strategy slowly gives way to day-to-day survival.
King V recognises that this is not simply a management problem. It is a governance problem.
Leadership is responsible for ensuring that the business remains directed, focused and sustainable over time.
For SMEs, that responsibility often sits directly with the owner or leadership team.
That is why strategic planning can no longer be treated as an occasional exercise.
It has become part of responsible leadership and governance.
Need support with structured strategic planning?
See how Perispec helps SMEs clarify direction, align priorities and build a practical plan for execution.
Want to assess your current governance alignment?
Use the Perispec Strategy Governance Check to reflect on strategy, execution and accountability in your business.