Corporate governance has become a defining reality for firms regulated by the Financial Services Regulatory Authority (FSRA) in ADGM and the Virtual Assets Regulatory Authority (VARA) in Dubai. It has moved decisively beyond a compliance exercise. Regulators are no longer satisfied with the mere existence of governance frameworks. They are increasingly focused on how effectively boards discharge their oversight responsibilities in practice.

Across both FSRA and VARA regimes, governance is now viewed as a critical control function, directly linked to risk management and financial soundness, market integrity and investor protection, and the long-term sustainability of regulated firms. The expectation from both regulators is clear: governance must be demonstrable, effective and continuously evolving.

Converging Regulatory Direction

There is a clear convergence in regulatory direction between FSRA and VARA. While they operate across distinct sectors, traditional financial services and virtual assets respectively, their governance expectations are increasingly aligned around global best practices and risk-based supervision.

Board accountability has become an important focus. Under both regimes, the board is ultimately responsible for setting the firm's strategy and risk appetite, overseeing senior management and controlled functions, and ensuring the firm operates within its regulatory permissions and obligations. For FSRA-regulated firms, this is embedded within prudential and conduct rulebooks requiring clear governance structures and effective oversight. For VARA-regulated entities, governance expectations are equally robust, with particular emphasis on board-level oversight of AML/CFT frameworks, monitoring of technology, custody and operational risks, and ensuring transparency and accountability in virtual asset activities.

Board Composition, Independence and Expertise

Both FSRA and VARA expect boards to demonstrate an appropriate balance of executive, non-executive and independent directors, with sufficient technical expertise. For FSRA-regulated firms this means deep financial services knowledge. For VARA-regulated entities the expectation extends to virtual assets, blockchain and technology risks. There is growing scrutiny on whether boards possess the right mix of skills to understand emerging risks, particularly in high-growth and complex sectors such as digital assets. Regulators are assessing not just who sits on the board, but whether they are equipped to challenge management effectively.

Integrating Governance with Risk and Control Frameworks

A key expectation across both regulators is the integration of governance with risk and control frameworks. This includes clearly defined risk governance structures and active board oversight of risk registers, compliance monitoring and internal audit findings. For VARA-regulated firms, additional emphasis is placed on technology governance and cybersecurity oversight, safeguarding of client assets and custody arrangements, and managing financial crime risks within virtual asset ecosystems.

Evidence-Based Supervision

Perhaps the most significant development is the shift toward evidence-based supervision. FSRA and VARA are increasingly focused on whether firms can demonstrate meaningful board engagement, clear documentation of decision-making processes and evidence that governance frameworks are operating effectively in practice.

This is reflected in regulatory reviews, inspections and ongoing supervision. The key questions regulators are asking: are board discussions substantive and risk-focused? Is management being appropriately challenged? Are governance structures proportionate to the firm's scale and complexity? Governance is no longer assessed by structure alone, but by outcomes, behaviour and evidence.

Recurring Governance Challenges

Despite well-established frameworks, several recurring governance challenges continue to arise across regulated firms in ADGM and Dubai's virtual asset ecosystem. These include limited board challenge and over-reliance on executive management, governance frameworks that are not fully aligned with FSRA or VARA rulebooks, risk registers that are insufficiently robust or not actively monitored, and the absence of formal board or director performance assessments. These gaps often remain latent until identified during regulatory reviews or remediation programmes, where corrective action becomes more complex and more costly.

Board Effectiveness Evaluations

For FSRA and VARA-regulated firms, Board Effectiveness Evaluations (BEE) are increasingly becoming both a regulatory expectation and a strategic governance tool. A well-executed BEE provides an independent and objective assessment of board performance, benchmarks governance frameworks against FSRA and VARA expectations and international standards, and delivers actionable recommendations to enhance board composition, committee effectiveness and information flows.

In highly regulated environments such as ADGM and Dubai's virtual asset ecosystem, governance is increasingly a competitive differentiator. Strong governance frameworks enable firms to build regulatory trust and credibility, attract institutional investors and partners, navigate regulatory change with confidence and scale operations sustainably. Conversely, weak governance exposes firms to heightened regulatory scrutiny, operational and financial risk and reputational damage.

The Direction of Travel

For FSRA and VARA-regulated firms, the direction of travel is unmistakable. Governance is no longer a static framework. It is a living system that must be tested, evidenced and continuously improved. Firms that proactively invest in governance will not only meet regulatory expectations but will also position themselves for sustainable growth, enhanced resilience and long-term value creation.

At j. awan & partners, we bring deep, practitioner-led expertise in supporting regulated entities across ADGM and Dubai's virtual asset ecosystem. Our Governance Advisory services are specifically designed to address the evolving expectations of FSRA and VARA regulators, including Board Effectiveness Evaluations, Governance Framework Design, Governance Policy Development and Governance Implementation and Ongoing Advisory.

To discuss what this means for your firm, contact us at clientrelations@jawanpartners.com or visit www.jawanpartners.com.