Delegation of Authority Matrix: A Guide

A delegation of authority matrix is a table that shows, for each type of business decision, who in the company may approve it, who must recommend or review it first, and who must be informed. It turns the board’s general powers into clear, written limits for managers, so that spending, hiring, contracts and payments are approved by the right person at the right level. Boards, external auditors, banks and investors ask for it because it is the simplest proof that a company controls how its decisions are made.

What is a delegation of authority matrix?

In most companies, the board of directors, or the managers named in the articles of association, hold broad powers to run the business. No board can approve every purchase order or every new hire, so it delegates part of its authority to the chief executive, who delegates further to department heads and managers. The matrix records that chain in one document.

A typical matrix has:

Rows listing decisions, grouped by area: finance, procurement, contracts, human resources, sales, assets, legal and regulatory matters, and information technology.
Columns listing roles, not names: the general assembly or the partners, the board, board committees, the chief executive, the chief financial officer, department heads and managers.
Cells with a short code showing each role’s part in the decision, such as approve, recommend, review or inform.
Limits where relevant, such as the highest contract value each level may approve. The company sets these limits itself, based on its size and its appetite for risk.

Governance, Risk & Compliance — Knowledge Base — Governance, Risk & Compliance

Why boards and auditors ask for it

Internal control. Auditors test whether transactions were approved by someone with the authority to approve them. Without a written matrix, there is nothing to test against.
Board oversight. The board remains responsible for what it delegates. A clear matrix shows what it kept for itself and what it handed down.
Speed. Managers know what they can approve without escalating, so routine work moves faster.
Segregation of duties. The matrix helps make sure that the person who requests a payment is not the same person who approves and releases it.
Banks and investors. Banks need to know who may sign, and the matrix should match the signing mandates given to them. Investors and lenders often review it during due diligence.

Listed companies in Saudi Arabia follow the Capital Market Authority’s Corporate Governance Regulations, which deal with the board’s powers and how it delegates them. Unlisted companies are not bound by those regulations in the same way, but many use them as a reference for good practice.

How to build the matrix

Start from the law and the articles. List the decisions that the Companies Law or the company’s articles of association reserve for the general assembly, the partners or the board. These should stay at that level and not be pushed further down.
List the decisions. Go through each function and write down its recurring decisions: budgets, capital spending, purchases, contracts, payments, hiring and terminations, salary changes, write-offs, discounts, legal claims, and opening or closing bank accounts.
List the roles. Use job titles from the organization chart, not people’s names, so the matrix stays valid when staff change.
Agree the codes. A common set is A for approve, R for recommend, V for review and I for inform. Keep the set short and define it on the first page.
Set the approval limits. Decide, for each type of decision, the level of value or risk each role can approve. Base the limits on the company’s budget, transaction volumes and past exceptions, and do not copy another company’s amounts.
Add conditions. Note when an approval needs two signatures, when the decision must fall within the approved budget, and when an item outside the budget must go one level higher.
Test it on real cases. Run recent transactions through the draft and check that each one lands with a sensible approver.

Linking the matrix to the articles and policies

The matrix does not stand alone. It sits between the company’s articles of association, which define who holds authority in the first place, and the detailed policies that describe how work is done. When they conflict, confusion follows and auditors report it.

The procurement policy should refer to the matrix for approval levels rather than repeat them.
The financial policies, including payments, petty cash and write-offs, should use the same limits.
The human resources policies should match the matrix for hiring, promotions and terminations, and should follow the Labor Law and the company’s internal work regulations.
Powers of attorney and bank signing mandates should match the matrix, so that no one can sign externally beyond what the matrix allows internally.

The articles or a board resolution give the matrix its authority. Without that link, it is just a chart.

Review, approval and sign-off

The matrix should be approved by the body that holds the powers being delegated, usually the board of directors, or the managers or partners in a limited liability company. Record the approval in a resolution, date the document and give it a version number.

Review it on a regular cycle set by the board, and whenever something material changes: a new organization structure, a new business line, a new chief executive, a major change in the budget, or audit findings about approvals. Keep the old versions so that auditors can check which matrix was in force when a past transaction was approved, and make sure every manager has read the current version and acknowledged it in writing.

Common mistakes

Names instead of roles, which makes the matrix out of date with every resignation.
Delegating what the law or the articles reserve for the general assembly or the board.
Limits copied from another company that do not reflect your size, so either everything escalates or nothing does.
No rule against splitting transactions. State that dividing one purchase into smaller ones to stay under a limit is not allowed.
The same person requesting, approving and paying.
No rule for absence. Define who approves when the holder of an authority is on leave.
A matrix the systems ignore. If the accounting or procurement system lets anyone approve anything, the matrix exists only on paper. Set up approval workflows in the systems to follow it.

Frequently asked questions

Who prepares the delegation of authority matrix?

Usually the finance or governance function drafts it with input from department heads, the chief executive reviews it, and the board approves it.

Is a delegation of authority matrix required by law?

For listed companies, the Capital Market Authority’s Corporate Governance Regulations set requirements on how the board exercises and delegates its powers. Companies in regulated sectors, such as banking and insurance, should also check the governance rules issued by their supervisor. For most other companies, the matrix is a matter of good governance rather than a separate filing requirement, but auditors and lenders commonly expect it.

How often should the matrix be updated?

On the review cycle the board sets, and straight after any material change in structure, strategy or leadership.

Can a small company use a simpler matrix?

Yes. A small company may need only one page covering spending, contracts, payments and hiring, with two or three approval levels. The principle stays the same: written limits approved by the owners or the board. Innovant can help you draft the matrix, set limits based on your budget, and align it with your policies and systems.

Book a free consultation with an Innovant advisor.

Delegation of Authority Matrix: How to Build One for Your Company