This Report is about the state of governance. Few would doubt that the conditions of governance have changed -- and continue to change -- as the early 21st century seems to enter a period of profound uncertainty. Yet, at the same time, the world seems alive with a cacophony of approaches -- old and new -- on how to improve governance and, ultimately, policy outcomes. This Report -- the first in a series of annual editions produced by the Hertie School of Governance -- seeks to address the implications of the current state of the world in terms of "good governance," that is, the effective, efficient, and reliable set of legitimate institutions and actors dedicated to dealing with matters of public concern, be it in the field of financial markets, health care, security, or migration, and across local, national, and international levels. Following an introduction that offers a framework of basic concepts and models, The Governance Report 2013 then goes on to explore a number of global challenges and the reasons behind seemingly lacklustre responses and highlight the need for responsible sovereignty; examine in depth the challenges of financial and fiscal governance with a focus on the trade-offs and ways to address them; analyse key governance innovations and their potential for success; and assess existing indicators of governance, while proposing a new framework for collecting, interpreting, and applying governance-related information. The findings lead to a set of concrete proposals on the way ahead.