Understanding Governance, Risk and Compliance solution in post pandemic economy
When Covid-19 pandemic hit the world in early 2020, the biggest challenge businesses faced across the globe was the shift from working every day within the office to working remotely. Thus regardless of the size, nature or type of business, a need for digitalization of all the business processes and operations was recognized worldwide in order to have a chance of surviving the global lockdown. However, the challenge was not just the automation of key business processes but also exposure of the businesses to risks associated with the automation but the identification and management of such risks was not without complications.
Initially, it was the lack of experience of working in a remote environment along with the unavailability of essential tools and equipment that caused disruptions and delays. Therefore, risk managers were tasked with the job to incorporate learnings from the pandemic to provide more appropriate settings for the long run. As a result, the risk management function was forced to put work into building flexibility and resilience for the business for the future.
With the world now finally looking to emerge from the pandemic, risk managers now have to look forward again to provide solutions related to governance, risk and compliance in the post-pandemic economy mainly by focusing on a more technology-driven approach.
What is GRC?
GRC stands for Governance, Risk, and Compliance and includes systems and processes implemented by an organization for the management of risks, following regulatory changes and ensuring their compliance. Governance ensures that the policies and processes of an organization are designed in a manner that enables monitoring of organizational activities. Risk management includes the development of processes that enable the identification and control of risks in organizational policies and practices. The role of Compliance is to ensure that internal (and in some cases external) policies, rules and regulations are complied with.
The Rise in Digital Adoption of GRC
Before the Covid-19 pandemic, majority of financial institutions were reluctant to adopt digital technologies in their risk and compliance functions mainly due to the sensitivity and significance of these functions. However, due to lockdown across the globe, the priorities shifted towards a more digital approach in the areas of GRC. GRC applications, therefore, also evolved drastically in order to keep pace with the rapidly evolving and increasingly complex nature of businesses.
Financial Institutions worldwide are now more focused on adopting digital technologies in their GRC function in order to comply with the regulatory requirements and management of risks in an effective and efficient manner. Digital technologies such as cloud, big data, and predictive analytics have been able to help in enhancing transparency, improving decision making as well as reducing the cost of risk and compliance management functions. However, any such digital solution must be built keeping in mind the following important aspects in order to embrace the digital age:
- Embedding of solution across the organization
While the traditional GRC tools were used to identify the data breaches and issues within the organization, due to the rapid changes in business technologies, the new solutions must be able to bridge the gap and come up with solutions like never before. A number of leading organizations, including financial institutions, are now focused on investing in new technologies to improve processes that not only manage operational risks but also third party risks, management of compliance functions, IT risks, etc. The use of such tools in GRC processes enables an organization to automate and standardize processes, analyze risks and escalate to the different levels of organization accordingly.
- Keeping both internal and external factors in mind
In order for a GRC framework to work effectively, the solution must be able to take inputs from various internal and external sources surrounding the organization and provide meaningful results to help in decision making. A dynamic solution will assist the stakeholders in managing risks in a better and efficient manner.
A GRC solution must be able to use the organizations’ encounters with risks related issues in past and provide a list of scenarios with a possibility of recurrence. Key features must include analyzing past events to track, terminate, or report an issue before it happens. However, for such a solution to work, organizations need to analyze their systems and processes carefully.
- Enabling employees to make decisions
A digital solution for GRC should be reliable enough for employees to make decisions on their own on the basis of available data and predefined scenarios. Being the end users, organizations can also allow employees to participate in the implementation of the GRC framework to enable them to gain more in-depth knowledge of the system.
What makes GRC Transformation Significant?
The structured set of practices and processes of a well-designed GRC solution helps an organization align its IT with its business objectives. A well-integrated GRC solution helps an organization in identifying and managing key activities by breaking down the barriers between business units and requiring them to work in cohesion for the achievement of organizational goals and objectives. Several global trends that make GRC transformation significant for organizations are:
- Regulatory Pressures: Financial institutions these days are under constant pressure of meeting regulatory deadlines, therefore, a well-designed GRC solution will help ease such pressure to some extent.
- Third Party Risks: The digitalization of processes has resulted in increased exposure of risks such as third party risks including cyber-security and audit related risks. Organizations, therefore, need the assistance of a GRC solution that helps in mitigating these risks accordingly.
- Significant Increase in Data: The digital age has significantly increased the data that the risk managers are required to go through each day, hence an adequate GRC solution can help managers utilize their time efficiently.
The use of digital technology in the GRC function brings multiple benefits to organizations such as improving productivity, increasing efficiency and saving costs. Some of these benefits are:
- Cost Savings: Perhaps the most important benefit for financial managers, a GRC solution results in saving organizational costs by ensuring compliance with regulations and thus avoiding fines for non-compliance. With cross-functional visibility and less manual monitoring, a GRC solution allows for better management of risk.
- Time Saving: Increase in operational efficiency by using a GRC solution enables managers to do more in less time and perform other routine tasks on a timely basis.
- Better Decision Making: A greater oversight of organizational risk leads to much more informed decisions about investments, developments and procurement. Better decision-making is pivotal not only in market expansions, technology implementations but in the overall long-term expansion of an organization.
- Continuous Compliance and Accountability: Automated processes as a result of GRC solution pave way for better compliance of regulatory requirements by removing the responsibility from employees and helping managers effectively manage risk and compliance related tasks.
- Operational Stability: By centralizing the knowledge of risk and compliance, GRC solution increases risk visibility and accountability. It also facilitates forecasting, since it has access to updated and accurate facts and figures.
Digitalization of GRC and Future Expectations
As the world comes back to operating in the way it used to a couple of years ago before the pandemic began, it is fair to say that digitalization of business processes and procedures is here to stay. However, the recent wave of digitalization which saw the development of tailor-made expensive solutions is likely to be eclipsed by tight financial controls.
GRC solutions will continue to evolve with the emergence of new risks and the availability of more data with the passage of time and in the near future, will be able to provide features such as:
- Centralized Control: There are numerous benefits related to having centralized business processes while implementing a GRC technique. The most important being, it allows managers to have an outline of the complete list of controls that are relevant to an organization. Moreover, they provide consistency in an organization’s approach to GRC and increases the speed of data collection and its management. Centralized controls are, therefore, going to be an important feature in the future to fast track the process of decision making.
- Automation of GRC function: A GRC solution that is unable to automate workflows or reporting is perhaps outdated and needs to be upgraded/replaced. GRC solutions in the future will be able to better automate workflows and consequently eliminate the possibility of human errors and improve decision making.
- Flexibility: A GRC solution should not restrict working in a certain way only, particularly when it does not meet the organization’s business challenges. In future, GRC solutions will be more flexible and easily customizable to suit the organization’s requirements.
- Easy Task Delegation: Automated task delegation will not only result in speeding up processes but also increase the efficiency of the entire workflow process by delegating the task to the most appropriate individual.
- Customization of Reports: In this age, where the size of any organization’s data continues to grow bigger each day, the business world is moving towards highly intuitive analytics and reporting. Therefore, GRC solutions nowadays are able to create customizable, in-depth reports that suit organizations’ requirements enabling better decision making.
Managing organizational risks is not just about data breaches or cyber attacks, it is more about the processes, policies, systems and people involved. A smart organization, therefore, aligns its digital strategy with its risk functions.
In order to identify the right GRC solution for an organization, the following tips need to be kept in mind:
- After continuous monitoring of organizations’ risks, high risk areas should be identified. The GRC solution must also be able to prioritize the areas which are significant to the success of the business.
- All the relevant emerging risks the organization is operating in, need to be understood. GRC solution must be updated to manage these current and future risks.
- Identify and understand both internal and external threats and incorporate the strategies to mitigate the same into GRC solution at a very early stage.
- Recognize that the global business landscape is continuously changing in response to the changing economic conditions due to the pandemic. Therefore, in the future, new and unknown risks might possibly emerge.