Governance, Risk & Compliance management – burden or benefit?

By taking an integrated, enterprise-wide management approach, governance, risk and compliance can actually be turned into a profit-centre.

I am sure that it will not come as any surprise that to many organisations compliance to multiple legislative and regulatory standards is seen as another cost and resource burden impacting on  bottom line business goals.

 

It may be surprising though that to me, as the MD of a GRC (Governance Risk and Compliance) company, that this “hardened cynicism” is understandable and forgivable given that historically new business processes to meet “next big thing” needs are often perceived as having added little to the business other than cost.

 

With reference to compliance, some argue that the same cynics mantra can be chanted again. For as the tidal wave of recent new standards has appeared, with draconian penalties for non-compliance, many private and public sector organisations alike have adopted multiple systems to manage compliance problems on a case-by-case basis. Unfortunately, too often responsibility for ensuring compliance lay initially with individual line managers; not trained compliance staff. Here  imposition of new processes has led to a tick box culture where managers effectively do the minimum to comply hoping to minimise the impact on their department’s daily working practices. A recent Achiever survey revealed too that 8 out of 10 managers responsible for GRC felt that “overkill” levels of “noise” were too onerous and threatening management attitudes.

 

 Integration and coordination

However, often even where trained corporate compliance officers have been involved, the adoption of multiple, mutually exclusive systems has generally in my opinion failed and will continue to fail. This is not only because of the costs and resource commitments involved, but also because the complete lack of integration or coordination between these systems, across the enterprise generates significant and unnecessary complexity. This in turn results in a lack of management buy-in and understanding.

 

However, before one predicts a widespread backlash, I see compliance starting to emerge from this self-inflicted and troubled puberty, and that its real and unsung benefits are driving the desire by organisations themselves to invest in getting GRC right. The reasoning behind this change is that effective management of compliance and risk issues are now being seen not as the pariah of control freaks hell-bent on frustrating business, but more as a potential profit-centre. This attitudinal turnaround has happened because it has dawned on senior management that the only effective way forward is to deploy a centralised enterprise-wide system, which eliminates the problems of using multiple systems.

 

For any enterprise wide Governance Risk and Compliance management system to be effective though, it must delivers a single, integrated management strategy across the whole organisation, be harmonious with the organisational or business goals and drill down into every-day business processes. In short, we are talking about GRC systems going beyond mere compliance, instead serving as a catalyst for enhancing overall business consistency, efficiency and accountability. This is in sharp contrast to the historic approach of multiple systems that do little more than mirror legal requirements.

  

 

Ease of access to infromation

On the compliance front, this approach provides a framework that immediately saves money, eliminates duplication and introduces increased efficiency and productivity into the business. This framework coordinates all areas from health and safety and employment legislation to high profile regulatory compliance areas such as Sarbanes Oxley and Basel II. It should integrate too with key market specific directives such as MiFID in the financial services industry.

 

It must be role sensitive when it reaches operational management – in other words they can access exactly the information they need for their role. Each manager should have a clear single view of those GRC standards that apply to their area of operation, ongoing performance against these criteria, links to archive resources and if possible up to the minute RSS feeds to inform or alert them to daily task-relevant developments that impact on their ability to comply or avoid risk. In short, the system is not a burden to be coped with, rather it is an asset that can improve the role performance and the upward and horizontal lines of communication between departments.

 

In an ideal world, access to this information is delivered by portal or at least via the existing company intranet. The responsibility for pulling this together should either rest with a trained compliance operation or the IT department.

 

The benefits of this integrated role-sensitive approach vary from organisation to organisation but are likely to include the reduction of system maintenance costs, training requirements, and IT support resources and ensures greater take up by and communication between employees across the business. More importantly, the consistency and structure it delivers on an operational day-to-day basis will help staff at all levels understand their roles and responsibilities better and improve the organisation’s ability to make better decisions, faster by defining decision rights for new services and in particular the decisions rights that exists between the business & IT. 

 

By this means GRC ensures that all organisational stakeholders have a clear understanding of what decisions need to be made, who should make them when. This eliminates confusion and uncertainty; two of the greatest threats to teamwork and the ability of teams to work well together.

 

Further, an efficient enterprise-wide roles based system will enable automation of ongoing policy and process definition & recording; manage access rights, alerts and escalations, and deliver timely actions to the right people for follow up. The resources previously used down the line propping up multiple systems will be free to allocate back to achieving operational goals, concentrating on business tasks. IT staff are also more in touch with the business too and can work better with individual units delivering high levels of service at a lower cost.

 

 

Benefits of compliance management

When one looks at the risk side of the equation, the enterprise wide approach delivers even greater benefits. With the introduction of an integrated and centralised, risk based strategy the areas of highest risk and cost to the business are flagged more quickly and consistently allowing them to be addressed as a priority. Management are able to see at a glance where the highest problem areas occur and with what frequency specific problems arise. This ensures that they are able to act more quickly and consistently than before. 

 

Previously, it was often difficult to know the areas of highest cost and risk to the business relying instead on a “they who shout loudest” gains most attention culture. Less vaunted risks would often be overlooked and yet prove to be the most costly of all. This was not only in terms of the costs of recovering from a problem but also in the worst cases, serious damage to corporate reputation and goodwill. This of course ultimately is reflected negatively in the balance sheet. 

 

In contrast, by determining that Governance, Risk and Compliance are systematically managed enterprise-wide, there is a very different impact on the balance sheet: greater profitability. This one fact alone will ensure that the technology to drive GRC forward is destined to become an essential element of best business practice. 

 

 

 

 

This was last published in October 2007

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