GRC—Effectively Increasing the Culture of Risk Intelligence

Since the early 2000s, various industry and government organizations have expanded their compliance regulations to include risk mitigation strategies, policies, and processes for businesses. 

Compliance officers are virtually always under pressure from top stakeholders to convey the status of compliance risks and controls in real-time with the greatest accuracy feasible. Significant risk information is gathered and presented to all risks of the company in a timely way, allowing staff, management, and the board of directors to carry out their obligations. While all three lines of business must collaborate to identify and mitigate risks, compliance professionals must identify and manage compliance risks proactively, assisting the organization in avoiding possible regulatory or policy infractions. Businesses require integrated risk perspectives, established risk management rules, coordinated reactions to risk occurrences, and risk management technologies. To manage risk effectively, management and the board of directors must adopt a pragmatic approach to risk management and the operational discipline necessary to carry out this approach at the corporate level. To manage risk successfully, an organization's day-to-day business operations must incorporate risk management. While corporate executives may assist in establishing the ideal culture, this alone does not ensure that risk management choices are made correctly daily. However, sound structural and organizational design, job and responsibility descriptions, and suitable definitions of organizational units and reporting lines are critical for ensuring that business risk is handled reliably and effectively. 

Individuals and groups inside an organization — not simply a risk organization — have a significant role to play in implementing a business's risk management strategy. The objective must be to identify the most effective methods for risk integration into their core management procedures. A risk-based approach assists businesses in rethinking their corporate risk management to provide senior management and the board of directors with pertinent information about risks and opportunities to aid in the development of strategy and management effectiveness. 

What is a culture of risk intelligence? 

A risk intelligence culture is defined by the alignment of risk management with the organization's strategy and the promotion of an integrated risk management and insurance approach. A risk culture serves as the glue that holds the risk management infrastructure together, representing the shared values, goals, practices, and processes for risk integration into organizational decision-making and governance. Risk culture is also critical for resolving the inherent contradiction between producing corporate value via innovation and efficiency and safeguarding corporate value through risk appetite and risk management. 

To be successful, businesses must take a top-down approach to risk and compliance management and cultivate a culture of risk awareness. A risk management culture emphasizes transparency, bottom-up communication, the exchange of information and best practices, continuous focus on process improvement, and a strong commitment to ethical and responsible corporate behavior. To transform feeling into a robust culture of risk, workers must be aware of the impact of their decisions and actions on the company's greater objective. While the proper tone stresses strong ethical standards and compliance culture, it must be matched with a message that enables managers to take calculated risks in pursuit of short- and long-term commercial gains. When determining the need for adjustments to enhance the culture of risk, consider the influence of changes in strategy and structure, as well as the occurrence of external events, such as changes in the regulatory environment. Following an initial evaluation of the present risk culture, senior management should determine the necessity of organizational transformation and take the necessary actions to achieve it as instructed by the board. By comparison, risk management, corporate governance, and compliance are all integrated into a single risk management process. As a result, risk management strategies are increasingly incorporating business procedures for identifying and controlling risks to digital assets, such as confidential business data, personally identifiable information (PII), and intellectual property. Risks are often responded to according to their perceived severity, which may include control, prevention, acceptance, or transfer to other parties, whereas organizations typically manage a broad spectrum of risks. 

Although GRC (Governance Risk Compliance) is viewed differently by different firms, it often encompasses tasks such as corporate governance, enterprise risk management (ERM), and regulatory compliance. Disciplines, their components, and regulations must now be integrated, comprehensive, and enterprise-wide (the three primary features of GRC) — by the GRC-managed and supported (business) activities. IRM is transforming both the culture and tools used by risk and compliance teams to improve transparency and uniformity throughout the business. By incorporating more advanced quantification and monitoring capabilities into a company's day-to-day strategy implementation and concentration on important risks and opportunities, management may develop a composite risk profile fit for the digital era. Additionally, an integrated compliance data model adds tremendous value by providing a contextual perspective of risk, that is, in connection with other risks, controls, legislation, policies, functions, and objectives. By giving visibility into risks throughout the company and consistent and trustworthy data on the possible effect of those risks, technology may help raise stakeholder risk awareness. This capacity for risk comprehension and management helps firms to make more confident business judgments. However, CEOs and company executives are increasingly taking a proactive attitude to better strengthen their risk management abilities (based on their strategic and economic priorities and increasing levels of aspiration). Finally, they can achieve a genuine competitive edge and grow the value of the firm while taking risks into account. For example, the ISO 31000 principles give a framework for enhancing risk management procedures that businesses of any size or target sector may utilize. While ISO 31000 cannot be used for certification reasons, it can assist firms in conducting internal or external risk audits and comparing their risk management procedures to globally recognized benchmarks. 

Additionally, integrated solutions may assist firms in defining and connecting critical compliance aspects, such as objectives, procedures, risks, controls, and regulations. For instance, a company may be required to comply with new data privacy rules (compliance activities) that contribute to the reduction of IT risks (asset risk management activities), as well as specific internal data protection procedures (corporate governance activities). When separate compliance departments do not collaborate or integrate, whether it is for policy management, compliance risk management, regulatory change management, compliance case management, or regulatory reporting, a great deal of effort and data duplication occur.