Managing Risk in an Interconnected World
Our brains are wired to seek certainty. Indeed, neuroscience has shown our need to know what’s going to happen next is as powerful as our need for food and water; not knowing makes us uncomfortable, even stressed. Because we live in an uncertain world, this psychological need means we invest a significant amount of time and effort trying to exert a degree of control over what happens around us.
This is not an easy task. In the last two years alone, we’ve had indisputable proof of the world’s capricious nature and our limited ability to either foresee cataclysmic events or fully appreciate the depth and breadth of their consequences. Sometimes it’s a singular occurrence, such as a large container ship running aground and blocking the Suez Canal. Sometimes it’s a complex set of circumstances combining to create a shortage of a small but fundamental building block of modern life – for example, the current shortage of computer chips impacting not only computers and smartphones, but also everything from Volvos to fridges, LED displays to wind turbines.
Businesses are basically conglomerations of people, so it’s not surprising they share our need for control and become equally anxious when it’s hard to find. Sadly, our ingenuity is only exacerbating the problem. As systems and processes span departments to create more efficient value chains, a risk in one area is unlikely to remain contained in its silo. Worse, businesses are not only becoming more connected, but also more extended through outsourcing, the Cloud, and reliance on global supply chains. More interfaces and connections mean more – and more complex – risks.
Although events such as pandemic, war, climate change, and the looming threat of global recession have grabbed the headlines in the last couple of years, they’re just adding to the already long list of “day-to-day” risks businesses need to manage – cyber-attack for example, or compliance, or even staff shortages. Regulations intended to reduce risk (such as Sarbanes-Oxley, HIPAA, PCI DSS, SMCR, CASS, and DORA) only add to an ever-expanding landscape of complexity which includes IT security, data protection, health & safety, and other codes of practice.
As individuals, we develop strategies for anticipating what’s going to happen next, managing our response, and dealing with uncertainty. Governance, risk management, and compliance (GRC) is the business equivalent. It’s a means by which organizations can manage their operations and supporting services to ensure they’re complying with regulation, adhering to policy, and meeting the right standards in terms of performance.
Software tools can help create a standard way for organizations to manage uncertainty and reduce corporate anxiety. Some of the reasons why businesses invest in GRC platforms include:
- increasing your enterprise value by being able to prevent and mitigate the impact of risk, thereby being more likely to meet market and shareholder expectations
- being able to make better and more timely decisions
- detecting exceptions to reduce damage as quickly as possible
- automating controls for increased efficiency
- reducing compliance costs and audit complexity
The best GRC tools take a holistic view of your organization. As discussed above, today’s business risks are usually multi-threaded and interconnected. A problem in one part of your organization (or one of your external partners) might have a disproportionately disruptive impact on another part. One department’s flap of a butterfly’s wing might be another’s tempest. Tools which look at problems in isolation, rather than considering their upstream and downstream consequences, just aren’t good enough.
An effective GRC tool must be able to:
- capture and grade risks and threats based on regulatory and internal governance requirements; create, implement, and maintain controls
- manage breaches or incidents
- report to executives, internal audit teams, external regulators, and third parties
Crucially, it should also be able to link controls to operational processes because this allows you to embed the checks and balances you need into your operational DNA. Think of it as building better reflexes for your organization.
In a world in which risk is getting harder to manage and new risks are emerging every day, GRC tools that don’t allow you to accurately see and manage the interconnected whole don’t offer control, merely complacency.
BusinessOptix GRC module helps organizations:
- identify governance, risk and compliance requirements
- create, implement and maintain controls linking these controls to operational processes
- manage breaches or incidents
- report to executive and internal audit teams, and external regulators and 3rdparties
To learn how we can help you build better governance, risk and compliance reflexes for your organization contact us today.