Risk management has advanced a lot in the 21st century. In the past, we all associated it with buying the insurance, and that was it, but now businesses are starting to focus more on their internal risks. Today, we’re seeing regulations being put in place that forces certain businesses into compliance. These are an effort to eliminate scandals and protect investors.
The line between risk management and compliance has become quite blurry since it has become a legal requirement. However, think of it like this. When you are failing to put the proper risk mitigation practices into place, then you are not in compliance. Therefore, risk, governance, and alliance must always be in alignment. This brings us to a concept known as compliance risk management, which we’ll dive deeper into later.
Non-compliance is risky in a lot of different ways. There are a ton of different outcomes that can happen to businesses that are not focusing on risk management. These outcomes include losing trust with consumers, fines, penalties, and a disruption in business.
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One of the problems that many businesses run into (especially small businesses) is that they believe that compliance alone is enough. The bare minimum is fine just as long as they are following regulations. However, businesses that create compliance risk management plans going above and beyond regulations are going to find themselves in a great position.
Another interesting thing is that some businesses will consider their non-compliance fees to be a normal expense and eat them. They feel that the cost of implementing a risk management plan is more costly than the fine itself. Government officials will identify this behavior and raise their fines and also reduce the time between inspections. Plus non-compliance puts businesses at risk. It’s not worth it!
Governance, Risk Management, and Compliance (GRC)
Governance, risk management, and compliance should be treated as close relatives. They all aim to protect a business against risks and address specific uncertainties. Let’s take a look at each of these essential areas.
· Governance: The system that a business puts in place to ensure that compliance risk management practice is being properly planned and followed. It manages the entire GRC process.
· Risk Management: All policies and actions taken by a company to mitigate risk. This is from both a compliance and business perspective.
· Compliance: How an organization complies with both internal and government regulations.
We have to put all of those together to create a GRC management system. This process can be seen in the Quality Management System of related medical services, where businesses access, identify, mitigate, and control all of the elements associated with GRC.
A lot of businesses try using software to solve all of their problems, but software alone is not enough. In the end, businesses must develop new practices at a fundamental level to become GRC compliant. Bad processes cannot be patched up using the software. You have to fix these processes at their very core.
The Benefits of GRC Convergence
First and foremost, having the right GRC processes in place is the key to unlocking huge success in business. It has always been one of the milestones that separated large businesses from small ones. Risk mitigation is an essential part of the decision-making process. It helps protect those decisions from losses both financially and reputably. Now that regulations are in place being GRC complaint will also save your business from fines and other penalties. Here are some other benefits:
· Being GRC conscious paints a realistic picture of potential risks associated with specific business decisions.
· Executives are all given one version of the overall picture. Without the proper processes in place, departments might not all be on the same page.
· The actual risks involved with certain decisions are more accurate so that stakeholders can make better investment decisions.
Requirements for Successful GRC
Now we’re going to look at the requirements for creating a GRC plan for your business.
Step 1: Perform a Risk Analysis
Make a list of areas in your business that could potentially be at risk and then assign them a number based on the level of risk involved. This will show you where your company is most vulnerable. You will use common rules to evaluate each area equally so that you can prioritize where to put in the most effort initially. Compliance risk management starts with a firm understanding of your weak points.
Step 2: Plan Actionable Updates
So you can’t fix everything in a day. That’s why you just took the time to prioritize areas where your business is the most vulnerable. The key is to create simple plans and not over complicate things. Having a large volume of highly technical documents is a big mistake that businesses tend to make. Strive to create strategic items more streamlined. This makes it much easier to manage the internal structure of your business.
Don’t forget to develop a method of effectively communicating these plans with all leaders in the company. Another big problem comes from miscommunication.
Step 3: Put it All Together
Compare all of these new policies with regulations to make sure your business is compliant. Then measure how these changes impact your business. You will also need to develop an internal system that regulates these new policies to ensure compliance. You do not want to fail an audit or inspection because of sloppiness. You’re devoting a substantial amount of resources to these new practices, so make sure they are being implemented.
It’s also important that you develop a plan for keeping track of new regulations so that you can become compliant as quickly as possible.
GRC is a Smart Investment
In today’s business world, all businesses are under pressure to perform at peak efficiency, so having a GRC program in place is going to make a huge difference. Identifying risks before they have a chance to impact your company is going to put you ahead of most businesses. In short, compliance risk management is a smart investment.
If you are struggling to develop a GRC program, then consider bringing in an outside provider like the Research Optimus team to help you get everything up-to-date.