Risk seems to be a four-letter word which can be easily ignored. But the consequences of the tiny word can be catastrophic. Risk is an unforeseen event that can cause damages, injury, or loss of property. For better understanding, we have seen people say:
“We need to take the risk of negotiating a thick jungle to get to the other side of the village.”
However, very few say: “We better be prepared to mitigate any eventuality.”
This is the place where compliance protects us.
Financial risk management helps us keep the risks away. This can be a rule book, guideline, or mentor that helps minimize the effect of the unforeseen event and effectively manage it. Compliance is never a compromise on ideologies or the way we think we can do the job but a well-structured list of dos and don’ts equipped with emerging trends and technologies, making ourselves compliant with rules, regulations, and policies.
Given the ever-changing business environment that requires robust risk management, there could be several reasons why Risk and Compliance have etched a prominent place in one’s mind. Organizations have gone way beyond to comply with regulations. One of them is protecting the personally identifiable information (PII) of customers as a risk management measure. As an individual or organization, the accountability flows down to the lowest of levels. A breach may get snowballed, inviting hefty penalties and loss of reputation of the organization or individual. The scenarios where compliance itself is at risk can be scary.
A few points to ensure compliance is by implementing:
- An effective and efficient Risk Management Plan with periodic reviews and upgrades.
- Regular audits at the granular level to prevent human error, leading to a compliance problem, jeopardizing risk management
- Training individuals about the situation with case studies
- Use of technology to mitigate data privacy issues for better risk management
- A governance council comprising knowledgeable leaders from different streams for a collective and effective contribution toward mitigating the threats arising out of breaches
- A strong process to control the risks has always provided the necessary inputs to the underlying technology building a robust platform for expansion and sustenance
The cost of being compliant as part of a risk management plan often acts as a major factor preventing organizations from implementing regulations. They instead adopt an alternative approach and sit back and say:
“We are good so far and let us wait and see what happens next.”
This siloed approach of organizations not only aggravates the situation (stressing the need for a risk management plan), but also nullifies the effort involved in building reputation. Cautious investment and onboarding the best in the business not only help grow the organization, but are also critical in the sustenance and continuation of the business.
There are several models on governance on risk and compliance as part of a risk management plan. The real benefit is if we are making the best use of these models. Governance is an outcome of risk and compliance management taken together. It all starts with:
Rapid advancement in the digital technology continue to reshape the world, making the world a smaller place. Due to this, the probability of an unforeseen event is unpredictable. The number of cybersecurity issues is increasing the risk of threats at the highest level. But are we prepared for such threats while remaining compliant, maintaining the confidentiality, integrity, and availability?
The following are a few tough questions to put forth as we assess the situation and endeavor to ensure compliance.
- How good are we in integrating all risks and compliance issues together in a single platform for easy access?
- How can we ensure that the data that is classified is PII is protected at different levels with entry and exit checks at each level?
- How is our monitoring mechanism and in case there are gaps, how can they be covered?
- How is our continual improvement process for getting better results?
- Is the technology good enough that can make the governance effective?
- Is the business model favorable to sustain with the governance policies and procedures or do we need something that can be customized?
An effective and efficient governance of risk and compliance has far more benefits than the insignificant issues that we face while implementing them. A few are highlighted below.
- High customer satisfaction helps business to expand exponentially with a trust factor involved that establishes a stronger connection between the organization and the stakeholders
- Reduce risk of financial impact maintaining transparency in reporting
- Introducing internal controls and guidelines further enhancing the governance model
- The cost involved in identifying and fixing the issues for being compliant is far more unpredictable with the additional burden of consequences
- The IT infrastructure is more robust with enhanced security and timely alerts.
- Establishes an effective and efficient channel for communication and sharing data between different teams across geographies
- Improved analytics for better prediction.
Though we move ahead with times, a lack of interest in keeping pace is one of the primary reasons we are left behind. The challenges that we face are:
- Not having a vision and compliance culture put on a single platform
- Complying the demands from the government and governing regulatory bodies with tough deadlines with hefty penalties
- Technological challenges
- A lack of expertise and knowledge available in the market
- Embracing and adapting to change for a better cause is never an easy task