Complete governance, risk, and compliance (GRC) systems are crucial to create for the full-fledged performance and profit of organizations. However, certain organizations do not consider GRC as one integrated system and make the mistake of considering internal governance, outside risks, and regulatory compliance as individual policies, somewhat to reduce the costs involved. The following practices provide essential information and insights on optimally creating a comprehensive GRC system:
1. Executive Level Chief Risk Officer
Due to the organization’s structure hierarchy, the GRC department heads may not report directly to the CEO, causing risk management issues to escape the notice of the CEO. Appointing an executive level Chief Risk Officer who reports directly to the CEO can foster the authority to address all risks.
2. Integration of GRC Departments
With technologically advanced and globalized economies, risk managers today address financial, operational, strategic, legal, and other risks. Expertise in each risk domain and integration is required for the best performance of GRC departments.
3. Empower Risk Oversight Committee
Risk oversight committees instruct board members about risks, discuss strategic risks, approve risk appetite, improve corporate governance, and more. This committee addresses all organizational risks unlike a mandatory audit committee predominantly focused on financial risks.
4. Prepare a Risk Management Strategy
Risk management strategies include risk trading, diversification or risk steering, and loss controlling depending on the risk attitude and economic environment. Such strategies help understand the business strategy and management attitude.
5. Build a Risk Culture
A risk culture with management training and communicating with employees ensures comprehension of risks and uncompromised focus on risk assessments and audit reports.
6. Measure Risk Appetite
Without risk appetite, some organizations take excessive risk, some take too less, while some organizations decide a rough estimate of risk appetite to take business decisions. So, models to calculate risk appetite are advantageous.
7. Improve Risk Reporting
Improving risk reporting or communication between risk managers and the board, senior and middle managers can help enhance smooth internal functioning and selling.
8. Focus on Strategic Risks
Risk managers should assist senior management in addressing intentional risks, such as emerging market risks, market demand, financial market volatility, and more.
9. Become a Business Partner
Risk managers need to morph risk management functions into transformation and business value enhancers that provide a competitive edge to business.
10. Invest in Tools and Technology
For proactive and continuous risk management, investment in tools and technology prepares the organization for unexpected risks along with enhanced resource allocation and utilization.
Overall, these practices will reduce losses, enhance business growth, and ensure GRC compliance.