Companies around the world are constantly working to reduce the risks facing their organizations while maximizing the return on their investments. They are looking to build a business founded on strong customer service and quality products while mitigating financial or quality risks.
Finding an effective way to manage those risks might feel overwhelming.
Every company faces risk. That’s why companies commonly use governance, risk, and compliance (GRC) platforms to help them make smarter risk-based decisions and gain a broader understanding of all the risks across the company. A risk-based approach allows you to make informed decisions on growth strategies, regulatory impacts, operations, and compliance.
You might think that you need to devote an extensive amount of time and resources to properly manage risk. That’s why many companies just remediate identified issues or findings without really understanding how the risk affects them. That narrow approach can stifle productivity and growth if companies focus their energy and efforts in the wrong areas.
You don’t necessarily need to be afraid of risk in your organization. Every company carries different levels of risk based on the innate nature of the business and the products offered. You will never be able to eliminate all risk, and even if you spent a lot of time and money, risk still would remain. The key is to manage your risk down to a tolerable level.
You should evaluate your risks and set acceptable tolerance levels. Risk tolerance is the level of risk or the degree of uncertainty that is acceptable to your company. Many companies try to track risk programs through spreadsheets, point solutions, and more, but that is inefficient. Enterprise risk, operational risk, vendor risk, personnel risk, regulatory risk, and more all need to be tracked in a unified manner, with a common risk criteria and rating.
One of the best ways to centralize all the different channels of risk is to use a GRC platform to bring visibility to all levels of the organization. That way, all risk can be identified, communicated, and properly addressed.
The key to running a successful risk management program is knowledge. If you’re adequately informed on the status of risk within your company, then you can proactively make decisions that can benefit your customers, employees, shareholders, and brand.
Data is important not only for reporting and compliance reasons. It’s essential to making educated business decisions. Just as when you select stocks for your portfolio, you want to analyze data for the company. If you have no data available, then you probably wouldn’t buy a stock. Managing risk is the same.
For example, you might have a positive connotation associated with one of your third-party vendors based on nothing more than a flashy brand name or a gut feeling. If you don’t have the quantitative data to back up a decision, not only could it be the wrong move, but there’s a chance it could end up costing you in the long run. Everyone in the organization has a role in managing risk, and part of that role is to share information related to known risks so better business decisions can be made across the company.
A GRC solution that effectively collects and analyzes detailed information in a centralized location can help you make better-informed decisions and reduce additional risk rather than introduce new threats.
Risk management affects the operations of your organization, and it can have a tangible impact on how your employees work. The more effectively you can communicate risk across the business, the more your employees will be able to grasp the importance of properly managing risk and the vital part they play in maintaining the health of the organization.
If you are dealing with a risk, chances are several others in the organization are trying to manage that same risk. A GRC platform is a simple way to group similar risks and allow collaboration and oversight so risks can be managed consistently. A shared approach to managing risk also will encourage accountability with your employees and allow them to deliver information to the management level. Additionally, you easily can share and communicate the information the GRC solution collects throughout your organization, so you aren’t relying on one individual or department for reporting details.
You don’t have to shoulder the challenge of continuous risk management alone. A centralized GRC tool can help risk leaders oversee the organization and provide guidance and recommendations for a unified approach to risk.
A one-size-fits-all strategy doesn’t work with risk management. You need to account for all risk throughout your entire organization, including risk faced at local levels and its impact at the enterprise level. And risk isn’t restricted by region. It also can be tracked by product, project, facility, or department. Your enterprise risk team cares about all risk, but local leaders need to manage their risk effectively as well, so it’s important that your GRC platform is customizable. Failure to manage risk at a local level can be costly.
For example, a manufacturing plant in the United States with thousands of workers might face the same risk as a strategic startup manufacturing plant in another country that has only 10 employees. Let’s say the negative impact of risk can be valued at $1 million for each location. For the larger plant, this risk might be considered lower, because the company is part of a billion-dollar organization. However, the impact might be more severe for the startup plant, which is generating only $5 million in revenue. The leaders would want to remediate the risk appropriately, so it doesn’t have a negative impact on their plants and success.
Your company likely relies on third-party vendors to provide you with a variety of resources, services, and tools. But what happens if a vendor goes out of business? What if there is a delay in production or delivery? How will your company be affected? And how can you mitigate risk in these types of situations?
Your GRC platform can be used to centralize the external risks that come with third-party vendors. You should have the tools you need to evaluate all areas of supply chain management, including inventory, equipment maintenance, and logistics. You can take advantage of the evaluations to position yourself as a strategic partner for vendors you want to continue doing business with, or you can find new vendors if you identify issues that bring unwanted risks.
Your GRC strategy doesn’t need to be cost-prohibitive. In the end, it likely will cost you more to implement an unbalanced or incomplete risk management strategy rather than one based on your organizational needs. You can use the intelligence and information that is collected to make appropriate responses by allocating resources to areas of need and fostering innovation through new initiatives and strategic growth.
Evaluating risk also can help you handle strategic risk, operational risk, and even risk associated with mergers and acquisitions. For example, when you acquire or merge with another company, financial and strategic decisions are being made, and you want to be able to look deeper than just the surface financial and strategic impacts. You want to have a full window into how the change will affect your operations and brand – both positively and negatively. Your GRC platform will help enable you to manage regulatory impacts, consolidate duplicate resources, and merge asset data into a centralized platform once the M&A deal is completed.
Crowe has helped clients use the ServiceNow® platform to create an integrated GRC solution that provides the solid foundation they need to balance risk management throughout their organization.
Learn how Crowe uses the ServiceNow platform to provide GRC solutions to a wide array of industries, or schedule a demo.
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