Technology-driven governance, risk and compliance

February 2025  |  FEATURE | RISK MANAGEMENT

Financier Worldwide Magazine

February 2025 Issue

Companies today face increasing regulatory requirements around governance, risk and compliance (GRC). At the same time, their GRC processes are more frequently scrutinised by a range of stakeholders.

New GRC-related developments include artificial intelligence (AI), operational resilience, environmental, social and governance (ESG), and data privacy, among others. As these challenges evolve, companies are turning to new ways to meet their compliance obligations.

Notably, compliance solutions and obligations are no longer the exclusive purview of the chief compliance office or chief risk officer. Instead, compliance has evolved to encompass the entire organisation to some degree. This requires a strategic approach to managing the risk profile of the company’s varied business units, functions and projects.

Digital GRC

Organisations are moving away from spreadsheets and manual tasks, which leave companies vulnerable to mistakes. They also cannot provide a comprehensive, timely and holistic view of a company’s risk exposures.

To help refine and improve their GRC processes, organisations are embracing technology. Advanced software solutions, including automation and data analytics, allow companies to identify and mitigate risk more efficiently and effectively than before.

With GRC technology, companies can track risks in real time. Managing end-to-end processes and collating all risk-related information in one place provides companies with a productivity boost. Integrated GRC technologies can save on labour, too.

AI and machine learning can predict risk and automate compliance processes. Software continuously monitors the environment to ensure companies maintain regulatory compliance and avoid penalties from state and federal regulators.

Ultimately, technology embeds efficiency, precision and interconnectedness within an organisation. GRC platforms provide comprehensive risk visibility, enhance decision-making processes and facilitate regulatory compliance across an organisation.

Cloud-based GRC solutions provide efficient, scalable and remote access. Their collaborative capabilities allow organisations to manage GRC processes remotely, ensuring continuous monitoring and real-time updates. Though it may be expensive to introduce GRC solutions into a business, the initial financial outlay is likely to be offset by savings in the long run.

GRC technology enables organisations to mitigate risks and achieve effective governance. They incorporate various processes and systems to create a comprehensive framework for managing GRC activities.

Artificial intelligence (AI) and machine learning (ML) are increasingly important to GRC. Automation of routine tasks provides predictive insights and enhances decision making. Potential risk and compliance issues can be identified before they escalate, so they can be proactively managed. And while they still require human oversight, AI and ML tools can reduce the number of repetitive tasks employees must undertake.

An eye on third parties

Among the areas where these tools are being deployed are third party and supply chain risk management. With companies relying on third parties for some of their most vital functions, supply chain and vendor management has become increasingly complex.

Companies can use GRC technology to identify and mitigate potential vulnerabilities within third-party relationships and processes. Implementing third party risk management workflows enables companies to streamline and automate information related to third parties, including key documentation such as agreements, contracts and other policies. More vendors can be assessed in a shorter amount of time. An easier, more efficient process also reduces costs.

One of the most significant benefits of GRC platforms is their ability to facilitate detailed risk assessments of third-party vendors. These assessments consider essential factors such as financial stability, regulatory compliance and cyber security practices. GRC technology helps identify potential risks early in the engagement process, allowing organisations to make informed decisions about which vendors to partner with, potentially safeguarding their operations from future disruptions.

Continuous monitoring capabilities enable organisations to oversee vendor activities, track compliance with contractual obligations, and stay informed about changes in the vendor’s risk profile or regulatory environment. Issues can be raised and addressed in real-time, minimising negative impacts.

Stumbling blocks

When taking on GRC technology, companies do open themselves up to potential pitfalls. Implementation, for example, comes with risks. GRC technologies often need to integrate with other enterprise systems. If done poorly, integration can lead to data silos, inconsistencies and operational inefficiencies. Using standardised protocols and ensuring compatibility with existing systems can mitigate these risks.

The nature of the data handled by GRC systems also makes them attractive to cyber threats. Robust security measures, such as encryption and multi-factor authentication, are crucial to protect the sensitive data organisations hold. Compliance with regulations such the EU’s General Data Protection Regulation must also be observed.

If companies continuously monitor for evolving threats and regulatory changes, they may avoid surprises down the line. Risk assessments that identify vulnerabilities enable organisations to institute targeted mitigation strategies.  Addressing challenges practically allows organisations to maximise the benefits of GRC systems and strengthen their governance and risk management strategies in the process.

Investing

GRC obligations are unavoidable. Companies must do everything they can to minimise the threats they face and avoid potential sanctions arising from compliance breaches.

By investing in technology, companies can anticipate and mitigate potential risks, ensure compliance and observe good governance. This requires a proactive, forward-thinking approach to optimising GRC practices.

© Financier Worldwide

BY

Richard Summerfield