Compliance is often a logical, externally driven starting point for risk management programs. Staying ahead of changing regulations can be a daunting task. Factor in disruptions like the pandemic and the evolving business landscape and it becomes clear that no single risk management function standing alone can adequately protect an organization from risk.
With integrated risk management, companies go beyond compliance to layer on audit management, enterprise and operational risk management, third-party governance, and other functions. This layered, “mesh” approach creates a more holistic model providing depth to the risk management strategy.
In our whitepaper, “The State of Integrated Risk Management”, we outline the lessons learned by those who thrived in their digital transformation efforts during the pandemic to help companies along their journey to improving business outcomes through operational resiliency. Get the insights and read more about the four themes of operational resiliency here.
Compliance is Still Foundational but Not the Endgame
Many times, individual departments may create their own compliance processes to address policies and meet regulatory obligations. This siloed approach makes it difficult to identify, prioritize and respond to issues that impact your business.
With changing priorities and resources stretching due to shifting business needs, disconnected processes not only impact an organization’s productivity but also its ability to sustain and grow the business. By establishing a coordinated and consistent compliance program, the executive team can get the full picture of the state of compliance across the entire organization. Organizations should establish formal processes for stakeholders to understand and manage changes that may affect the organization’s compliance, including how new and changing activities may impact the organization’s obligation.
A coordinated approach to compliance improves operational resiliency and should create a proactive approach that supports a holistic risk management strategy. More than 1/3 of respondents in our survey stated a risk-based compliance methodology is a priority for them in the next two years illustrating the cross-over between compliance approaches and risk management.
Why Operational Resilience is End Game
While compliance is a critical component of managing risk, operational resilience has become an increasingly important topic. Risk today is multidimensional, and the frequency and magnitude of disruptions, like the pandemic, have motivated organizations to take a deeper look at how they identify and analyze risk and how they plan to avoid or recover from them.
Operational resilience considers the strategic goals of the organization, engages all parts of the organization, and embraces integrated risk management to drive the development of resilient business practices.
Strong operational resilience can:
Improve the company’s finances by reducing costs that would have been incurred during a disaster.
Drastically reduce operational disruptions by preparing for potential disasters before they occur.
Allow you to respond swiftly in crisis situations to protect your ongoing operations.
Minimize the impact on your business by breaking down the silos across functions and teams.
Help organizations have the capacity to quickly put together mergers and acquisitions
Help organizations swiftly adapt to changes in technology due to digital transformations.
Improve visibility over all the performances of different sectors paramount to the organization’s growth and the resources necessary to achieve the goals.
Provide complete oversight over all the company’s outsourced operations.
How to Create a Culture of Operational Resilience
The ability to absorb changes and adapt to an evolving risk environment is a regulatory, corporate, and board-level topic within many organizations. Traditionally, building a culture of resiliency is a function of an effective business continuity management program. To build ownership across the entire organization, each department from IT to sales must proactively participate in implementing operational resilience into processes, systems, and practices.
This cultural change should be led at the executive level. Gartner predicts that by 2025, “70% of CEOs will mandate a culture of operational resiliency to survive coinciding threats from COVID-19, cybercrime, severe weather events, civil unrest, and political instabilities.”(1) Having change driven by the chief operating officer (COO) or chief information officer (CIO) helps to reinforce the importance of implementation.
The first thing organizations should do when creating a culture of resiliency is have a definite purpose and aim. When organizations have a clear vision that every sector can relate to, it is easier to work together and achieve mutually beneficial goals.
Second, organizations must establish consistent procedures and policies. For a program to thrive, all departments and functions performing separate risk management activities should be using the same methodologies, tolerances, and toolsets.
Last, it is vital that internal and third-party organizations are as aligned in their resiliency efforts as they are in their delivery of products and systems. This alignment can be accomplished in the onboarding process, service-level agreements, or clauses in contracts.
The State of Integrated Risk Management: Themes of Operational Resilience
Strong compliance processes are one step, albeit a critical foundational step, towards achieving operational resilience. Programs focused on operational resiliency bring risk information together so you can better understand your risk posture, determine more easily how to treat risks, as well as see the interrelationship of these risks to the entire business. Explore the other themes of operational resilience by downloading our whitepaper, “The State of Integrated Risk Management”.
As a leader in providing integrated risk management solutions, we can help you with strategic-decision making and improving your operational resilience.
Contact us today to see how Archer Regulatory and Corporate Compliance Management can aid you in providing a clear consolidated view of your organization’s state of compliance and how an integrated risk management approach better prepares you to thrive in a multidimensional and evolving risk landscape.
(1) Gartner: Predicts 2021: Operational resiliency. January 2021.