Saturday, November 27, 2021

Governance, risk and compliance in the new normal

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Today, GRC topics are the defining challenge for board members and the C-Suite,

The governance, risk, and compliance landscape is evolving rapidly to keep up with the accelerating changes in the broader corporate climate. New challenges – from the dual effects of disruption and digital innovation to changing expectations for social justice and corporate responsibility – are raising the bar higher than ever for executives tasked with navigating turbulent waters. When we step into a reality in which a new normal arises every 18 months, which governance, risk and compliance (GRC) topics dominate the discussions and how can today’s board members and the C-suite relate to leadership and success prepare?

A variety of complex factors influence GRC. Many are interconnected, and all of them have a significant impact on the way companies operate within the corporate and social ecosystem.

Five dominant topics are:

None of these topics are new. Board composition, ESG and cyber risk management issues have been waiting in the wings for years, but the pandemic has brought them to the fore. It has accelerated both the pace of change and the expectations of stakeholders – from investors to consumers and workers – about effective leadership.

GRC is defined by the OCEGlike the ability to reliably achieve goals while dealing with uncertainty and acting with integrity. This requires executives to be equipped with the skills and information that will enable them to see around the corner to anticipate future threats and opportunities, and these are increasingly outside the traditional realms of finance and law.

As there is a growing awareness that different risks require different skills, investors make their feelings known. The 2021 proxy season saw the lowest level of shareholder support for director re-election in record history, suggesting concerns that the current squad lacks the skills needed to succeed the nascent “next normal” respectively.

As a result, we should expect a “great refresh” from corporate boards and C-suites as cybersecurity expertise, sustainability experience, and human resource management skills, among other things, are becoming very desirable. New leaders with these skills will generally be more diverse, allowing companies to accelerate their diversity and inclusion programs at the same time.

Boards that respond to the pace and complexity of the current environment change the way they approach their jobs. Board meetings are more frequent, and the directors work more closely with each other and with the leadership teams. To ensure decisions are informed, directors now seek a wider variety of information from a variety of sources.

Diligent’s Beyond The Board Room report found that two-thirds of directors are now doing independent research in addition to the materials the company makes available to them. They consult colleagues, read a lot and are huge consumers of information. This is the form of modern governance where executives consume vast amounts of data and use tools to collaborate and anticipate future scenarios.

As this new generation of leaders takes control, they must consider the full spectrum of success criteria. Identifying, measuring and monitoring non-financial metrics related to ESG and cybersecurity is critical to the sustainability and longevity of the company.

Directors need to know what key metrics are and how the company plans to track and report on them. This includes setting up an infrastructure supported by appropriate tools, into which all departments bring data and which thus provides a comprehensive overview of the company’s performance.

A holistic GRC approach that ensures the flow of information to a central location will help pull GRC out of the silos and provide the seamless visibility required to robustly position GRC as a vehicle for corporate integrity, resilience and success.

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Originally published on Business Reporter

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