The paper by KPMG and the Institute of Chartered Accountants in Australia addresses some of the most pertinent issues in the business world today. These include the risks, compliance and governance. Modern business leaders will appreciate the complexities that underlie the handling of these three items in the organization in order to ensure efficient and effective functioning of the business.
The paper takes the view that the functions of risk management, compliance as well as good corporate governance should be interlinked for the success of the business. The authors ponder as to why we have all the three operating as different segments in the business and propose that a more integrated GRC would contribute immensely to the success of the business.
The paper notes that there are a lot of overlaps in business in which for instance, the risk and audit committees are separate.
The core of the paper is therefore the integration of the corporate governance, risks and compliance sections of a business for maximum benefits. The authors are of the opinion that the effectiveness of GRC is maximized when it’s linked with the overall decision making organs in the business.
The approach to risk, by an integrated GRC is deemed the most effective since the people involved are probably the ones who understand the working of the company and its risk profile.
Lastly, the paper illustrates how to implement an integrated GRC strategy and does so in a number of steps that are listed below.
Formation of a cross functional team/ committee to oversee the implementation process
Definition of the specific individual roles of each member of the team early in advance
Having the process worked out before any investments are made in the technology
Creation o a common language and understanding around risks
Implementation of the integrated GRC in a gradual manner
How the report would benefit businesses and what types of businesses
This report will make an invaluable contribution as to how businesses are run. The issues of corporate governance, risk and compliance have been a great challenge to many a small business. This is because they do not have the capacity to have all these three departments as they are quite costly.
The issue of a one large integrated GRC system with competent and qualified professional will be a one stop answer to this form of business in terms of compliance, good corporate governance and also risk management
The illustrated method of integration is actually a simplistic one that even the smallest of businesses is able to implement once and for all.
As explained, the GRC approach has a proven ability to influence the positive direction of the business. This therefore means that small and medium sized entities will benefit a lot from the knowledge conveyed in this material.
Large and listed businesses will also reap the benefits of this invention. This is because, by the virtue of the fact that they manage all the three departments, the risk, compliance and then the board of the directors who are the pillars of good corporate governance must benefit from the reduced costs as a result of the reduction of the management committees in the business and their replacement with one, efficient and crosscutting spectrum of skills and experience of this team.
AS is explained in the case study, the GRC is a multifaceted, approach to risks, compliance and corporate governance. This effectively means that th company will have to reduce even on the costs of the business. At the same time, the business will automatically benefit from strategic view of GRC which enables a business to remain focused on utilizing and maximizing on the available resources expeditiously.
Reliance on this report would reduce the persistent inefficiencies and resources overlaps and underemployment that is witnessed especially when we have many people handling the same thing. Having for instance the compliance, audit and risks management department always means that we have resource overlaps and this is a very huge expense of the company.
What prompted this report?
In today’s competitive business world, business owners and leaders have realized that the world is moving from the conventional competitive strategies to more intrinsic forms of competitive advantage.
This is being done by the design and Improvement of internal business processes or even acquisition of state of the art technology that is able to outdo the competitor’s production levels. In a more advanced set up, management has realized that the reduction of costs while increasing efficiency per output staff is the way to go.
This has led to consorted attention on speed, accuracy and efficiency in the subordinate staff. Today, management has learned to lead from the front. This means that the management is learning to create efficiency while at the same time reduction on costs.
The merging of the risk management section, the compliance and corporate governance sections, besides building on unique efficiency, has also increased productivity and at the same time cuts costs, now that is visionary leadership.
The compliance with various regulatory and state requirements is very helpful in ensuring a smoother run of the business. As explained earlier, the integrated GRC is a simpler method of harnessing from the skills of the experienced people in the business.
In terms of good corporate governance, the infamous Enron case has led to people being keener with all what goes on in the business. This has necessitated the need for the integration of the management committees so as to ensure a holistic perspective of the business.
The above is a classic example of how the management of a company let the company can forgo important information that led to the near collapse of Enron, without implicating the auditor.
The recent cases where we have had large businesses losing millions of dollars of shareholders money would be a thing of the past if the business embraced the new system of business monitoring where we have the risk and compliance, and good corporate governance at the forefront in the running of a successful enterprise
References
Statman D. (1997), “Virtue Ethics: A Critical Reader”, Georgetown University Press,
Washington, DC.
Termes R. (1995), “Ethics in Financial Institutions” in “The Ethical Dimension of
Financial Institutions and Markets”, A. Argandona, editor, Springer-Verlag, Berlin.
Longstaff S. (1986), “The Ethical Dimension of Corporate Governance”,
http://www.ethics.org.
