RiskTech Forum

Wolters Kluwer: Governance, Finance, Risk And Compliance - Bringing Critical Functions Together For A More Comprehensive Picture

Posted: 1 March 2016  |  Source: Wolters Kluwer

As is true in many endeavors, sometimes you just can’t get there from here. Such a fragmented organizational structure is at least partly to blame for the failure of many firms that follow Governance, Risk and Compliance practices to prevent or immediately detect excessive risktaking and malfeasance during the global financial crisis. Barriers between departments prevented colleagues who knew the lie of the land from alternative vantage points from alerting others to existing or potential hazards.

Even during normal conditions, a GRC approach can encourage thinking that’s two dimensional and overly dependent on extrapolating long-running trends into the future. This is plainly inadequate in an age when banks encounter so many risks, interacting with one another in such complex and unforeseeable ways, that they multiply, not just add to, the variables that must be factored into risk management, risk control and financial reporting procedures, as well as stress testing scenarios.

This is where Governance, Finance, Risk and Compliance (GFRC) comes in. GFRC helps an organization get a fuller, more comprehensive picture of the challenges and opportunities it faces by incorporating GRC with finance, risk, performance and reporting elements into management and decision-making processes.

GFRC allows a firm to operate as a more cohesive unit by reinforcing the connective tissue that binds critical functions together. And because it encompasses all sources of risk, financial and non-financial alike, the model provides a foundation for processing and interpreting data in a more holistic way. Most important, GFRC plays a vital role in budgeting, planning and strategy, enabling a firm to anticipate events instead of reacting to them. It’s a vehicle that keeps everyone moving in the right direction and able to steer around potential traffic jams and accidents.

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