Organizations are facing new management challenges from market, financial and regulatory uncertainties in the current economic crisis.
In the market front, new competitors are driving pricing pressures. Companies need to move to unfamiliar markets and technologies. Finding new markets, especially in the Emerging World, requires the development of new competencies which are not always available.
In the financial front, shareholders are more demanding when dealing with market volatility. The global credit crunch became the main concern in this area since 2008. In addition, the worsening of fiscal terms is generating cost rises and difficulties in optimizing profitability. In the regulatory front, multiple law proposals complicate planning as companies anticipate systemic reforms. There are difficulties in managing the risks from the expansion of government's role in key areas of the economy.
Anticipating the potential impact of these new challenges on the companies is a time-consuming, and often a frustrating task, for its leaders. The continuous improvement culture helps companies to anticipate new risks and respond proactively to maximize their financial return. Companies are devoting more and more resources to contingency planning and risk prevention to cope better with the range of new risks. A positive aspect of early business intelligence is that forecasting to anticipate new risks is also forecasting to identify new opportunities. It also helps to respond better to complex global interactions while dealing with unpredictable crises.
The proper management of a Governance, Risk and Compliance framework will identify strategies to address these challenges. Companies are strengthening their governance processes and risk culture with reinvigorated risk procedures and more upper management involvement. According to the Business Risk Report 2010 issued by E&Y, 59% of the global companies are addressing these challenges via a risk management function. More than 70% of the surveyed companies in the financial areas reported that a strong risk management function is effective to address compliance and regulation threats.
Other companies are using different strategies, including investing in government relations capability, updating of the compliance functions, investing in IT to support new regulations, improving in their own capability for rapid implementation of requirements, focusing to key compliance issues, and expanding of compliance focus to their external partners, as well as, their suppliers and customers.
The main difference between success and underperformance comes from the skill with which a Governance, Risk and Compliance program is executed. There are not good of bad programs, but executions of programs. The Governance, Risk and Compliance area is moving companies forward from the retrospective analysis of business decisions gone wrong to anticipate new risks in a challenging world.