Using insights from time spent on the ground with businesses in a variety of sectors, Gaurav Kapoor, Office of the CEO and COO atMetricStream, explores five universal GRC trends
Over the past year, executives at large and small companies across a variety of industries have experienced fresh GRC challenges, bringing with them new risks and opportunities. What’s evident is that while each organisation is different – in terms of its culture, or speed of reaction to risk, or even digital maturity –there are several trends that remain consistent across all.
Disruption as the only constant
Disruption is one of the largest and often most under-represented risks that organisations face today. Banks, insurance firms, life sciences businesses, transportation companies, and even university admission processes, are all being disrupted at multiple levels.
Many are trying to predict and mitigate the risk of disruption ahead of time. A leading airline company, for instance, has created a risk-weighted customer experience where it aggregates and consolidates all its customer, operational, quality, and system related issues, and then aligns this data with its material and emerging risks. In doing so, the airline is able to proactively identify and address potential risk patterns, lapses, or gaps in customer experience that could be leveraged by the competition to disrupt the market.
Other firms are strengthening their preparedness to deal with both known and unknown disruptions. For example, in the national railway industry, a large provider is responding to potential market changes by prioritising risk events related not just to internal operations, but also to customers, the economy, and the entire national logistics infrastructure. This kind of risk vigilance is essential because of the critical role the organisation plays in ensuring that basic amenities reach some of the most remote locations in the country. As such, a lack of readiness for disruptions could lead to potentially life-threatening situations.
Harmonisation & the future
Enterprises are changing at an unprecedented pace, some are being acquired, others divested. Strategic priorities are shifting, while business models are evolving and, to match this, GRC functions, processes, and tools are also evolving. The key is to ensure that these changes occur in a harmonised, carefully thought-out, and phased manner.
A leading global insurance company learned this the hard way when it invested tens of millions of dollars in short-lived or ‘solve for now’ GRC programmes, which resulted in multiple silos and disparate processes. Compelled to rethink their strategy, the company sought to integrate and harmonise risk management, not with a ‘rip and replace’ approach but in a phased manner. They created a solid, agile foundation of data and process frameworks that allowed multiple legacy systems to co-exist. This data foundation formed the basis of a sustainable, future-ready risk management programme.
Another aspect of harmonisation lies in aggregating data from multiple sources, and then using it to provide risk insights in the context of business goals and strategic objectives. One firm undertook such a task after struggling for a long time to aggregate different perspectives on the same risk from quality, enterprise resilience, IT, and most importantly, business owners. By creating a common risk library and taxonomy the company was able to smooth out inconsistencies in risk communication. Additionally, implementing a federated approach to risk management provided the flexibility to accommodate various risk perspectives.
Crowdsourcing – knowing the lurking risks and opportunities
As organisations look for better risk information to guide their strategies, many are beginning to harness the knowledge and insights available in the front line. After all, it is there that emerging risks, opportunities, and hidden areas of concern are likely to be spotted. Getting that information starts with educating the front line about risk culture and expectations of ethical behaviour, backed by policies. Ultimately, employees need to be aware of key risks in order to mitigate them effectively.
The second step is about empowering the front lines with the information they need to make “in-stream”decisions. Closely followed by getting the front line more involved in risk management is to aggregate information from the mas simply as possible. A leading mortgage financial institution successfully achieved this through a “raise your hand” programme, which encourages the front line to report risks and issues using an easy-to-use, intuitive system. The data is then rolled up to the second and third lines for further investigation. It’s a simple, pervasive,and effective way to gather risk information from across the organisation.
Foresight as a competitive advantage
With digital information and the power of artificial intelligence (AI), GRC functions can, to a large extent, predict risk events, prevent anomalies, and act as true strategic advisors to the business. Instead of simply policing the enterprise, they can actually drive an organisation’s performance by providing forward-looking insights on risks and opportunities. That’s “AI for GRC” in action.
Just as important is “GRC for AI”. How do organisations effectively manage the risks around artificial intelligence, machine learning, and robotics – be it biases, immature technology, or incomplete data? One way is by bringing humans back into the equation. Human-assisted AI is key to better accuracy and governance in automated decision-making.
As an example,a social media company that relied on AI to automatically weed outposts that weren’t politically or socially correct realised that the tool was only 99% accurate. Humans had to be employed to assist the bots in making that last 1% work.
Agility as a key strategy
No matter how large and established an enterprise is, it has to be agile to keep pace with rapid changes in internal and external environments and the same applies to GRC. As the volume and velocity of information escalates – even while the time for decision-making comes down – GRC programmes have to be agile and adaptable, be it in terms of frameworks, processes, technologies, data models, context, data aggregation, or dissemination. Adaptability is key in responding to change without disrupting the business.
Being agile also means designing GRC programmes that are driven by outcomes and value, rather than the desire to “complete” the programme. GRC is an ongoing journey, its objectives will change as the business and external environment also evolve. By designing for outcomes, organisations can respond faster to change, and recalibrate their approach more efficiently.
Indeed, the GRC challenges ahead are many but so are the opportunities. For the first time, the tools to predict key risks with a considerable degree of accuracy are available to enterprises. There are also reports that offer a real-time view of the big picture – how various risks influence each other and how that in turn impacts the achievement of business objectives. Organisations can harness the potential of the front line in uncovering and mitigating risks before they snowball into bigger issues. All these opportunities open up new avenues to build a strong foundation of good governance and integrity that will ultimately power sustainable growth and success.
G20 to show united front on support for global economic recovery, cash for IMF
By Michael Nienaber and Andrea Shalal
BERLIN/WASHINGTON/ROME (Reuters) – The world’s financial leaders are expected on Friday to agree to continue supportive measures for the global economy and look to boost the International Monetary Fund’s resources so it can help poorer countries fight off the effects of the pandemic.
Finance ministers and central bank governors of the world’s top 20 economies, called the G20, held a video-conference on Friday. The global response to the economic havoc wreaked by the coronavirus was at top of the agenda.
In the first comments by a participating policymaker, the European Union’s economics commissioner Paolo Gentiloni said the meeting had been “good”, with consensus on the need for a common effort on global COVID vaccinations.
“Avoid premature withdrawal of supportive fiscal policy” and “progress towards agreement on digital and minimal taxation” he said in a Tweet, signalling other areas of apparent accord.
A news conference by Italy, which holds the annual G20 presidency, is scheduled for 17.15 (1615 GMT)
The meeting comes as the United States is readying $1.9 trillion in fiscal stimulus and the European Union has already put together more than 3 trillion euros ($3.63 trillion) to keep its economies going despite COVID-19 lockdowns.
But despite the large sums, problems with the global rollout of vaccines and the emergence of new variants of the coronavirus mean the future of the recovery remains uncertain.
German Finance Minister Olaf Scholz warned earlier on Friday that recovery was taking longer than expected and it was too early to roll back support.
“Contrary to what had been hoped for, we cannot speak of a full recovery yet. For us in the G20 talks, the central task remains to lead our countries through the severe crisis,” Scholz told reporters ahead of the virtual meeting.
“We must not scale back the support programmes too early and too quickly. That’s what I’m also going to campaign for among my G20 colleagues today,” he said.
Hopes for constructive discussions at the meeting are high among G20 countries because it is the first since Joe Biden, who vowed to rebuild cooperation in international bodies, became U.S. president.
While the IMF sees the U.S. economy returning to pre-crisis levels at the end of this year, it may take Europe until the middle of 2022 to reach that point.
The recovery is fragile elsewhere too – factory activity in China grew at the slowest pace in five months in January, hit by a wave of domestic coronavirus infections, and in Japan fourth quarter growth slowed from the previous quarter with new lockdowns clouding the outlook.
“The initially hoped-for V-shaped recovery is now increasingly looking rather more like a long U-shaped recovery. That is why the stabilization measures in almost all G20 states have to be maintained in order to continue supporting the economy,” a G20 official said.
But while the richest economies can afford to stimulate an economic recovery by borrowing more on the market, poorer ones would benefit from being able to tap credit lines from the IMF — the global lender of last resort.
To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by then U.S. President Donald Trump.
Scholz said the change of administration in Washington on Jan. 20 improved the prospects for more IMF resources. He pointed to a letter sent by U.S. Treasury Secretary Janet Yellen to G20 colleagues on Thursday, which he described as a positive sign also for efforts to reform global tax rules.
Civil society groups, religious leaders and some Democratic lawmakers in the U.S. Congress have called for a much larger allocation of IMF resources, of $3 trillion, but sources familiar with the matter said they viewed such a large move as unlikely for now.
The G20 may also agree to extend a suspension of debt servicing for poorest countries by another six months.
($1 = 0.8254 euros)
(Reporting by Michael Nienaber in Berlin, Jan Strupczewski in Brussels and Gavin Jones in Rome; Andrea Shalal and David Lawder in Washington; Editing by Daniel Wallis, Susan Fenton and Crispian Balmer)
Oil set for steady gains as economies shake off pandemic blues – Reuters poll
By Sumita Layek and Bharat Gautam
(Reuters) – Oil prices will stage a steady recovery this year as vaccines reach more people and speed an economic revival, with further impetus coming from stimulus and output discipline by top crude producers, a Reuters poll showed on Friday.
The survey of 55 participants forecast Brent crude would average $59.07 per barrel in 2021, up from last month’s $54.47 forecast.
Brent has averaged around $58.80 so far this year.
“Travel and leisure activity look set to catch up to buoyant manufacturing activity due to the mix of stimulus, confidence, vaccines, and more targeted pandemic measures,” said Norbert Ruecker of Julius Baer.
“Against these demand dynamics, the supply side is unlikely to catch up on time, leaving the oil market in tightening mode for months to come.”
Of the 41 respondents who participated in both the February and January polls, 32 raised their forecasts.
Most analysts said the Organization of Petroleum Exporting Countries and allies (OPEC+) may ease current output curbs when they meet on March 4, but would still agree to maintain supply discipline.
“With OPEC+ endeavouring to keep global oil production below demand, inventories should continue falling this year and allow prices to rise further,” said UBS analyst Giovanni Staunovo.
Oil demand was seen growing by 5-7 million barrels per day in 2021, as per the poll.
However, experts said any deterioration in the COVID-19 situation and the possible lifting of U.S. sanctions on Iran could hold back oil’s recovery.
The poll forecast U.S. crude to average $55.93 per barrel in 2021 versus January’s $51.42 consensus.
Analysts expect U.S. production to rise moderately this year, although new measures from U.S. President Joe Biden to tame the oil sector could curb output in the long run.
“A structural shift away from fossil fuels” may prevent oil from returning to the highs of previous decades, said Economist Intelligence Unit analyst Cailin Birch.
(Reporting by Sumita Layek and Bharat Govind Gautam in Bengaluru; Editing by Arpan Varghese, Noah Browning and Barbara Lewis)
Japan’s jobless rate seen up in January due to COVID-19 emergency measures – Reuters poll
TOKYO (Reuters) – Japan’s jobless rate is expected to have edged up in January as service industry businesses suffered renewed restrictions on movement to fight spread of the coronavirus in some areas, including Tokyo, a Reuters poll of economists showed on Friday.
While industrial production activity picked up in Japan, emergency curbs rolled out last month such as asking restaurants to close early and suspending the national travel campaign hurt the jobs market, analysts said.
The nation’s unemployment rate likely rose 3.0% in January, up from 2.9% in December, the poll of 15 economists found.
The jobs-to-applicants ratio, a gauge of the availability of jobs, was seen at 1.06 in January, unchanged from December, but stayed near September’s seven-year low of 1.03, the poll showed.
“As the impact from the coronavirus pandemic prolongs, it is hard for firms, especially the service sector, to expect their business profits to improve,” said Yusuke Shimoda, senior economist at Japan Research Institute.
“So, their willingness to hire employees appear to be subdued and it is difficult to see the jobs market recovering soon.”
Some analysts also said the government’s steps to support employment and existing labour shortages will likely prevent the jobless rate from worsening sharply.
The government will announce the labour market data at 8:30 a.m. Japan time on Tuesday (2330 GMT Monday).
Analysts expect the economy to contract in the current quarter due to the emergency measures to counter the spread of the disease.
(Reporting by Kaori Kaneko; Editing by Simon Cameron-Moore)
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