Fresh talks are expected to lay down more stringent regulations and re-evaluation of the existing policies and regulations
Governance, compliance and risk management issues will take top priority in board room discussions
Companies will be in a look out for comprehensive compliance and risk management solutions to mitigate risk of non-compliance
Governance, Risk and Compliance (GRC) was always gaining importance post 9/11. It became mandatory to comply with specific regulations, procedures, policies and documentation requirements. Trade security was a concern. This was not possible manually and could even lead to inefficient administration of customs processes. Losses due to inefficient customs and compliance management were high. It brought a sudden urgency and awareness to governance, risk and compliance. So much so that most of the companies started leveraging the compliance, risk and IT governance tools to reduce costs and risk.
We could face a similar situation after the current economic crisis, which is the worst ever after the great depression in 1939. Companies are busy mitigating risk from financial markets and PR is at full swing to retain investors trust. Focus is to deal with the expected decline in sales. Cost-saving measures are the new mantra since the break-down of the new economy. Research and development is on hold and all investments and Projects are being postponed to next year wherever possible. Lay offs and job cuts are the most common solutions to this crisis.
But post-US elections things are expected to change. There will be fresh talks to lay down more stringent regulations and re-evaluation of the existing policies and regulations. For most companies, exposure to the financial risk divided by the total cost to avoid the risk is the measure for financial returns from compliance activities. CFO Research published a report stating that senior management has started focusing on risk management measures as a result of the financial crisis. According to the research, 55% of respondents expect changes in their company’s risk management practices. Now Governance, compliance and risk management issues will be of main focus apart from cash management, investments strategies and CRM. With fresh laws and regulations expected to be introduced, companies will be in a look out for comprehensive compliance and risk management solutions to mitigate risk of non-compliance.
In all probability, banks and financial services who are the most affected in this crisis will adopt a conservative credit policy and cut down on their investment and lending portfolios. Hence, demands for increased transparency of financial portfolios will increase and risk management is also going to gain importance. Over the last decade non-financial companies have been increasingly active in the financial market and making profits through hedging funds in financial markets. But now even they will have to increase spend on risk management or else cut down their investments on the financial market and refocus on their traditional core competencies.