GRC Reputation Management and How To Protect Your Brand
GRC (governance, risk management, and compliance) refers to a management system that integrates a number of critical capabilities that allows a company or organization to correct errors, address any uncertainties, and achieve set objectives. With proper GRC in place, organizations are also expected to act with integrity. The aim of GRC is to enable an organization to develop best business practices and use them on a daily basis. The most recent example of GRC gone wrong is the collapse of Crypto trading exchange FTX by whiz kid Sam Bankman-Fried where they didn’t provide transparency and acted unethically with customer funds which ultimately hurt everybody from investors, shareholders, customers, and employees. With a proper compliance team this all could have been averted.
GRC Fails And How It Can Hurt Your Brand
GRC works across different disciplines, making it a highly effective tool for all departments within an organization to avoid a calamity like the FTX disaster. Companies that use it understand its benefits and are often rewarded by shareholders. They are also aware that should it fail, it can also have a serious impact on company reputation and as we’re seeing today on Twitter with SBF and FTX the trust once gain is nearly impossible to re-gain.
Why GRC Matters
First and foremost, the establishment and practice of GRC enables an organization to have a unified vision. This can be difficult, especially among established organizations that have already developed their own subcultures within. However, a proper understanding of GRC provides every member with the necessary information needed to understand his/her role and how best to maximize his/her capabilities to help the organization.
GRC also establishes rules and regulations that not only create a cohesive whole but also provide results that are useful and cost-effective. When end-users such as customers realize how well-established the organization is and how reliable its products and/or services are, they will be more confident, trusting, and, ultimately, loyal. With GRC, an organization can also improve its operational efficiency, thereby minimizing costly mistakes and impacting customer confidence. There are a few tools out there that help ensure companies are following regulations and laws. One software that is in beta called Captain Compliance, takes the approach of promoting diversity and transparency from day 1. In the privacy sector this is called privacy by design and is a principle used by companies that take privacy, security, and governance very serious. GRC also helps establish a solid management system that employees respect. This helps attract qualified talent and encourages them to stay.
Have a Clear Vision and Strategy
GRC is needed for organizations that have an unclear vision and strategy. A vision is part of an organization’s transformational strategy. It creates a guide for the management and employees to visualize what they are trying to achieve within a set time frame, how, and why. The absence of an established vision and strategy will lead to confusion among workers and, ultimately, conflict. From the customer’s perspective, the organization will be a company that has no clear direction and is therefore unreliable and untrustworthy. If a company isn’t trusted than they risk a lower share price like Facebook has seen and the need to use a reputation repair firm.
Every organization has different departments, each of which has unique functions. A GRC system that does not include this will ultimately fail to maximize the strengths and advantages of each department. This will compromise the whole organization since it can be difficult to find the right solutions for specific objectives. A problem can also occur if the GRC program fails to develop good communication parameters between departments that are open. If this happens, the organization will suffer from redundancy and inefficiency due to a lack of interaction and misunderstanding.
Failure to Calculate Risks
In some cases, a risk is just not risky enough. Very often, team members consider risks in the context of likelihood – such as, how likely is something going to result in an unwanted situation? In many ways, establishing the likelihood of an event relies on the ability of the organization to estimate. Sam Bankman-Fried failed to realize the amount of leverage his firm took compared to deposits. This leads to bankruptcy and big problems when you don’t calculate risks. Very often, an organization fails to use a time frame reference, which results in inconsistencies in values established as risks. This leads to the organization’s failure to prioritize, a key step in the decision making process.
Failure to Comply Resulting in Penalties
Organizations are naturally averse to penalties, particularly financial penalties. Companies are expected to meet regulatory standards, and non-compliance could lead to a significant loss in terms of finances and/or reputation. Non-compliance can also lead to a significant reduction in customer confidence which will affect sales. This in itself can already impact the organization’s bottom line. With reputational damage, an organization could suffer from serious issues. Not only are profits reduced, but the brand could experience devaluing, and the company will have to spend more on cost of capital.
It will also be difficult for a damaged brand to find and recruit talent due to its reputation and the loss of confidence from its own members. As a result, recruiting high-quality talent and retaining them will be a challenge as well. In worst case scenarios, it is even likely that damage to reputation could lead the business to fail.
Failure to Adapt to Change
GRC will change an organization from one built solely for growth. This isn’t a bad thing as protective measures are in place to help it adapt to change and stay compliant. Members of the organization may see change as daunting, but with the right tools, strategies, information, and technology, they will be capable of conforming to the new approaches and laws ranging from data privacy measures in California, like the CPRA to GDPR in Europe. ESG a classification of GRC should be fluid and must be designed in a way as to be flexible enough to make room for changes as the organization grows. If the system fails, it can severely cripple the ability of the organization to move forward and affect the confidence of the team and its customers.