Future of Manufacturing: Taking the Right Risks to Fuel Performance

With non-compliance penalties becoming more aggressive, the industry is under tremendous pressure to comply with regulations, standards, and procedures from a wide range of government and industry bodies. To add to this, new innovations, wider market opportunities, and fierce competition have made it extremely difficult for manufacturers to stay compliant and manage their changing risk landscape.

Global operations and the dependency on hundreds and thousands of partners and suppliers add to existing risks and challenges involved in ensuring compliance with regulations, standards, and procedures. This complication multiplies when subsidiaries come into play as they bring in new governance challenges. Parent companies are under pressure to have standardized processes and programs, ensure local adaptation at subsidiary levels, and make sure that there is appropriate information roll up and aggregation. Ineffective oversight can result in governance failures, which pose reputational, regulatory, and financial risks.

As product lifecycles get shorter and role of IoT increases, organizations will need their operations to sustain them through the future. These new developments will bring in its wake new and previously unidentified risks, adding to the already complex risk management universe. Needless to say, non-compliance and unmitigated risks can ruin reputations, shatter business performance, and cause unprecedented financial loss. It thus makes sense for manufacturers to consider an integrated, holistic, and programmatic approach to Governance, Risk, and Compliance (GRC) that is aligned with their business objectives.

 

Need for a Unified GRC Program

Although risks are interdependent and controls are shared in an organization, plans to identify and manage them are done in silos, increasing the overall risk of the organization. Siloed compliance and risk programs lead to a duplication in efforts and cause costs to spiral out of control. Additionally, cross-industry regulations such as SOX, FCPA, Anti-Bribery Act, export control, etc., coupled with various regional regulations and mandates, make risk and compliance management a highly intensive and exhaustive function. A unified governance, risk, and compliance process has the ability to coordinate and integrate these initiatives.

A well-defined GRC program can promote collaboration within the organization, helping manufacturers accurately gauge their true risk and compliance posture. This will also help in avoiding cost overlaps, making an organization stand out in terms of sustainability and competition. A truly unifying and pervasive GRC program can help in centralizing day-to-day activities, processes, policies, objectives, and other operating procedures within the organization. Additionally, the program can help identify and assess risks, as well as provide insights about the adequacy of risk mitigation plans and monitor compliance, thus driving business performance, value creation, and growth.

3 Tenets of GRC ProgramsIntegrating Policy and Compliance, Risk, and Audit Programs

As part of their GRC programs, manufacturers need to emphasize on the following key areas:

 

1. A Holistic Policy and Compliance Program

A well-defined compliance process enables organizations to cohesively manage multiple regulatory requirements such as SOX, FCPA, or Anti-Bribery, to reduce the cost of non-compliance and penalties, while making the processes repeatable and sustainable at a lower cost. Given the strict monitoring by regulators and rising amount of penalties being imposed, manufacturers can no longer overlook the ethics and compliance risks associated with their business, both internally and across their chain of third parties. They need to detect, protect, and prevent misconduct while promoting an ethical culture that creates awareness and promotes responsibility and integrity.

A holistic compliance program helps to integrate and map both corporate and regulatory compliance mandates, thereby simplifying compliance management and monitoring. It includes defining, documenting, assessing, and monitoring activities throughout the organization - at all levels and in all functions - while minimizing deviations and redundancies. It scales across the enterprise giving organizations a holistic and comprehensive view of risks and potential areas of non-compliance.

A policy management program that allows organizations to define, centrally manage, and enforce policies and procedures is at the core of a compliance program. Besides providing documentation of and enterprise-wide access to policies, procedures, and guidelines as well as their respective enforcement and compliance records, a policy and document management program offers robust mechanisms that enable organizations to manage the policy lifecycle including, communication, training, and awareness initiatives.

 

2. Proactive Risk Management Program

Manufacturers must view risk management as a strategic component that delivers sustainable growth and innovation. The business risk landscape is changing and organizations are shifting from being reactive to proactive in their efforts to identify, assess, and mitigate organizational risks. Manufacturers should focus on creating a culture of risk-based decision making wherein guidelines to deal with specific risks and expectations from the management are clearly communicated. They must ensure that proper controls are designed and monitored in order to mitigate potential risks.

Risk management should be a top priority for most manufacturers because in addition to 360-degree risk management, it facilitates a risk-based approach toward compliance and audit requirements. This enables organizations to focus resources on the most critical compliance issues.

Manufacturers must adopt new ways to decrease their risk profile while continuing to scale back on costs and personnel.

 

3. Audit as A Strategic Tool

Today, audit is looked at as more of a strategic exercise than an assurance tool. The audit function has evolved to take on an advisory role to the management by supporting organizational goals, monitoring enterprise-wide risks including supply chain risks, and strengthening compliance efforts. Manufacturers need to focus on creating a consolidated audit management program that includes internal, quality, supplier, compliance, and third-party audits.

The audit process today intertwines with the risk management process in such a way that an organization must take a risk-based approach to prioritize and conduct their audits. Furthermore, it helps in understanding the risks that are shared between various projects and initiatives. It also monitors whether controls are adequate enough to mitigate the identified risks. A federated audit program can help manufacturers drive organizational efficiency. It enables them to align their business, functional, and strategic goals, prioritize objectives and tasks, improve processes, remove redundancy, and eliminate complexities.

 

Improving Efficiency with Technology

Manufacturers must leverage technology to streamline, optimize, and strengthen their GRC processes. A unified platform to manage enterprise-wide GRC initiatives can give greater visibility to audit, risk, and compliance management processes. It can also consolidate risk and compliance intelligence from multiple sources and enhance collaboration, accountability, and communication, leading to better business performance.

Data aggregation is a critical component for the success of a GRC program. Technology solutions can help consolidate GRC data, map complex organizational hierarchies, support role-based access, and provide reports and dashboards for continuous monitoring. It cuts across enterprise siloes to aggregate and map risk, compliance, policies, controls, and audit data in one system for complete transparency. Technology also streamlines and automates multiple GRC workflows to enhance efficiency. Centralized risk, compliance, and control libraries help establish consistent risk taxonomies across the enterprise, thereby strengthening risk analyses and reporting.

Be it data aggregation, mobility, real-time reporting, advanced analytics, risk intelligence, or regulatory alerts and notifications, technology is viewed as an enabler for a successful GRC program in today’s complex and global enterprises. Manufacturers must adopt new technologies to gain a competitive edge in their GRC management.

 

Conclusion:

Running a GRC program is not a one-day activity, it is a journey towards a more prepared and aware organization with regards to known, unknown, and emerging risks. As manufacturers face greater risk and stricter compliance mandates, they should move towards creating a culture of GRC that pervades across organization and its subsidiaries. The key is to design a GRC program with clearly defined priorities that breaks through organizational siloes. This will also make it easy to understand the relationships and interactions between various risks, regulations, mandates, controls, strategic objectives, policies, and other elements across the organization. GRC will continue to evolve and become more critical for manufacturers. It is important to embark on the journey right now.