With the chaos and uncertainty brimming, organizations are facing risks at each step. From reduced employee productivity to third-party mismanagement to data theft, compliance risk along with technological risk factors, organizations are having a difficult time navigating through these challenges. Operational risk management is the need of the hour to help organizations to stay on track and increase their operational efficiency while staying compliant.
How To Drive Operational Efficiency While Staying Compliant?
With the chaos and uncertainty brimming, organizations are facing risks at each step. From reduced employee productivity to third-party mismanagement to data theft, compliance risk along with technological risk factors, organizations are having a difficult time navigating through these challenges. Operational risk management is the need of the hour to help organizations to stay on track and increase their operational efficiency while staying compliant. Let’s dig deep into the realm of operational risk management and operational efficiency and understand the nuances of it and how it can be achieved while abiding by all the necessary compliance factors.
What is operational efficiency and operational risk management?
Operational risk is defined as the risk of loss resulting from ineffective or failed internal processes, people, systems, or external events that can disrupt business operations. Losses can be of a direct or indirect financial nature.
Operational Risk Management (ORM) is a set of processes that includes risk assessment, decision-making, and implementation of risk control to reduce such threats to an acceptable level.
Operational efficiency is, on the other hand, a metric that is associated with the efficiency of profit earned as a function of operating costs. The higher the efficiency, the more profitable an organization is. It isn’t just about the number of employees or revenue that separates the winners from the losers in the professional services game. The real indicators of improved operational efficiency are intelligent resource allocation, higher billable usage rates, a culture of psychological safety, and a host of other factors.
At the same time, it’s no secret that all companies, large and small, want to reduce costs. According to McKinsey, 79% of organizations have reduced costs in response to the global economic crisis, but only 53% of executives believe this has helped their companies weather the crisis.
While cutting costs is the obvious route, research shows that approaching operational efficiencies is not enough to reduce costs. PwC data also suggests that less than 30% of cost-cutting programs achieve their goals and less than a fifth of those are consistently rewarded over the next three years. A balance should be maintained to stay at the top of operational efficiency while also focusing extensively on the compliance and risk management programs of the organization.
How to drive operational efficiency while staying compliant?
There are multiple ways we can achieve the desired operational efficiency while being compliant. A few of them are:
Promote global standards of compliance
In today’s world of operational risk management, promoting global standards is more important than ever. The industry is constantly evolving in response to new regulations and market demands and multinational companies face more compliance burdens than ever before. With increasing scrutiny from tax authorities, legislators, and even non-governmental organizations, they are reviewing their approach to statutory accounting and tax compliance. Increasingly, multinational companies are seizing the opportunity not only to incrementally improve their global compliance management but also to transform the operational performance of their compliance function and achieve exponential value with the support of a third party.
As a result, many organizations are looking for more consistent, efficient, and cost-effective ways to meet their compliance obligations. Organizations are choosing risk and compliance management platforms to manage and optimize their risk and compliance management.
Additionally, many countries have begun to implement their unique regulations to suit their needs. You need to ensure your procedures and standards are consistent across all locations.
Incident and compliance management platforms are designed to help organizations manage their compliance information. One of the best ways for organizations to promote global standards is to implement a compliance management system that is available anywhere, anytime.
The ways their efficacy can be measured are:
- Gaining real-time visibility into compliances so that a quick escalation resolution can be deployed if necessary.
- Improving compliance management information to minimize costs.
- Better and more comprehensive information to support proactive management of operational risks.
Ensure regulatory compliance
In recent years, several new compliance requirements have emerged that directly impact operational risk management. GDPR, MiFID II, and BCBS 239 all impact organizations’ risk management. The key to achieving compliance and operational efficiency is being proactive: track regulations as they arise, understand their business impact, integrate with ORM and audit frameworks, and define clear ownership boundaries.
From the point of view of the Basel reforms, there have been a number of changes over the past decade. Basel II defines operational risk as the risk of loss resulting from four broad categories: internal processes, people, systems, and external events. Today, other risk categories have become equally important, be it third-party risk, cybersecurity risk, capital adequacy risk, fraud risk, or model risk. As these new risk categories continue to emerge, organizations begin to build frameworks around them to ensure effective risk management. They also seek to understand how operational risks correlate to other risks and the organization’s broader business objectives.
With the help of a risk and compliance management system, they can ensure that they comply with all relevant standards and government regulations. A compliance management platform like VComply also helps organizations maintain full records of their processes so they can demonstrate compliance when an inspection is conducted, which can help avoid hefty fines or penalties.
An operational audit system can help companies comply with regulatory requirements. Having thorough auditing along with compliance and regulatory checks are must for organizations to thrive amidst uncertainty.
Leverage tools for operational risk management
Technology is becoming more and more crucial from an operational risk management perspective. While planning the operational risk management and operational efficacy, consider building the risk and control library and risk assessment process proactively in a risk management application. Establishing effective risk management capabilities and operational compliance management is an important part of enabling data-driven business decisions.
Integrating processes with technology ensures they are applied consistently. A strong operational risk management program can help you improve your operational audits and risk library, as well as your SOC2 audit assessment, SOX, and cybersecurity compliance programs.
VComply for internal audit management can help organizations manage, automate and streamline the operational risk management program and transform the underlying operational risk into opportunities for competitive advantage with enhanced operational efficiency.
Facilitate cross-departmental collaboration
The biggest bottleneck in both compliance and operational risk management is multiple departments working in silos with limited or no knowledge of each other. Breaking the barrier is critical to achieving higher operational efficiency for an organization.
Centralize and automate compliance processes across multiple functions and locations with VComply’s compliance management platform. Collaborate effectively with your team and break down silos by quickly driving transparency and accountability across the board while meeting all compliance obligations (such as GDPR, ISO 27001, Vendor compliance, policies, risks, and more) all in one place.
Some ways to achieve significant operational compliance management with VComply’s GRC platform are:
- Assign tasks, risks, action plans, and policies to individuals or groups in a matter of seconds.
- Generate actionable, data-rich reports just as easily with your own report library.
- Set up workflows and create controls with just a few clicks.
- Set up workflows to review evidence of compliance and proactively report any issues or gaps in the process.
Importance of operational compliance management
Undefined business processes and poorly managed operational decisions can expose an organization to the risks of violating regulations and heavy penalties along with loss of reputation and business discontinuity which add up to the repercussions.
An effective operational compliance management system helps you implement an operational compliance program and manage internal risks and frameworks.
If you’re looking to improve operational efficiency while staying compliant with minimal effort, an operational compliance system helps you take the headache out of your audits.
The benefits of implementing an operational compliance system are:
- Reduce the workload of compliance managers so that they can focus on value-driven activities.
- Minimize the risk of violating regulations with operational decision-making.
- Promote transparency in business procedures and operations.
- Manage multiple regulatory frameworks from a single dashboard and implement the changes quickly within your compliance system.
The key features of VComply GRC platform for operational compliance management are:
- Team management – Automate communications through responsibility workrooms, consolidate compliance data in a centralized repository, and bring all responsible teams to a single platform.
- Task management – Schedule internal controls, track current and past controls, automate responsibility management, and communicate over the in-built dashboard.
- Regulation and policy management – Create policies, establish regulatory frameworks, track regulatory changes and perform impact assessments, and bridge the gap in policy apprehension with a centralized library.
- Compliance reports – Automate the generation of compliance reports, track compliance postures with stunning dashboards, have a single source of truth for compliance data, and enable proactive planning for future regulatory compliance requirements.
- Risk assessment – Identify risks, assess them, and proactively plan for risk mitigation, get automated risk reports to identify vulnerabilities, and implement proactive risk management planning.
- Audit management – Gather audit data and document it in a central repository for internal audits, create audit plans with scope, objectives, and schedules and have a single source of truth for audit reportings with failings, controls, and recommendations. Empower the leadership to take preventative and corrective measures based on the findings.
Refine processes to improve operational efficiency
Improving operational efficiency starts with refining processes. Processes are at the core of operations. Without diving deep into work organization and understanding what drives day-to-day operations, any operational strategy improvements will come out of nowhere and soon prove ineffective. As numerous studies show, the root cause of the lack of operational efficiency and operational compliance management in an organization is repetitive, non-billable work and a lack of structure. Not only do they consume too much time that cannot be regained, but they also hinder the successful completion of the project.
Every organization is looking for a better way to increase its operational efficiency while staying within the defined parameters of compliance. The right technology can help streamline operational compliance management while improving the productivity of your compliance and risk management teams.
To know more about VComply’s operational compliance management system, book a personalized demo.