GRC adds value, providing competitive advantage

Ramani KANGARAARACHCHI

Most financial institutions have viewed GRC as discrete activities undertaken by different departments with no coordinated efforts and as a result, there is a lack of integration of GRC across business areas or functions.

Deputy Governor General, Central Bank of Sri Lanka Dr Rani Jayamaha said delivering the key note address at a seminar organized by John Keels Business Solution Ltd on “GRC package and the roadmap for financial service industry”.

She said that the three GRC imperatives; Governance, Risk management, and Compliance are interrelated in financial business and the emerging perception of GRC is that it is an integrated set of concepts.

When it is applied holistically within an organization, it can add significant value and provide competitive advantage. Further, the holistic approach would be more efficient, consistent and legally sound and the Boards of Directors, senior management and staff at all levels would be involved in the organization’s conduct of business.

She pointed out that now is the time to change and there should be a multifaceted approach to face the GRC challenges.

“GRC should be treated as one package or a set and this approach includes governance, built on Principles and Rules, Integrated Risk Management Mechanisms to identify, assess and mitigate risks and a defined compliance mechanism that deals with internal and external compliance requirements,” She said.

Dr Jayamaha insisted that the financial institutions have the responsibility to establish a compliance mindset throughout the organization as a foundation that places high regard on ethics, trust and values.

“Energies that are used by some banks and financial institutions to design ways and means of flouting instructions and defying directives should be diverted to observance of governance and compliance,” she said.

According to Dr Jayamaha in the present financial industry environment, where the stakeholders and other interested parties put pressure for greater transparency and corporate responsibility, the Board of Directors and senior management have to set high standards in all aspects of GRC.

The increase in investments to improve the IT infrastructure and human resources to integrate GRC management can improve risk management as well as compliance performance and its efficiencies.

The financial institutions that have strong governance and compliance processes in an integrated GRC framework will be more capable of winning public confidence, attracting investors, improving corporate reputation and efficiency, as well as contributing to promote financial system stability.

She said it is also important to note that markets and investors are much more vigilant than banks and financial institutions themselves. They may watch global events with bemusement or with justified suspicion and feel that nothing is straightforward anymore.

“We need to reduce such feelings in the public in our country and instill confidence in them. Given the severe impacts of the recent sub-prime crisis and low quality credit decisions in the US and Europe and large frauds in international banks, it is important that the financial services industry and the regulatory community reflect on what additional precautionary efforts should be initiated to ensure that Sri Lanka’s financial services industry continues to function as a stable and resilient one,” She said.