**London**: Klaus Jaeck from Horváth USA discusses the necessity for businesses to enhance risk and compliance frameworks. He advocates for proactive strategies and advanced technologies to manage interconnected risks and bolster organisational resilience amidst an increasingly complex global business environment.
Disruption in global business operations has become a permanent fixture, underscoring the need for enhanced risk and compliance frameworks. Klaus Jaeck, a representative from management consultancy Horváth USA, elaborates on how organizations can strengthen their resilience with advanced tools and integrated approaches in risk management. In a recent discussion with Corporate Compliance Insights, Jaeck noted that businesses are reminded of their operational vulnerabilities through various events, from the Covid-19 pandemic to anticipated disruptions such as extreme weather conditions and strikes affecting dockworkers in 2024.
As organisations face increasingly interconnected risks, it is evident that merely reacting to crises is no longer adequate. Jaeck asserts that there is a pressing need for companies to evolve their strategies to proactively manage risks. To this end, a clearer picture of risk and compliance can enhance organisational resilience and improve stakeholder confidence.
A key aspect of effective disruption preparedness is proactive risk management, which can be realised through the implementation of advanced Governance, Risk, and Compliance (GRC) frameworks. By consolidating and standardising risk data across various departments, organisations are better positioned to assess and understand their risk landscape in real time. Jaeck highlights the importance of early-warning systems—powered by AI and data analytics—to identify potential risks such as geopolitical tensions or supply chain vulnerabilities before they escalate into significant issues.
Once risks are identified, employing unified assessment methodologies can facilitate the prioritisation of threats, allowing resources to be allocated efficiently. This structured evaluation helps to ensure that critical risks are addressed promptly, while less urgent matters can be managed without detracting from overall strategic goals. Furthermore, by participating in scenario-based simulations, businesses can stress-test their responses to hypothetical challenges, fine-tuning their contingency plans in preparation for potential crises.
Cross-functional integration is another vital component in modern risk and compliance strategies. Jaeck emphasises that risk management should not remain siloed within specific departments but instead requires alignment across operational, financial, and strategic domains. This unified approach not only enriches risk management but also promotes collaboration and accountability throughout the organisation. Improved transparency across departments can lead to a cumulative understanding of risk that addresses issues holistically, revealing connections that could have otherwise gone unnoticed.
In this landscape, technology plays a crucial role in enhancing compliance functions. As compliance moves beyond a mere regulatory obligation to become a strategic enabler, integrating AI, advanced analytics, and automation becomes essential. These technologies allow organisations to bolster their performance while simultaneously ensuring regulatory requirements are consistently met without prolonged manual efforts, ultimately streamlining tracking and reporting processes.
Companies that focus on risk transparency, resilience, and cross-functional collaboration are more likely to convert potential disruptions into competitive advantages. Jaeck outlines five elements that organisations should concentrate on to develop high-performing risk functions: understanding risk-bearing capacity, integrating risk and opportunity assessments into strategic planning, conducting scenario-based simulations, balancing risk and returns in decision-making, and optimising cash flow and liquidity management.
As the interconnectedness of today’s global economy facilitates the rapid spread of various types of disruptions—ranging from natural disasters to cyber attacks—companies must not only develop the capability to recover but also to anticipate and adapt to these events. Successful businesses are characterised by their proactive risk management capabilities, allowing them to make informed decisions and seize new opportunities, even amidst uncertainty.
In a practical application of this methodology, a global retail and services leader undertook a project to reassess its risk inventory following the outbreak of the war in Ukraine. This initiative involved creating guidelines for risk quantification and processing key risks using advanced analytical tools. Through this project, the company identified its reliance on China for procurement as a significant risk. By diversifying its supply chain, the company projected it could reduce imports from China by 40%, liberating $600 million in risk reserves and potentially increasing earnings before interest and taxes by 0.5%.
As disruptions continue to evolve in frequency and complexity, companies that adopt a dynamic approach to risk management and compliance will be strategically positioned to navigate uncertainties, harness emerging opportunities, and secure sustainable success over the long term.
Source: Noah Wire Services
Subscribe to Industry Updates
