The power of integration
An evolving governance, risk, cyber and fraud strategy
Before the financial collapses of Enron, Tyco and WorldCom, businesses approached compliance, risk, governance and fraud in a siloed manner — each arm often functioned on its own.
In the wake of these corporate financial scandals, regulatory changes were born. The Sarbanes-Oxley Act of 2002, for example, mandated certain practices in financial recordkeeping and reporting for publicly listed companies.
Also consider the role of internal audit over the years.
Rarely was an internal auditor responsible for looking for fraud during an audit. Now, according to the International Standards for the Professional Practice of Internal Auditing Standard 1210.A2 on proficiency, “Internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization.”
And where risk management is concerned, 2120.A1 says, “The internal audit activity must elevate the potential for the occurrence of fraud and how the organization manages risk.”
The risk landscape doesn’t stop at traditional fraud. Emerging cyberthreats brought on by a changing work environment (remote work, specifically), a shift to the cloud and increasingly clever threat actors who deploy new and surprising attacks means your risk appetite should also evolve to include technology.
It’s no longer enough to have a check-the-box compliance program. And duplicative programs create risk management fatigue — separating your governance, risk, compliance (GRC), cyber and fraud arms fragments data and technology. Your risk and compliance data and processes shouldn’t be scattered across multiple systems in unstructured formats.
Now businesses are creating new methods of corporate governance focused on continual monitoring and agile processes that align with risk and compliance functions.
Integrated risk management
Integrated risk management (IRM) is a comprehensive approach to identifying, assessing, mitigating and monitoring risks across multiple domains using a unified framework. The technology and analytics have consistent taxonomies, centralized risk data stores and shared outputs. Using an IRM will help move you from a reactive approach to a strategic management plan, aligning your digital transformation with your overarching business goals.
Risk and compliance programs have often been seen as time consuming and manually intensive with little business value but, according to the Association of Certified Fraud Examiner’s 2022 Report to the Nations, organizations with proactive data monitoring and analysis techniques experienced lower fraud losses and detected fraud more quickly.
Moving your long-term GRC strategy to an integrated and agile foundation will allow your processes to be flexible and easily adaptable. Consider the following six benefits:
1. Enhanced efficiency and effectiveness
Integrating GRC and fraud prevention into a single system streamlines processes and eliminates silos. Don’t manage multiple disjointed systems — identify and respond to threats more efficiently using a unified view of all potential risks. By consolidating data, automating workflows and standardizing reporting, you can enhance communication and improve decision-making.
2. Comprehensive risk assessments
An IRM solution allows businesses to look at risks holistically. It considers how different risks are connected and how they might affect each other. This approach will give your company a complete picture and help you understand how risks might impact your business.
3. Reduced costs
Maintaining multiple, disparate risk management systems can be costly. Integrating GRC and fraud prevention not only reduces the expenses associated with managing multiple solutions but also eliminates redundancies. By centralizing data storage, standardizing processes and harnessing automation, you can optimize resource allocation, minimize manual efforts and reduce overall operational costs.
4. Improved compliance and regulatory alignment
As regulations and industry standards change, adhering to them can become cumbersome. Ensure compliance by using an IRM to create a centralized framework to monitor and manage regulatory requirements. It facilitates controls mapping, streamlines audits and generates comprehensive reports for regulatory reporting purposes.
5. Strengthened cybersecurity defense
An IRM solution combines cybersecurity and risk management to allow you to proactively identify vulnerabilities and implement robust security measures. By integrating cybersecurity tools, risk assessment processes and incident response mechanisms, you can strengthen your defense against cyberattacks and enhance your visibility into potential cyber risks.
6. Early fraud detection and prevention
Fraud poses a significant risk to businesses, leading to financial losses, reputational damage and legal repercussions. Integrating fraud prevention into the broader risk management framework enhances your ability to detect and prevent fraudulent activities. By correlating data from various sources, such as transaction records, employee activities and external threats, an integrated solution can identify patterns and anomalies indicative of fraud. Using advanced analytics and machine learning algorithms, you can develop proactive fraud prevention strategies.
The next generation is integrated
Modern business environments should be dynamic as cyberthreats continue to evolve. Integrating your GRC and fraud prevention into one cohesive solution is essential. An IRM approach can help you maintain regulatory alignment and enhance your resilience in the face of advancing cyberattacks. Foster your organizational resilience with a forward-thinking approach that includes informed decisions, proactive steps to mitigate risks and a risk management practice that aligns with your business objectives.
How Wipfli can help
Prevent, detect and investigate fraud, misconduct and cyberfraud with a team of financial and digital forensic specialists. Wipfli combines technology with investigative and analytics skills in accounting, technology, fraud, compliance and litigation to help mitigate or respond to internal and external threats. Reach out to see how we can help.