Governance, risk and compliance (GRC) is a concept that businesses have had to deal with frequently in the last couple of years, with increasing requirements from government and regulatory bodies for organisations to take heed of and conform to a myriad of new regulations and legislation.
As a result, these terms have become synonymous with a sort of grudge implementation, where businesses are taking GRC seriously only because they are being forced to, and are losing sight of the long term benefits they can deliver to an organisation, writes Jayen Vyravene, managing partner of Quency.
Aside from the improved long-term sustainability there are more tangible benefits to be achieved, chief among which is an improved standing among international businesses and along with this increased opportunity for international commerce and increased attractiveness for foreign investment.
Having a solid GRC framework in place and knowledge of the various regulations in place in different countries around the world can stand businesses in good stead when it comes to expanding operations beyond national boundaries.
All of the aspects of GRC form important criteria for international organisations when it comes to selecting business partners, and this holds true for organisations in South Africa.
In terms of governance, criteria for choosing a partner include how the business has been run in the past, the future outlook of the company, the structure of governance, accountability and responsibility, and the sustainability of the business as a whole.
Listed companies will have additional requirements placed on them such as their standing with rating agencies and the stakeholders' opinion of the business.
As organisations all over the world become more critical when it comes to selecting business partners, governance and how it is handled will be a critical criterion for partnerships, so South African businesses need to look to this to be more attractive and viable, addressing these international concerns.
Risk is another major factor for businesses looking at partnerships, mergers, acquisitions and joint ventures.
A risk assessment will be conducted on any company an organisation is looking to partner with, encompassing the business as a whole including the financial environment, the past running and management of the business and future financial sustainability.
Compliance too is a vital area that international organisations will examine when looking to partner with South African businesses.
Organisations in countries such as the United States have to comply with certain regulations, for example Sarbanes-Oxley, FCPA and will look for partners that comply with these requirements too.
All contracts will be examined for compliance and a particular focus will be placed on how bribery and corruption are dealt with, as these are increasingly becoming a focus for international legislation.
Ultimately if GRC structures and frameworks are not put into place in South African organisations, local companies will not even be considered for multinational partnerships, which not only hampers opportunity but also growth locally.
If businesses wish to grow into true international concerns, GRC is vital, because partnering with organisations across the world is the key to this growth, and with the multitude of laws and regulations in place and due to be set into motion, non-compliance and poor corporate governance and risk management simply are not an option.
While legislation around anti-bribery and corruption, as well as expectations around due diligence and open, visible contracts, are mainly restricted to the USA and Europe, because much of international business in South Africa is linked to these areas the laws affect businesses locally as well.
This places international pressure on local organisations to comply not only with South African legislation but global regulations as well.
Currently, this is a complex and costly process in South Africa because locally, companies are not as mature as global organisations when it comes to GRC, meaning that in order to get up to speed they need to enter from a much lower starting point than many international businesses.
There is also a lack of skill and knowledge in the GRC field. However, this is changing and GRC is becoming increasingly important and companies are beginning to realise its importance.
When it comes to GRC the benefits are largely for the long-term, which means that many organisations lose sight of why they have embarked on this process in the first place.
In the beginning organisations will need to bear the cost, but GRC creates an environment that delivers sustainability of the business for the long term, and sustainable businesses have correspondingly higher share prices, happier stakeholders and greater investment potential.
Sustainability is the key reason for implementing GRC, in order to comply with laws and regulations, but also to deliver better overall business practices that will lead to more profitable and successful businesses, which will benefit everyone in the end.