AB-EB-Emerging-Trends-in-Governance-Risk-and-Compliance

[Virtual Presenter] The Governance, Risk, and Compliance Report 2024 provides a thorough examination of the most notable advancements in governance, risk, and compliance for the forthcoming year. As we delve into the report's discoveries, we will examine the primary forces influencing this crucial aspect of business operations. Let us embark on our exploration of the report's findings..

[Audio] Governance, risk, and compliance for 2024 are highlighted in the report, which provides insights into the impact of AI on GRC, the challenges it poses, and the road ahead. The report also explores the role of GRC in the new data privacy landscape, the expanding reach of ESG in GRC, data-driven compliance, cybersecurity as a compliance enabler, and maintaining compliance in remote workforces..

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[Audio] In the regulatory environment of 2024, effective Governance, Risk Management, and Compliance frameworks are crucial for navigating emerging challenges and opportunities. The report highlights the dual need to adapt to rapidly changing regulations while maintaining high ethical standards across industries. Key trends include the impact of Artificial Intelligence on regulatory and ethical frameworks, increased data privacy and protection demands, and the expanding scope of Environmental, Social, and Governance criteria. These areas present distinct challenges and opportunities for GRC professionals. The report equips professionals with knowledge and tools to navigate the complexities of the modern regulatory and operational environment..

[Audio] Organizations cannot afford to manage governance, risk management, and compliance separately. A siloed approach results in inefficiencies, duplicated efforts, and increased risk. To succeed in today's competitive landscape, organizations require a clear direction and a well-defined strategy to overcome challenges and achieve long-term success. Governance, Risk Management, and Compliance (GRC) provides a comprehensive framework that serves as a guide, directing enterprises toward sustainable growth. Compliance ensures adherence to relevant laws, regulations, and industry standards. Governance establishes the foundation by defining clear rules and processes for decision-making. Risk Management identifies and mitigates potential threats to the organization's success..

[Audio] The dawn of GRC was marked by manual processes, towering stacks of paperwork, and isolated functions, leading to inefficiency and inconsistency. Integration and automation then arrived, weaving governance, risk, and compliance into a seamless tapestry, enhancing accuracy and streamlining operations. Enterprise platforms subsequently emerged, providing a holistic overview and granting organizations unprecedented visibility and decision-making power. Cloud-based GRC solutions became accessible, allowing for greater scalability, real-time data access, and collaboration across diverse geographic locations. Big data and advanced analytics were integrated, enabling more sophisticated risk modeling and predictive analytics. Finally, AI and machine learning took center stage, intelligent sentinels parsing vast information streams, automating complex compliance chores, and dynamically tracking regulatory shifts..

[Audio] The emergence of artificial intelligence, particularly generative AI, has been the most significant technological leap in the last decade. A survey by Deloitte found that 62% of organizations have improved the efficiency of their compliance procedures using AI. AI automates complex and repetitive tasks, such as compliance audits and risk assessments, enhancing the compliance process. The compliance department must anticipate the potential challenges and threats posed by AI, considering both its benefits and risks. AI can be used to optimize or solidify the compliance function, but departments should proceed cautiously to avoid compliance and cybersecurity issues. As AI is implemented, compliance officers must serve as trusted advisors to senior management and other departments, ensuring prudent and compliant use of the technology..

[Audio] AI in the compliance function offers immense potential. Corporations possess vast amounts of data, which AI thrives on consuming. A custom-built generative AI tool, trained on a company's transaction data, third-party information, and internal communications, can serve as a virtual detective. This AI tool asks pointed questions about potential compliance risks in clear, concise language, delivering clear and direct answers that highlight potential red flags. By leveraging AI, compliance officers can maximize its value for the organization..

[Audio] AI in RegTech is revolutionizing the sector by enabling more efficient and accurate compliance processes. One of the most impactful applications is in the area of Know Your Customer (KYC) processes, where AI technologies are used to automate data collection, verification, and risk assessment tasks. By integrating AI into KYC procedures, organisations can dramatically reduce the time and resources required for onboarding clients while enhancing the accuracy of fraud detection systems. According to a report by Juniper Research, AI-driven RegTech solutions are projected to save businesses approximately $1.2 billion in compliance-related expenses by 2023. An example of this application is the use of ML models to analyse vast amounts of data to identify patterns that may indicate fraudulent activity, significantly improving the effectiveness of anti-money laundering (AML) efforts..

[Audio] AI should empower your GRC team to make more informed decisions by focusing on clear objectives, defining goals, and identifying areas where it can add value. Transparency and explainability are crucial, ensuring understanding behind AI-generated suggestions and fostering trust. Prioritizing data quality, investing in data cleansing and governance processes, and using AI to augment human expertise and judgment are also essential. Continuous learning and improvement are key, adapting to the evolving regulatory and risk landscape..

[Audio] Data privacy has become a major concern globally, with many countries implementing laws and regulations to protect individuals' personal information. The importance of data protection cannot be overstated, as it is essential for maintaining compliance and safeguarding against breaches. With the increasing reliance on technology and the rise of artificial intelligence, data privacy has transcended basic individual information security. National security concerns, the potential for deepfakes to damage reputations, and corporate data breaches involving biometrics all contribute to the complexity of the issue. As a result, compliance, ethics, risk, and data privacy officers face a constant challenge in navigating this landscape..

[Audio] Countries are now fighting for economic control through data privacy, with Russia and China imposing hurdles for businesses. Russia's 2022 law demands data localization, whereas China's PIPL law grants individuals the right to access, correct, and erase their data. Likewise, India's Digital Personal Data Protection Act sets standards for companies managing personal information..

[Audio] . GRC Report 2024 13 The digital age has brought a wealth of new technologies, but also new challenges for data privacy. One emerging technology, blockchain, is shaking things up by offering a way to conduct data transactions with greater transparency and security. This, in turn, has the potential to significantly enhance trust and compliance. Here’s how blockchain is influencing data privacy practices: Empowering Users with Control: Blockchain technology uses a decentralized ledger system, where data is not stored in one central location but distributed across a network of computers. This gives users more control over their personal information, as they can choose what data to share and with whom. Imagine a permission slip for your data, where you control who gets to see it. Transparency Through Immutability: Once data is recorded on a blockchain, it becomes tamper-proof and cannot be altered. This creates an audit trail that shows exactly what information was shared and when. Think of an unalterable receipt for your data transactions, providing clear evidence of what happened. Blockchain Revolutionizing Data Privacy Enhanced Security with Encryption: Blockchain employs strong cryptographic techniques to encrypt data, making it extremely difficult for unauthorized access. This encryption acts like a high-tech lock on your data, protecting it from prying eyes. By offering these features, blockchain fosters trust in data transactions. Users can be confident that their information is secure and hasn’t been tampered with. This new found trust can lead to greater compliance with data privacy regulations, as organizations become more transparent about how they collect and use data. However, it’s important to remember that blockchain is still a developing technology. Challenges like scalability (handling large amounts of data) and energy consumption need to be addressed before it can be widely adopted. Despite these hurdles, blockchain’s potential to revolutionize data privacy practices is undeniable. It offers a future where users have more control, organizations operate with greater transparency, and trust becomes the foundation for a more secure digital world..

[Audio] With a complex web of data protection laws, a principles-based approach is your best bet for compliance. The EU's GDPR and its seven core principles, including transparency, purpose limitation, and data minimization, serve as a solid foundation. These principles can be applied to most data protection laws, simplifying compliance efforts. Knowing your data landscape is also essential, which involves conducting a comprehensive data inventory and mapping exercise to understand where your data resides and how it flows within your organization. Embracing core principles and having knowledge of your data landscape enables you to review and update contracts, stay informed about regulatory changes, and simulate a crisis to prepare for unexpected events..

[Audio] Companies will need to collect less personal information on individuals, resulting in fewer data breaches and a reduced burden in complying with privacy laws. Moreover, advanced tools will be used to protect user data, even when companies utilize it for purposes like developing innovative applications. By 2025, many large corporations are anticipated to adopt these protective measures. This shift towards prioritizing data privacy signifies a commitment to customer trust and protection..

[Audio] Environmental, social, and governance factors are becoming a fundamental consideration for organisations worldwide. The EU's trend-setting ESG disclosure requirements will increase in importance, influence, and accountability for businesses globally, regardless of their location. The EU's leadership in this area sets the stage for other regulatory bodies, including the United States, to follow suit. As the US grapples with new climate disclosures, examining the EU's approach provides critical context for understanding the evolving landscape of ESG considerations in corporate reporting practices..

[Audio] Companies must report on all ESRS disclosures that are material to the company or required as a general disclosure by the framework. They need to disclose accurate information about their environmental, social, and governance performance, including metrics and targets. The reporting requirements will also extend throughout the value chain, making it essential for organizations to collect reliable data and ensure transparency in their reporting..

[Audio] The Corporate Sustainability Due Diligence Directive, also known as CSDDD, was passed by the European Union's parliament in June 2023. Its purpose is to enhance organizational accountability along the value chain and establish reporting and disclosure mechanisms to strengthen the responsibilities of boards and directors in ensuring company compliance. According to the directive, organizations with over 500 employees and €40 million in annual turnover within the EU, or those with a global turnover of €150 million, must conduct due diligence assessments of environmental and human rights risks associated with their suppliers, guarantee third-party compliance, establish a grievance reporting mechanism, identify and mitigate potential risks, and publicly disclose this information. This directive is likely to significantly influence businesses operating within the EU, particularly those operating in high-risk sectors such as textiles, agriculture, and extractive industries..

[Audio] Companies operating in the U.S. should be aware of the EU's ESG requirements because they may have a significant impact on U.S.-based companies doing business in the EU. Many larger U.S. companies already meet the EU's requirements for the CSRD and CSDDD, and they would do well to begin preparation for both SEC and EU reporting to avoid financial and human capital constraints. The uncertainty surrounding enforcement in the U.S. is another factor to consider, particularly given the upcoming elections and potential changes in administration..

[Audio] Big companies in emerging economies like India and Brazil are revamping their corporate landscape with a focus on Environmental, Social, and Governance practices. They will need to be more transparent about how they handle the environment, treat their workers, and follow the rules. By implementing ESG regulations, these countries can create a more sustainable future for themselves, not just for the sake of attracting outside investment, but for the wellbeing of their environment, workforce, and overall business climate. This shift isn’t just about attracting investors who prioritize sustainability; it’s a way for these developing nations to show they’re serious about tackling environmental challenges, ensuring fair labor practices, and operating with good governance. There are hurdles, of course. Smaller companies might struggle with the resources needed for robust ESG practices and reporting. The regulations themselves are still evolving. But the trend is clear: emerging markets are embracing ESG, paving the way for a more sustainable future for their businesses and people..

[Audio] As analysts, we anticipate that these requirements and disclosure frameworks will significantly influence future equity events. The global ESG landscape will continue to consolidate, with enforcement intensifying and becoming more public. Stakeholders and regulators will scrutinize how businesses operate. According to RIMS, over 65% of risk management professionals currently consider ESG criteria in their risk assessments, acknowledging the critical impact of ESG factors on overall risk profiles. The SEC's decision will undoubtedly affect companies operating in and conducting business with the US. There will likely be substantial overlap with EU and California disclosure requirements, making alignment with CSRD, CSDDD essential, as well as utilizing ISSB and TCFD frameworks for disclosure. Publicly traded companies must prioritize aligning with these standards as the EU continues to pioneer ESG regulation and enforcement..

[Audio] Complying with regulations requires more than just collecting data. It demands a plan to transform that data into actionable insights that drive business success. Known risk factors must be identified among existing or potential third-party vendors. Moreover, policies should be regularly attested to and adhered to by every level of the organization. Accurate policy management ensures that information remains up-to-date and relevant. With a clear understanding of compliance risks, businesses can proactively mitigate potential issues, avoiding costly consequences like fines, reputational damage, or employee leaks..

[Audio] Effective data integration is crucial for actionable insights. Creating a framework that connects data from different systems through common elements such as locations and shared terminologies is essential. This method organizes scattered data into a clear story that reveals more detailed insights. For instance, HSBC was fined $1.9 billion in 2012 for poor anti-money laundering practices due to their disparate data systems failing to provide a holistic view of suspicious activities. After enhancing their data integration, they were able to better track and report potentially illegal activities across global branches, significantly improving their compliance with regulatory requirements. Similarly, hospitals can integrate data from various sources to better identify and address potential safety issues, while Amazon integrates transaction data with compliance requirements to understand how to maintain compliance across different regulatory environments. By leveraging data analysis, organizations can pinpoint areas needing attention and take targeted actions to improve compliance..

[Audio] Walmart's sophisticated data management system oversees compliance across its global supply chains, particularly in monitoring labor practices and safety standards. This system enables real-time reporting and immediate corrective actions where necessary. Leveraging data-driven compliance, Walmart promotes a transparent, accountable workplace culture that minimizes risks and enhances the overall health of the corporation. This strategic shift is vital for sustaining robust compliance practices across industries. Employees who witness their company actively promoting a compliance-oriented culture are more likely to feel engaged and committed, and are better equipped to report any issues that may arise. Companies that fail to utilize data proactively can face reputational damage, whether from regulatory bodies or public opinion. By adopting proactive data usage, Walmart can effectively counteract these challenges..

[Audio] Ford's successful implementation of advanced data analytics has enabled it to strengthen its safety compliance measures. By analyzing patterns in manufacturing data, the company has identified potential safety issues early on, resulting in significantly reduced recall rates and increased consumer trust. This proactive approach not only minimizes risks but also boosts employee morale and engagement. As technology continues to evolve, the importance of data integration in fostering a sustainable compliance culture will become increasingly crucial. With the help of AI and machine learning, organizations will be able to predict and prevent compliance challenges, promoting a transparent and accountable corporate culture..

[Audio] The evolution of technology has significantly altered how organizations approach risk management. Safeguarding sensitive information is no longer just about physical security measures. Today's business tools are smaller, faster, and more connected, making them more vulnerable to hacking. The rapid pace of technological progress has led to constant software updates and innovations, boosting productivity and efficiency. However, it also brings challenges, drawing the attention of sophisticated cybercriminals and leading governments to expect more robust security measures from companies. Good hiring practices, security cameras, and simple physical access limitation policies worked well in the past, but they are no longer sufficient. The rise of smartphones, laptops, and cloud computing has created new vulnerabilities and requires a different approach to risk management. Organizations must adapt to these changes and prioritize cybersecurity as a compliance enabler..

[Audio] Cybersecurity and compliance are two vital components of any organization's risk management strategy. The evolving relationship between cybersecurity professionals and compliance teams is crucial in addressing the growing threats to sensitive information. Both teams must work together to educate and align the organization on the risks associated with new technologies and tools. This partnership is essential for building and maintaining a corporate culture that meets the expectations of various stakeholders. By working together, cybersecurity and compliance teams can advance the cultural imperatives of both groups and the organization more effectively and efficiently, ensuring that the company stays ahead in a rapidly changing risk landscape..

[Audio] Even with the best technology, cybercriminals often target the weakest link – people. Phishing emails and social engineering tactics can trick employees into giving up passwords or clicking on malicious links. Security awareness training for employees is crucial to prevent these attacks. By staying informed about these emerging threats and taking proactive steps to address them, organizations can protect themselves from cyberattacks and ensure they're complying with evolving regulations. With all these new gadgets connected to the internet, there are new challenges to following the rules. Many of these devices don't have great security built-in, so some laws might require companies to add extra security themselves. These devices collect a lot of data, so companies need to make sure they're following data privacy laws about how they collect, store, and get rid of that information..

[Audio] Conduct regular cybersecurity audits to evaluate the effectiveness of current security measures and identify vulnerabilities within the organization. These audits should be conducted independently of regular IT assessments to ensure they focus specifically on security aspects and compliance with internal and external regulations. Findings from these audits can drive improvements in security strategies and help align them more closely with compliance requirements. Ensuring systems communicate effectively is crucial, as organizations adopt increasingly sophisticated tools. Interdepartmental data sharing can help identify trends and validate risk assessments, making data more actionable. Granting cybersecurity leaders access to a wider array of risk-related data can significantly enhance their ability to plan and deploy resources effectively for better risk mitigation..

[Audio] The increasing use of AI in cybersecurity is expected to enhance threat detection and compliance monitoring, allowing organizations to prevent breaches before they occur. As cyber threats continue to evolve and regulatory demands rise, the synergy between cybersecurity and compliance teams becomes crucial for managing insider threats and ensuring data privacy. With integrated teams, organizations can significantly reduce data breach costs, reducing the financial impact of non-compliance. Regulatory bodies like the GDPR and CCPA emphasize the importance of stringent compliance, highlighting the need for proactive cybersecurity measures closely integrated with compliance frameworks. By prioritizing cybersecurity, organizations can demonstrate their commitment to data protection and minimize the risk of regulatory fines and penalties..

[Audio] The pandemic has permanently changed how we work, making remote and hybrid work common in many workplaces. These flexible work setups have several advantages, including improving company culture, helping employees balance work and life better, allowing companies to hire from a wider pool of candidates, and cutting down on office space costs. However, these changes have also brought about new challenges, such as issues like cybersecurity threats, protecting private information, and keeping up with compliance rules becoming more complicated with employees spread out and not in a central office. As more people work remotely, businesses must update their strategies for managing risk and ensuring they follow rules properly, ensuring their operations remain safe and up to standard even when their teams are not all in one place..

[Audio] The rise of remote and hybrid work environments has introduced new challenges for companies to prevent and detect fraud. The Association of Certified Fraud Examiners reports an increase in internal fraud in companies operating remotely, with substantial losses often resulting. Companies must enhance their detection methods, possibly by using technology that can monitor and analyze employee behavior more effectively to spot potential fraud early. The decreased direct supervision in remote and hybrid setups reduces a manager's ability to directly observe and engage with their teams, diminishing spontaneous interactions that promote a vibrant work culture and motivating employees. Gallup's research indicates that employees working remotely may feel less connected to their company's culture, which can negatively impact their performance and job satisfaction. Without direct supervision, it becomes easier for those inclined to unethical behavior to avoid detection, potentially leading to increased incidents of workplace misconduct..

[Audio] Remote work fundamentally changes how workplace investigations are conducted, especially those related to misconduct. Investigators must develop new skills for conducting effective interviews remotely and utilize technology to capture and analyze more subtle indicators of deceit. Although savings on investigations have been reported, this shift also brings challenges. Virtual interviews may miss non-verbal cues that can be crucial in assessing truthfulness. Adapting to these changes requires developing new approaches to ensure employee well-being and regulatory compliance..

[Audio] The shift to remote work has undoubtedly expanded the compliance landscape for organizations. Robust data governance practices and a culture of compliance can act as a virtual vigilance net, ensuring adherence to regulations even in a geographically dispersed workforce. Michael Rasmussen, Chief Privacy Officer at Duo Security, emphasizes the importance of investing in mental health resources and training programs to ensure a healthy and compliant workforce. Companies with strong engagement and mental health support see a 20% decrease in misconduct and notable improvements in employee satisfaction, according to Deloitte's insights. Organizations are entering a critical phase of adaptation as they analyze the impact of the remote workforce on GRC. The remote work model has significantly altered how GRC functions are managed, emphasizing the need for enhanced data analytics, improved employee engagement, and robust digital infrastructure..

[Audio] Organizations must adapt their strategies to manage increased risks and compliance obligations effectively. They must adopt advanced analytical tools for proactive fraud detection, strengthen their digital infrastructures to protect sensitive information, and cultivate a workplace culture that supports transparency and inclusiveness among remote employees. This requires proactively refining GRC practices to secure operational and ethical boundaries while capitalizing on the opportunities presented by digital transformation. By strengthening GRC capabilities, organizations can shape an adaptable, ethical, and forward-looking culture, ready to meet the challenges and seize the opportunities of the digital age..

[Audio] AI and machine learning are increasingly being used to drive efficiencies and reduce costs in various industries. Regtech spend is expected to surge to $207 billion by 2028, driven by the adoption of AI and machine learning. Worldwide security investments are forecasted to grow 12.1% in 2023 to $219 billion. The cost of a data breach is estimated to reach $4.35 million on average, highlighting the importance of robust cybersecurity measures. Cybercrime is expected to cost the world $9.5 trillion annually in 2024, emphasizing the need for proactive measures to mitigate risks..

[Audio] The conclusion of this report is an opportunity to express gratitude to those who listened to its findings. Their attention and engagement were invaluable in understanding the evolving landscape of governance, risk, and compliance. It is hoped that the insights presented will serve as a valuable resource for organizational decision-making processes. Further questions or requests for additional information can be directed to www.EM360tech.com or info@EM360tech.com. Thank you for participating, and we wish continued success in navigating the complex world of GRC..