GRC issues that complicate issues at the board/senior management level.
Board of Directors are now taking an active role in shaping reality scenario's of their responsibilities in relation to their Governance, Risk management, Compliance and IT-Security (GRC) illustrations (1/3)
EU directives and local regulatory compliance enforcements have now developed a clear plan on how a Board should fulfill its transparency, ethics and accountability (TEA) compliance responsibilities by providing reasonable oversight, developing an organization of culture and integrity, and by receiving and providing adequate role and responsibility relevant training, and by giving proper and direct access to ethics officers, committees. In short, the board must encourage the entire palate of GRC enforcements across the organisation.
In this first of a 3 part paper we focus on TEA. How must the Board fulfill its transparency, ethics and accountability (TEA) compliance responsibilities?
Right resources and competencies
One of the many intricate Governance, risk management, compliance and IT security (GRC) issues facing many companies is that not all related GRC components of globalization have developed in the same direction. The result is that companies are dependent on complex, multi-level supply chains and distribution networks, tax laws, global governance and regulatory compliance mandates that do not span the globe. Some US and UK laws have multi country jurisdiction but that is not a sustainable answer.
All stakeholders but primarily the investors, employees and oversight authorities are increasingly demanding the TEA components of transparency, CSR, ESG responsibility throughout the manufacturing and distribution chain, including third party compliance.
The Board of directors' oversight role is to ensure that the company's TEA program is fully equipped to address the challenges a comprehensive risk assessment process has identified.
The Board must see to it that the TEA program has the right resources with the right competencies, responsibilities organizational placement and support from both management and the Board.
The entire Board and senior management should have knowledge and oversight of the company's key TEA risk areas and the TEA program oversight is ‘delegated' to the right committee.
TEA culture failures
Do not underestimate the power of a company culture. While organizational culture may feel like an unstructured soft management splash it consists of powerful components like prejudice, pride, vanity and emotion.
When a mandate, rule, policy or a code is in conflict with the company culture, it is culture that prevails due to its widespread hold of almost every management process in the organsation. Therefore, in order to have an effective TEA program, focus on the company culture to start with.
Two questions to be addressed are:
- Is the Board of Directors knowledgeable about the content and operation of the companies TEA program?
- Does the Board exercise reasonable oversight on implementation and effectiveness of the TEA Program related to the components of the company culture?
Lack of accountability and the TEA program.
There's no accounting for the GRC issues risks an organization faces, when the employees do not understand what they are held accountable for in performing their roles. According to research1, 50 percent of workers who feel uncertain about their work accountabilities experience higher levels of frustration
If the employees do not know what is expected of them at work each day and how an understanding of accountability, or lack thereof, impacts work life it does not matter what duties they have performed that day. (Paraphrasing, Alice in Wonderland).
The research concluded that when employees aren't sure what's expected of them, the results simply just cannot be positive, especially when the complexity of work and the pace of change is taken into consideration.
When considering the root of the TEA culture uncertainty, it is necessary to identify the level of failure that can be contributed to the lack of accountability that could trigger an organizational crisis. Furthermore, when the board becomes more accountable to GRC it often takes then further away from the senior management if the right TEA communication lines are not developed.
The Board must first identify the company's weak TEA links especially related to the tone of the company cultural. These assessments will, lead to the identification of the company's main cultural risks and determine the why and how to address them.
How the organizational culture is perceived by various and each stakeholder can also be prioritized. The response will support the culture through language and branding, and what tools to use to shape the culture in the direction that the Board wants.
