VUCA world is forcing the GRC to take the driver’s seat

Walid Elsherbiny ,MBA
Certified in Credit Management from the Chartered Institute of
Bankers -UK.
lecturer at the AUC , seasoned banker & Certified leader from Toastmasters International-USA.

In the nowadays VUCA world (Vulnerability, Uncertainty, Complexity & Ambiguity) the driver’s seat is shifting to the GRC (Governance, Risk & Compliance).Nevertheless risk management & compliance rules are adopted by a lot of organizations worldwide yet governance rules if compared to risk management is still behind the scene for a lot of corporations.

Thus, it is worthy to be acquainted with the “Governance” term.

In simple words it is the set of rules, laws and foundations that govern the work of companies to achieve effective control over their board of directors, and regulate the relationship between them along with the other stakeholders, in order to achieve transparency, justice and to fight against corruption.

Governance helps the government and institutions in protecting the interests of all parties, especially the conflicting interests, as well as preserving shareholders’ rights while maximizing the company’s profits and market value by avoiding mismanagement, in line with managing group of anticipated risks.

The word governance appeared in 1976 in the Official Gazette of the US Federal Government, while the US Securities and Financial Markets Commission addressed the issue of corporate governance and made it a priority, years after the bankruptcy of one of the top  transportation companies  despite its successes, which led the US Securities and Financial Markets Commission to impose legal proceedings against three directors for providing misleading financial statements, as well as a group of other managers for violating professional rules.

Governance consists of the following :

External components such as the investment, legislative and regulatory environment in the country, and consists of all the laws governing the work and protection of companies, in addition to the banking and regulatory environment. Internal components such as the rules and foundations that determine the mechanism of decision-making and the distribution of powers and responsibilities within the company between the board of directors and the executive director with his team of executives.

So, what are the main principles of governance?

The principles of governance can be summarized as follows:

Transparency:
The Board of Directors must explain to shareholders the reasons for making fundamental decisions.

Responsibility:
Each member of the Board of Directors is responsible for carrying out his tasks with high professionalism and integrity.

Accountability:
The members of the Board of Directors must be in a position of accountability to shareholders for mistakes committed.

Justice:
All shareholders are equal when dealing with the CEO & all members of the Board of Directors (No privileges among each other & no discrimination for any of the shareholders).

Conclusion:
GRC is extremely important to control the markets at all times, however during the time of VUCA its importance is increasing drastically.

This doesn’t mean we stop business;on the contrary we need more business to overcome any leakage; yet in a different & more sophisticated way through highly skilled experts with an intellectual capacity.