Don't let risk weigh you down
Take a more nimble approach to create value and improve performance
Ten years ago a large multinational consumer products organization left itself too exposed to risky events that negatively impacted its production — and its brand.
Determined never to leave itself unprotected again, the organization implemented a comprehensive cross-enterprise risk management program.
The organization mandated that every facet of the business use the same internal controls and compliance checklists — regardless of the size of business unit or location.
As the years passed and the company grew, the organization’s static approach to risk management and controls began to weigh it down.
Many of those tasked with implementing the program had no idea why they were doing it. And the controls and compliance checklists they were mandated to implement were far too expansive for the risk they were designed to protect against.
The very risk management program the organization had designed to protect itself was paralyzing decision-making and causing it to lag behind its competition.
1. What’s the issue?
Multiple regulatory requirements from food safety to the Foreign Corrupt Practices Act provide greater complexity to consumer products organizations.
To address this complexity, many organizations take a static approach to risk management and controls in their operations and finance areas. This approach may cost more than necessary, compromise business performance and limit profitable growth.
This can slow an organization’s ability to keep pace with accelerating change, its growth trajectory and its flexibility to proactively prepare for unforeseen events.
2. Why now?
The consumer products industry is more competitive than ever. A rising number of global competitors, the constant quest for the next “big hit” and escalating raw materials costs are squeezing already tight margins.
In developed markets, consumer products organizations are fighting both flat or declining demand and pressure from private labels and other new players that are disrupting traditional market dynamics.
As a result, these organizations are racing to gain an edge in emerging markets, where they face fierce competition from their developed market peers and emerging market domestic players that already have brand recognition.
To remain competitive, organizations need to have the flexibility to increase speed to market, minimize administrative and operational burdens, protect itself from emerging and unforeseen risks, and deliver sustainable cost savings.
3. How does this affect you?
Programs with multiple siloed risk functions can end up with overlaps and gaps in risk coverage. A lack of transparency across risk functions also means that the organization has little visibility to which risks matter most relative to its risk appetite, how much internal controls are costing or how many resources are dedicated to managing a manual control environment.
Additionally, business units in emerging markets that are mandated to use controls meant to address risks in developed markets are devoting valuable resources to implementing controls that may have little or no relevance. At the same time, they may be ignoring controls that could protect the business unit from the emerging market risks they actually face.
Over-engineered risk management and controls programs tend to be a sign that an organization lacks confidence in its ability to adequately protect and monitor itself.
These inefficiencies eat into already tight margins and significantly reduce a consumer products organization’s ability to respond to a rapidly changing landscape — ultimately compromising its ability to grow in both established and emerging markets.
4. What’s the fix?
To compete in today’s fast-moving environment and protect the business, consumer products organizations need a dynamic risk management program that can be tailored to the needs not only of the organization, but also of each business unit.
This requires a multifaceted approach:
5. What’s the bottom line?
Until recently, consumer products organizations were focused on mitigating risks, controlling costs, keeping the business out of trouble and protecting the brand.
Today, organizations are more interested in developing risk management strategies that enable the business, accelerate performance and drive growth.
Consumer products organizations that embed automated smart controls and GRC technology into their risk management programs will see significant efficiency improvements almost immediately, including:
- Greater visibility into the risks that matter most based on risk tolerance
- Risk alignment to corporate strategy
- Potential 20% to 40% reduction in process costs related to controls
- Increased reliance on automated controls enabled by GRC technology
- Real-time monitoring and reporting
- Increased business performance and significant return on investment