Risk, Compliance, and Cybersecurity

There have already been more data breaches this year than there were in all of 2020, according to the Identity Theft Resource Center (ITRC), heralding a year of record-breaking hacks. At a time when high-profile assaults are making headlines, such as the SolarWinds hack and Colonial Pipeline shutdown, risk and compliance are more important than ever.  

Because ransomware and supply chain intrusions are becoming more common, businesses must have risk and resilience frameworks in place that have been thoroughly established, planned, and tested. As a result, there are no longer justifications. There are no retakes in this game. Organizations must have a comprehensive strategy for resilience and be proactive in making all business choices considering resilience in mind. 

Businesses and their risk and compliance plans in 2022 are a subject that comes to mind as we reflect on the last year. 

ESG And Cybersecurity Programs Are Getting More Attention in Risk Modeling 

More strict underwriting processes are driving the maturation of the cyber insurance industry because of the rise in cyberattacks. Insurance firms are expecting more from businesses in terms of risk mitigation. As a result of inadequate cyber hygiene, large-scale, disastrous cyberattacks often occurred in 2021, making some users "uninsurable," disrupting services, and causing significant financial losses. Increased accountability for risk mitigation in cyber programs is expected by organizations in 2022, as underwriters have become more aware of what kinds of risk controls create effective cyber programs. 

An organization's cyber insurance provider will ask to see documentation demonstrating that the company has procedures and policies in place to guard against a security breach. Many cyber insurance providers now require organizations to implement multi-factor authentication in their IT infrastructure, updated patch management, air-gapped and encrypted data backup, and staff knowledge, among other measures.

Equality, diversity, and climate change are among the many environmental, social, and governance (ESG) issues that customers, workers, and investors hold businesses more responsible for their actions. For the sake of the greater good, businesses are required to conduct themselves in a morally and ethically sound manner. Cyber insurance is an excellent example of how insurance firms have linked the quality of ESG programs to predictors of risk and placed increasing scrutiny on these programs. In addition, there is a growing interest in the importance of ESG disclosures in financial reporting. For example, the US House of Representatives recently passed legislation requiring firms to publish ESG data if signed into law. SFDR laws in Europe are constantly changing. 

2022 will be critical for organizations to fully grasp the environmental, social, and governance (ESG) challenges impacting their operations and ensure they are included in their bank risk management framework. These companies must have policies and procedures incorporated into their culture, systems, and processes and a structured ESG reporting system to be completely transparent in their ESG approach. 

The Role of Risk and Compliance as Change Accelerators Is Becoming More Prominent 

When it comes to expectations for firms to perform in a socially responsible and ethical manner, the game has completely shifted. Stakeholders want more than just a profit margin from firms; they expect them to understand their place in the larger ecosystem. The company’s reputation, the capacity to recruit and keep the best employees and users, and the company's position in the market are all in danger if ESG, resilience, and effective cyber and compliance processes are not in place. 

However, risk and compliance were historically viewed by many as the organization's police force, enforcing the rules and addressing any infractions or misbehavior. Risk management software will be just as important to firms in 2022 as customer service or employee well-being, for example, will be. Increasingly, ethical conduct and decision-making programs will be commonplace as executives rethink the role of compliance in the workplace and implement adequate risk-related governance. 

Organizations' risk and compliance teams are particularly placed to collaborate with other company parts. With access to all stakeholders and business processes, their teams can design programs from the ground up and be effective with minimum resources. Strategic possibilities for achieving corporate objectives may be found and used as long as risk and compliance play an enabler role. 

As part of sentencing guidelines or in establishing fines, penalties, and other sanctions if misbehavior has occurred, regulators will also examine the company's compliance culture. An organization's principles and leadership style must demonstrate that risk, resilience, and compliance are intertwined. As the company and legislation change, they must show that they are championing a culture of compliance, risk management, and ethics and that they will continue to do so. 

The Importance of Organizational Resilience Is Highlighted 

When it comes to resilience, it is not just about dealing with disruption or coping with several unforeseen occurrences beyond an organization's control - it is about so much more than that. An organization’s resilience is based on proactive decision-making by the company, which includes integrating the different activities of governance, risk, and compliance with other business operations. 

Business executives will focus on building more intelligent, more robust ecosystems next year. As a result, executives should prioritize third-party risk management in their operational and strategic risk planning and modeling. 

Reputational risk has always been a problem, but it has been dramatically accentuated during the past year. Even if an event does occur, leaders understand the importance of showing that the company's culture or principles did not cause it. They must do this to limit a data breach or hack’s harm to their reputation. 

Developing an organization's resilience is not just a one-time event that security leaders check off their to-do list. It is a gradual process that does not happen all at once. Because there is always more to learn about risk management and resilience, there is no such thing as a "completed" path for security professionals. Stakeholders (e.g., workers, investors, customers) are mobilized to embody this and produce a robust and relevant business model that incorporates a risk-and-resilience framework at its heart.