Banks which adopt a holistic governance, finance, risk and compliance (GFRC) approach to their business are able to operate more cohesively by reinforcing the connective tissue that binds critical functions together, says Wolters Kluwer.
The GFRC approach forms the central theme of a white paper, entitled ‘GFRC: Bringing Critical Functions Together for a More Comprehensive Picture’, just issued by the information services company. It shows how GFRC encompasses all sources of risk, financial and non-financial alike, providing a foundation for processing and interpreting data in a more holistic way.
The paper argues that even during normal conditions, the traditional governance, risk and compliance (GRC) approach can encourage thinking that is two dimensional and overly dependent on extrapolating long-running trends into the future. “This is plainly inadequate post financial crisis, in an age when banks encounter so many risks,” according to its authors.
The paper outlines the many benefits of such a model, including how it can facilitate best practice approaches to new regulatory standards, such as IFRS 9, which requires banks to estimate critical bits of data or make broader forecasts based on various possible scenarios, rather than on similar situations in the past.
“Firms adopting a GFRC approach need technology that can store massive amounts of historical and current data – data sets that are often so large and complex that traditional processing methods are inadequate,” says Richard Reeves, vice president of strategy for OneSumX at Wolters Kluwer.
“Banks need to overhaul antiquated organizational structures and technology if they are to benefit from a GFRC model. Failing to recognize that means losing ground to more nimble, progressive rivals and running afoul of regulators who are demanding that banks handle increasing amounts of interrelated data and display ever greater foresight.”
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