From regulatory rigidness to meaningful resilience

Regulations are growing faster than the GDP

Regulations are growing faster than the GDP. In fact, in a world of economic decline, it is the fastest growing industry. The rate of increase exceeds the capability of heavily regulated industries to integrate them into their environment; leaving these businesses and their management vulnerable to fines, censure or worse. It becomes more and more clear that ‘business as usual’ is cancelled. Old recipes don’t work anymore. The business operating system is coming to a grinding halt.

What is needed is a new perspective, a systemic perspective that looks at root causes of not being able to install and maintain a coherent governance, risk and compliance ecosystem.

It is all about Meaning

An important root cause for the disproportional burden of compliance organizations are struggling with is the inefficient way they deal with ‘Meaning’. In the Governance Risk and Compliance domain ‘Meaning’ tells us ‘What’ we have to do, ‘How’, ‘Why’ and ‘When’ in a specific situation. It is the connecting element between regulatory prudence (setting rules to achieve or prevent something) , business motivation (strategy, objectives,risk tolerance, policies, performance targets), operation (executed policies, transaction decisions, performance results) and evaluation (oversight, assessment, reporting, mitigation). ‘Meaning’ is more than simple rules. Every obligation forced upon us means something in the specific context of a transaction, a case, a product or a customer. Every decision in a customer and employee interaction is taken via an interpretation of the meaning of specific rules and objectives, and of the context at hand.

Managing Meaning

Meaning is the Semantic Sweet Spot of every knowledge intensive organization. Managing ’Meaning’ is managing the heartbeat of your organization, preventing your business to collapse as the consequence of a severe corporate heart condition. Therefore, you have to become an Entrepreneur of meaning and lever the Semantic Sweet Spot of your business operating system.
Traditionally, organizations deal with meaning in a fragmented and not well coordinated way. Look for in- stance at the process of introduction of a new regulation. There are numerous points of interpretation, decision making, transfer, translation and evaluation in which the meaning of regulatory and business requirements is lost or becomes eroded. Businesses are hardly able to grasp anymore the inter-dependencies between regulations and their relation to the internal policies. Dependencies are overlooked and anomalies surfaced only after high-risk decisions have been taken. Monitoring, oversight and compliance comprises a reverse look at transactions to determine if an infringement has occurred. This means large, tiresome and ineffective audits that do not solve the problem at its source but instead identifies culprits. The result is a vicious spiral of frustration and demotivation, stakeholder irritation and considerable financial loss.

Entrepreneur of meaning

Becoming an Entrepreneur of meaning is possible by establishing an end-to-end process in which the connecting thread is the meaning of regulations and objectives. This thread connects the corporate intentions and obligations to the outcome; all the way. From risk assessment and policy setting to operational controls, procedures and decision making. From monitoring, auditing and reporting to assessment, recommendation and remediation. From training and certification to interpretation of a case in context, collaborating, following best practices and adhering to the code of conduct. The result is a virtuous spiral of better decisions, engagement, resilience and profit from new opportunities.

For more information, see the free download of 'Playing Jazz in the GRC-Club, the 'Future Perfect' of Governance, Risk and Compliance. You may also read this post.

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NB: This article is also published on LinkedIn.