Hyper focus on compliance and risk management has blossomed since the world financial crisis in 2008. As regulators and legislators struggle to define, design and implement new regulations to be sure that never again will we face such calamity, what must the leaders of business large and small do to cope?

First, some guiding principles:

Business is good. Business exists to serve customer needs. By taking various types of risks to transform capital into product, the business seeks to generate a return for its owners that the owners feel justifies the risk involved. It is too easy in the current environment to perceive that not only risk but business itself is bad, and compliance and risk management csars are required to discipline the bad and eliminate risk, including non-compliance risk. There can be no innovation without risk, and innovation drives progress.

Change is constant. It is hard to ignore the seeming increase of unexpected events. As a Harvard Business Review article put it, “Surprises are the New Normal; Resilience is the New Norm”.

Business resilience is a term for a collection of steps that enable a business to endure and recover rapidly from these unplanned events. IBM defines it as “The ability of business operations to rapidly adapt or respond to internal or external dynamic changes – opportunities, demands, disruptions or threats – and continue operations with limited impact to the business.”

Regulators are behind the curve. Their job is to react. Their effort to address their embarrassment for having overseen a system that went astray is understandable. Like having more security at airports, new rules create the comforting impression that Something Is Being Done. In many cases, they are, however, looking backward, which is not something business can afford to do.

Business must model best practices. Our best bet as business leaders is to continue to become ever better: to develop agile organisations able to adapt to change.

So how does company leadership handle ever more demanding customer markets, more volatile supply issues, ever shorter product life spans, various cross-border and cross-cultural issues, increased shareholder and even employee activism, and also comply with a constantly growing burden of regulations that are so numerous that the regulators and legislators that created them cannot yet fully define them?

Jan-Mar 2014 Issue

Solon Group, Inc.