Consequences of Risk Management Failures

Toyota Bank Polska’s GDPR fine is a perfect example of how governance, risk, and compliance (GRC) failures can result in significant penaltie (https://lnkd.in/e2mWyfEb). This case shows the importance of aligning data processing activities with established frameworks like GDPR. The bank’s profiling of customer data for credit risk assessments lacked proper documentation and a mandatory Data Protection Impact Assessment (DPIA). This highlights weak governance and oversight in processing high-risk data activities. Without a DPIA, the organization couldn’t properly assess or mitigate risks to individuals’ rights. In GRC terms, this failure underscores the need for a robust risk management process tied to regulatory requirements. Another major issue was the independence of the Data Protection Officer (DPO). By reporting to the security director, the DPO’s role was compromised, creating a conflict of interest. This governance gap not only breaches GDPR but also undermines the internal controls needed to ensure impartial oversight. This case is a clear reminder of GRC fundamentals: • Risk assessments, such as DPIAs, are essential for identifying and mitigating data processing risks. • Governance structures must prioritize clear roles and responsibilities to avoid conflicts of interest. • Compliance frameworks require documentation and accountability to demonstrate adherence. When GRC processes fail, the consequences go beyond fines—they erode trust and expose organizations to legal and reputational risks. This is why GRC professionals must emphasize transparency, independence, and consistent alignment with regulatory standards.

Evolve Bank & Trust has been hit with a Federal Reserve enforcement action due to significant deficiencies in its anti-money laundering, risk management, and consumer compliance programs. This action highlights the critical need for robust risk management frameworks, especially in fintech partnerships. The Fed's requirements include enhanced oversight, improved compliance programs, and rigorous monitoring of fintech relationships. From an internal audit perspective, this case underscores the importance of evaluating and strengthening risk management and compliance controls. Internal auditors should ensure that effective governance structures are in place and that comprehensive risk assessments are conducted regularly. Organizations expose themselves to severe regulatory penalties, reputational damage, and significant financial losses without a solid risk management framework. Internal auditors play a pivotal role in mitigating these risks by thoroughly evaluating and strengthening risk management and compliance controls. Staying informed about regulatory changes and collaborating with compliance and risk management teams are key to maintaining robust oversight. #InternalAudit #RiskManagement #Compliance #Fintech #Audit

The world paid close attention when approximately 8.5 million systems running Microsoft Windows were suddenly out of service. CrowdStrike has said a bug in a quality-control tool that it uses to check system updates for mistakes allowed a critical flaw to be pushed to millions of users running Microsoft Windows. One of those users, Delta Airlines, scrubbed over 5,000 flights over the course of five days – far more than rivals. Delta’s heavy exposure to Microsoft and CrowdStrike meant that 40,000 servers had to be manually reset. There just may be a few risk management lessons for businesses: 👉 On what does your business depend? As North America keeps a watchful eye on tropical weather systems in the Atlantic ocean, many businesses think about the physical safety of people, structures, autos, inventory, and business income from direct losses. Some fail to take the time to think about dependency on third parties and services to keep the business running. 👉 Do you have insurance? Dependent properties time element coverage is time element property insurance that pays for the loss of income or increase in expenses resulting from damage from a covered cause of loss to the premises of another organization on which the insured depends, such as a key supplier or customer. Even though this insurance is inapplicable to Delta’s issues with Microsoft and CrowdStrike, it is a valuable bit of coverage for businesses that go through the risk analysis of their dependencies. 👉 Do you have a plan? Boxers can get knocked out defending against the right jab and leaving themselves open for the left hook. But a good plan and defensive strategy is better against those left hooks than no plan at all. Even if planning for an expected risk, like a cyber attack, the planning may just save your business if the interruption in service is caused by something else. 👉 What if you had to go “old school” in your business? Delta did. It may not have been pretty, but Delta knew how to get back to pen and paper in a hurry. Do you keep a paper copy of your insurance policies somewhere in the event of a loss of power or interruption in digital service? Pay attention to that which you depend so that you can protect those who depend on you. #risk, #enterpriseriskmanagement, #insuranceagents