In the ever-evolving landscape of the financial services industry, the concept of Governance, Risk, and Compliance (GRC) has emerged as a critical and dynamic force in recent history, driven by compelling statistics that underscore its significance, particularly in Europe. Over the past few decades, the European financial world has witnessed a series of transformative events and regulatory changes that have made GRC not just relevant but indispensable for organizations operating within this sector.
Consider, for instance, the global financial crisis of 2008, which severely impacted Europe, resulting in the loss of €1.6 trillion in output by 2009, according to the European Commission. This crisis emphasized the critical need for enhanced risk management and regulatory oversight within the European financial system. Since then, Europe has experienced a notable surge in regulatory requirements.
The implementation of the Basel III framework, for instance, required European banks to meet higher capital adequacy standards. In 2018, European banking institutions spent an estimated €77 billion on regulatory compliance, as reported by the financial consultancy firm, Opimas.
Furthermore, non-compliance with European financial regulations has become increasingly costly. The General Data Protection Regulation (GDPR), introduced in 2018, has levied substantial fines for data protection violations. In 2020, GDPR fines across Europe amounted to €158 million, highlighting the considerable financial risks associated with inadequate governance and risk management practices.
These statistics, among many others, underscore the imperative of GRC in the European financial services industry. To fully appreciate the significance of GRC in this region today, we must delve into the recent historical developments and the key factors that have propelled this paradigm shift.