In my previous entry, I mentioned Adrian Slywotzky and his book on the upside of strategic risk. Slywotzky was one of several leading consultants I profiled this year for another publication, Consulting Magazine, which each year selects and honors the best management consultants in the world (the Top 25). I am not involved in the nomination or selection process; I just get to interview these consultants who you, Business Finance readers, pay top dollar to help address vexing business challenges.

I was pleased to see that several of my subjects, including Slywotzky and PwC's Miles Everson, are heavily involved in risk management. Everson, who leads his firm's advisory GRC practice, is one of the primary authors of the COSO ERM Framework, which was published in 2004. The framework pulls together the previously discreet disciplines of internal control, risk management, and performance management and places them under set of common principles.

I asked Everson about GRC's future as a management tool, and he was optimistic about its longevity. He identified three reasons for its growing importance and need:

1. The rate of change continues to accelerate. The fundamental principles of risk management, and of GRC, are about understanding the techniques and approaches and capabilities companies need to understand events and conditions that spark change and affect -- positively or negatively -- the company's future. If managers do not understand these principles, they will not know how to apply them to new events and circumstances. And that results in a highly reactive, and probably short-lived, organization.

2. Flexibility has bred complexity. Enterprises have grown much more flexible in response to changes in the business environment. Think of outsourcing, virtual teams, innovative new product-services mixes, and the ever-extending supply chain. This complexity clouds visibility: think of Baxter's Heparin problems, which appear to originate in its Chinese manufacturing partner. GRC is designed to foster visibility.

3. A growing external demand for transparency. Managers are not the only ones who want to better visibility into operations. Regulators, shareholders, customers, and other stakeholders also demand greater transparency into company operations. As that visibility increases, mistakes (risks that come to fruition) also become visible more quickly -- before organizations can correct them -- and therefore inflict greater damage.