Encouraging stakeholders to raise issues internally is a cornerstone of an effective Governance, Risk, and Compliance (GRC) program. This approach allows the organization to be the first to learn of and respond to potential problems. It provides the opportunity for a prompt, internal investigation and affords greater flexibility in designing and implementing corrective actions. By addressing concerns directly and quickly, the organization can mitigate potential harm, prevent escalation, and demonstrate a commitment to a culture of integrity and accountability, which can strengthen stakeholder trust. This proactive stance is more efficient and less damaging than reacting to external regulatory actions, litigation, or media reports.

B. The goal of a GRC program is to foster a culture of integrity and encourage reporting to improve the organization, not to deny legitimate whistleblower rewards.

C. While managing reputation is a factor, the primary purpose of internal reporting is to resolve issues transparently and ethically, not to conceal them from public view.

D. This is incorrect because many issues, once identified, may carry mandatory reporting obligations to regulators or other stakeholders; the goal is not to avoid reporting.

1. OCEG, "GRC Capability Model 3.0," (2015). Section 4.3.4, "Monitor, Investigate & Respond," emphasizes establishing processes to "receive, assess, investigate, and resolve issues and complaints" from stakeholders. The model's focus on timely and effective resolution supports the idea that internal reporting allows for prompt and flexible corrective action (Answer A), contrasting with the negative motivations in B, C, and D.

2. Scott, C. L., "The GRC Capability Model," in Managing the GRC Process (2010). Chapter 4 discusses the "Perform" component of the GRC model. It highlights that effective internal reporting and issue management systems enable an organization to "take appropriate corrective and disciplinary action" and "prevent future noncompliance." This proactive capability is lost when issues are first raised externally.

3. Stanford University, Rock Center for Corporate Governance, "An Overview of Whistleblower Protections and Policies," (2019). This publication discusses how robust internal reporting programs are a key element of good corporate governance. They are designed to "encourage employees to report potential wrongdoing internally so that the company can investigate and remediate problems before they become larger legal or reputational liabilities." This directly aligns with the rationale of prompt, flexible action described in Answer A.