GRC is a term that came into vogue in the early 2000s after some major corporate financial disasters made national headlines. The debacles sent corporations scrambling to improve their internal controls and to enhance their governance practices in order to save their reputations. Regulatory authorities tightened their rules, placing even more pressure on corporations.
Defining and Breaking Down GRC
GRC is an acronym for governance, risk and compliance. The term refers to a capability or strategy for managing a corporation’s governance, risk management and compliance processes. If we break it down, it means:
Governance: Corporate governance comprises the rules, processes and practices that boards of directors use to control a corporation. It’s a framework for meeting the corporation’s goals that incorporates action plans, internal controls, performance measurement and ethical disclosure.
Risk: Risk relates to the uncertainty of future earnings. Investors analyze how much risk they’re willing to take to realize a gain. Risk also refers to measuring the potential negative impact of a project, which, in the worst-case scenario, could be engulfed by other corporate assets.
Compliance: Corporations must organize and operate their activities in a way that meets the laws and regulations for corporations.
The goal of GRC is to improve decision-making. GRC is a broad process that helps to eliminate silos and reduce fragmentation across departments and divisions.
A Deeper Look at GRC
GRC isn’t a material thing; yet, GRC software can help to manage governance, risk and compliance across a corporation or an entity. GRC is actually a capability that spans every department within the entire organization. We can break down GRC even further.
For example, GRC includes:
- Quality assurance
- Performance management
- Information security management
- Business continuity management
- Human resources
GRC also includes the resources that corporations need to conduct business. Those resources include things like policies, practices, protocols, strategies, standards and structures. Roles, responsibilities, duties and people fall under human resources. Other types of necessary resources include technology, information, assets and third parties.
Business attributes are also considered part of GRC. Key attributes relate to performance, goals, profitability margins and targets. Corporations must consider various types of risk as they monitor GRC. This list describes various areas of risk for boards to oversee:
- Financial risk
- Credit risk
- Market risk
- Strategy risk
- Operational risk
- Fraud risk
- Reputational risk
- Information security risk
- Technology risk
- Compliance risk
It’s more important than ever before for boards to stay on top of compliance issues. Compliance encompasses regulatory compliance, legal compliance, organizational compliance, security, ethics and values.
The new focus on governance places emphasis on internal controls. If we break down internal controls even further, we can see that it incorporates management controls, process controls, technical controls and physical controls. GRC applies oversight for companies as they apply controls to their attributes and resources.
Assurance is also a major part of GRC. Assurance ensures that internal controls are effective and working as they should to meet compliance requirements consistently. Several types of audits, including internal audits, external audits, certification audits, financial audits, IT audits, compliance audits and security audits, provide evidence of controls over assurance.
Finally, we can break down governance into corporate governance, business governance, IT governance and legal governance. Governance pertains to finding direction, optimizing risks and resources, and overseeing compliance and performance. Process and function fall under the governance of operations. Several other activities fall under management governance, including planning, organizing, leading, coordinating, controlling and reporting.
The deeper look at GRC helps us understand why it’s nearly impossible for corporations to put their best foot forward with GRC without the help of the best GRC software system.
Using an Entity Governance Management Software System for GRC
Manual processes are becoming antiquated, as they fail miserably in matching the complexity of GRC. GRC software automatically adapts to rapid changes in the marketplace. In addition, GRC software evolves with emerging risk issues such as cyber threats, economic fluctuations, operational factors, environmental factors and geopolitical factors. It’s easy to overlook many of these issues when they’re harbored in individual silos. The scope and pace of today’s marketplace require corporations to evaluate risk and compliance across entities, so they can measure and set targets more accurately while maintaining all aspects of compliance.
GRC software products such as Governance Cloud by Diligent Corporation assist the auditing, policy management, compliance management and risk management processes. The software makes it easier to detect problems such as human error, material misstatements and fraud. The visibility of issues across systems makes it easier for boards to address issues as they surface and before they get out of control.
Diligent Boards offers a secure, cloud-based system for electronically filing and organizing financial reports, so that board members can find and retrieve them quickly and easily. Board management software systems such as Governance Cloud help auditors manage workflows and schedule audit-related tasks and reporting. Diligent makes it just as easy to access policies so board directors can review them according to legal or regulatory mandates, business objectives, risk and internal controls.
GRC software automates compliance management functions such as workflow, controls and associated risks. Governance Cloud provides fully integrated software tools for governance matters such as D&O evaluations and compliance matters such as D&O questionnaires. Diligent’s enterprise governance management system provides software solutions for reporting, testing and remediation, including financial reporting to regulatory authorities and compliance with industry regulations.
Governance Cloud provides risk management professionals with documents that provide a consolidated review of risks. Having breadth of information paves the way to follow up on incidents, and analyze credit risk, market risk and other risk reports.
Governance Cloud is a fully integrated enterprise governance management system with the highest level of security possible. Diligent Messenger provides a secure messaging system across the platform, so board directors have assurance that their collaborations remain confidential. Board directors can also develop and vote on resolutions and other matters within the security of the platform.
Larger corporations will find much value in Diligent’s Entity Management program to help them manage multiple entities securely and consistently.
Overall, implementing GRC software helps corporations reduce risk and improve control effectiveness, security and compliance. Governance Cloud uses software integration to decrease the negative effects of redundant and siloed processes.