In this article, we’ll answer the following questions:
- What is GRC?
- Why does your organization need GRC?
- What does a strong GRC strategy look like?
- What does a weak GRC strategy look like?
- How can the right tools help your GRC strategy?
Governance, risk and compliance (GRC) comprise a set of practices that help an organization align its governance, risk management and compliance requirements in an effective, optimized and repeatable way.
The term GRC was coined by the OCEG and formally defined in 2007 as “the integrated collection of capabilities that enable an organization to reliably achieve objectives, address uncertainty and act with integrity.” As the name suggests, there are three main components to the discipline: governance, risk management and compliance. Before we dive into what makes a GRC strategy effective, we’ll define and explain each of these three components individually.
Governance is the process of ensuring that all organizational activities (IT operations, training, etc.) are aligned in a way that supports and advances the organization’s overall goals and objectives. Governance typically involves the organization’s key decision-makers, such as its board members or high-level executives. It defines and enforces activities like:
- Board composition
- Corporate disclosure
- Executive compensation
How executives gather data, make strategic decisions, communicate with key stakeholders and determine who joins the board all depend on governance. An example of poor governance in an organization might be a group of executives engaging in insider trading or a director whose business decisions and strategies consistently reflect a lack of interest in environmental, social or legal guidelines.
Effective governance relies on using various data, information and hard evidence to develop strategies and make decisions. Key sources include:
- Internal audits
- Assurance reports
- Compliance monitoring results
- Risk assessments
Robust governance helps keep the organization on track and aligned with defined objectives.
2) Risk Management and GRC Security
Risk management involves identifying, assessing and controlling threats and risks to the organization. These threats could be financial pitfalls, legal consequences, cybersecurity threats, commercial liabilities, management errors and even natural disasters and other accidents.
Risk management processes typically rely on internal audits and risk assessments to identify critical gaps and areas of significant uncertainty. Risks can be found internally, within essential business operations and processes, or externally, out on the broader market.
Organizations often task many individuals with various elements of risk management, including IT security leaders, business analysts, finance officers and the governance board. A robust GRC framework can help ensure that all risk management activities are aligned with the organization’s ultimate goals and objectives.
3) What is GRC Compliance?
GRC compliance involves aligning organizational activities with the laws and regulations that impact them. These regulations could be legal mandates, like privacy or environmental laws, or voluntarily established company policies and procedures.
For example, a compliance officer at a software company might work to ensure that their systems abide by regulations like GDPR. In contrast, an environmental inspector might search a construction site for environmental code violations and take the necessary steps to address them.
GRC frameworks encourage organizations to centralize compliance monitoring and stay on top of any laws or regulations that could affect their processes. Breaking compliance could result in devastating financial, legal and reputational consequences. These could include fines, time and money spent in court, and a tarnished reputation.
Organizations face a rapidly changing and increasingly complex business climate. Whether you’re part of a large corporation, government agency, small business or nonprofit, you’ll face numerous challenges, including:
- Constant changes to regulations and enforcement that severely impact business operations
- Stakeholder demand for strong performance outcomes, consistent growth and transparent processes
- Growing costs of addressing compliance requirements and managing risk
- Increase of third-party relationships and associated governance challenges
- Potential legal and financial consequences resulting from lack of effective oversight and overlooking critical threats
A disorganized approach to GRC can slow down an organization and cost more — all while achieving less, missing requisite compliance requirements and misidentifying threats to your revenue or reputation.
Too often, organizations believe that buying a single GRC software system or forming a specialized department will help resolve all of their GRC-related concerns. However, a robust GRC strategy is about more than a specific tool or set of roles. An effective implementation involves:
- Defining the right objectives for your organization
- Ensuring smooth communication and that the right information always reaches the right people at the right time
- Establishing and enforcing the right set of actions and controls to address risk and compliance needs
Benefits of Well-Planned GRC Management and Strategy
Focusing on the above can help you prioritize your needs and select the right array of tools and processes that support your goals without slowing down or overcomplicating day-to-day operations.
Organizations that can implement a cohesive, integrated set of processes and technologies can expect benefits like:
- Reduced costs
- Reduced duplication of business activities
- Faster, easier access to information
- Higher quality and accuracy of information and communications
- Greater ability to consistently repeat key processes
The standard components of a strong GRC strategy include, but are not limited to:
- Effective oversight
- Integrated reporting and analytics
- Organization-wide ethics and integrity requirements
- Integrated information, risk and control activities
- Unified vocabulary across departments and disciplines
- Standardized practices for core processes like hiring, training, investments, evaluation, etc.
Many organizations approach GRC by constructing overly complex and specialized programs in risk management, performance management, compliance, internal auditing and corporate social responsibility. The danger in this is creating too many disconnected silos that slow down communication, limit access to critical information and duplicate activities due to a lack of transparency and knowledge across the organization.
The best GRC strategy may be invisible. The end goal is that your selected tools, technologies and processes become “baked into” the fabric of your organization – so that any GRC standards and practices become a natural part of doing business.
Unfortunately, a suboptimal approach to GRC can cause many issues. A weak strategy is typically founded on a host of disjointed activities and poor processes, including:
- Unclear objectives
- Lack of effective oversight
- Lack of access to crucial information
- Organizational and functional silos
- High costs
- High rates of duplication
- Wasted resources, data and information
- Unnecessary complexity
The Downsides of a Poorly Planned GRC Strategy
When organizations choose to haphazardly create departments and arbitrary programs instead of basing their implementation on GRC best practices, they can expect to face drawbacks like:
- Lack of visibility into key threats and risks to the organization
- Higher costs
- Difficulty measuring risk-adjusted performance
- Reduced ability or total inability to manage third-party risks
When GRC activities are siloed and relegated to specialized departments and programs, it’s more likely that substandard strategies are chosen, activities are duplicated, and day-to-day business operations are slowed down considerably.
It’s also helpful to note that doing GRC “wrong” is very common. As organizations expand, it becomes more challenging to keep track of all the people and processes involved. As the business grows, the severity and frequency of governance, risk and compliance issues also grow.
It’s natural to want to silo GRC activities and relegate them to a specialized department instead of building a strategy to incorporate them throughout your organization seamlessly. However, for your strategy to be more scalable, sustainable and cost-effective, focusing on the latter approach is more likely to give you the results you’re looking for.
After you have clearly defined organizational objectives, established an effective communications strategy and enforced the best set of controls for your organization, the right tools and technology can help you stay on top of your GRC activities.
Diligent Compliance software can help you store compliance monitoring results and internal audit documents in a single, centralized place. Governance boards can access the platform anytime, anywhere, across a range of devices.
Diligent also offers governance solutions to help board members and strategic decision-makers identify inefficient processes, benchmark against peers and stay up-to-date with the latest industry trends. These allow executives to:
- Keep track of industry news to identify market trends, stakeholder sentiments, key risks and critical opportunities
- Monitor governance “health” with peer group comparison, reputation monitoring and succession planning tools
- Enjoy a multi-channel experience with mobile, automated emails, dashboards, curated newsletters, API, finished reports, etc.
- Tailor the sources, volume, frequency and modes of consumption according to their personal preferences
- View analytics, flag discrepancies and evaluate performance
- Access an extensive database of director and executive profiles
- Access up-to-date intelligence and profiles on key competitors and companies of interest
Additionally, stay ahead of the curve with governance, risk & compliance news and insights delivered to your inbox. Subscribe to the Diligent GRC Newsletter.