What Is GRC and Why Does It Matter?
Any organization looking to meet its business objectives continues to face many challenges due to the complexity of the ever-changing business landscape.
A typical business operating in the 21st century may have to contend with the changing:
- Regulations (e.g. GDPR, HIPAA, SOX, etc.)
- Technology (move to the cloud, IoT, payment methods, etc.)
- People (diversity, Gen-Z, skill gap)
- Many other aspects
For this reason, there is an increasing need for companies to have mechanics in place to ensure the business can successfully ride through these complexities.
GRC is one of the strategies that enterprises must put in place to ensure the business can achieve its objectives, mitigate risks, and operate in an unpredictable business environment. But what exactly is GRC, and why does it matter? Keep reading to find out.
What Is GRC?
The acronym GRC stands for Governance, Risks, and Compliance, but the term goes beyond that. In its most basic form, GRC is a corporate strategy for managing governance, risks, and compliance with industry and regulatory authorities.
As an organizational strategy, GRC seeks to handle the interdependence between the following three components:
- Enterprise risk management programs
- Corporate governance policies
- Industry and regulatory compliance
The term GRC was coined nearly twenty years ago by the Open Compliance & Ethics Group (OCEG) when companies realized that people, processes, and technologies they used to manage governance, risk, and compliance could help them in two ways:
- Synthesize their approach in order to operate more ethically.
- Achieve their goals by improving efficiency, communication gaps, and other drawbacks of a siloed approach to governance, risk, and compliance.
Today, GRC spans multiple disciplines, including compliance, risk management, internal audit, third-party risk mitigation, etc.
Business leaders now are leveraging GRC to align IT activities to business goals, manage risk effectively, and stay on top of compliance.
And considering that 57% of business executives rank "risk and compliance" as one of the two top risk categories, they're unprepared to address, implementing a GRC strategy can help organizations cope with the increasing risk levels.
The Components of GRC
There are three main components of GRC:
- Risk Management
Governance refers to the way an organization is controlled and directed.
It's the set of rules, processes, and policies that ensure organizational activities are aligned to support business objectives. As such, governance encompasses:
- Resource management
- Management controls
In GRC, governance is critical for setting direction (through policies and strategies), monitoring performance, and evaluating outcomes.
Governance also ensures top executives can coordinate and influence what is happening at all company levels and that all business departments are aligned with customer needs.
Effective governance creates a conducive environment for employees to feel appreciated and empowered. Governance also aims to balance the interest of various stakeholders, including employees, top management, and suppliers.
One piece of maintaining this balance is ensuring the relationship between a company and external stakeholders is well maintained.
Effective governance also ensures procedures for solving and mitigating conflicts are in place and well understood by all necessary stakeholders. It also provides control over infrastructure and facilities like data centers and oversight of business applications.
2. Risk Management
According to Forrester's 2019 report on the State of Enterprise Risk Management, 62% of organizations have experienced a critical risk event in the past three years.
GRC's risk component seeks to identify, assess, and control financial, strategic, legal, and security risks in a way that supports business objectives. It encompasses people, processes, and technology that enables a company to establish objectives in line with values and risks.
The goal of an enterprise risk management (ERM) program is to achieve business objectives while minimizing risks inherent to the business. There are many types of risks that businesses face including financial risks, risks to reputation, compliance risks, etc.
To achieve this goal, businesses need to have a risk management program (ERM) or any other risk mitigation systems in place.
The program should help assess the system's ability to detect risks, assess technology, identify operational processes that could cause business failure, and monitor network vulnerability and its potential failure rate.
An ERM program can also help identify cybersecurity threats—such as software vulnerabilities and poor employee password management practices—and help companies implement plans to reduce the incidences of these threats.
Yet, according to Forrester's 2019 report, only 36% of companies have a formal enterprise risk management (ERM) program.
In a nutshell, Risk Management ensures an organization has the resources it needs to identify, analyze, and control risks that can derail business objectives.
Compliance officers rank "continuing regulatory change" as their biggest challenge, according to a 2018 Cost of Compliance report.
With GRC, all of these challenges can easily be avoided as one of its goals is to ensure all business activities meet legal and regulatory requirements. These requirements may vary by industry, so it's critical to stay abreast of industry-specific regulations, in addition to broad regulations, such as those involving employee safety.
From a legal perspective, it's critical to ensure all internal and external activities meet compliance standards.
Failure to comply with the various laws and regulations governing your business may subject you to heavy penalties and business closure in some cases. Internal and external audits can help you maintain continuous compliance.
Implementing GRC allows your business to benefit from bringing all these three components together under one discipline.
How Could GRC Benefit Your Business?
An obvious question to the idea of bringing in more processes and procedures would be whether this will increase bureaucracy and red tape.
However, GRC doesn't add to the complexity of the already overstuffed processes and systems. Instead, it helps to condense and streamline them for smooth running. But what do you specifically get by implementing GRC technology?
1. Cost Savings
GRC implementation often brings financial benefits as some forms of unnecessary spending can be cut. For instance, mitigating risks or identifying them before they occur can save your business from unnecessary spending on things like fines and penalties for non-compliance.
In short, getting ahead of threats can save you costs down the line. Plus, the clearer focus resulting from GRC implementation can also help to boost revenue.
2. Reduced Data Silos
A holistic GRC strategy can help reduce data silos within your organization.
Shared data between your IT, finance, legal, marketing, and other departments enables visibility and departmental collaboration.
Siloed data can lead to transparency issues, contribute to potential risk, and breed duplicative efforts. But when data is shared across departments, which GRC advocates, such risks can be mitigated or completely eradicated. As long as effective data privacy measures are in place when handling protected data, an open flow of information within proper departments can be beneficial.
3. Improves Operational Efficiencies
Adopting a GRC framework results in a unified operational strategy and consistent operations across the entire organization. Increased collaboration, reduced data silos, and the ability to quickly locate information can also lead to improved operational efficiencies.
Plus, creating a GRC framework often leads to the automation of many processes due to continuous monitoring and controls. This results in a more efficient running of operations as machines are not prone to human errors.
4. Higher Quality Information
A centralized approach to governance, risk management, and compliance speeds up the information gathering processes and improves the quality of the data collected.
Plus, by implementing a GRC strategy, your management team will have a view of the organization as a whole, and therefore, be better positioned to make more informed business decisions.
Why Is the Focus on GRC Increasing?
Today's risk landscape is more uncertain and crowded than ever before.
Modern businesses are subjected to various risks, ranging from operational to compliance, security, reputational, financial risks, and more.
Furthermore, one risk—like financial risk—can spill over to the supply chain, workforce productivity, IT security, and business continuity. With the level of threats facing modern businesses growing by the day, companies need to adopt a holistic approach, like GRC, to mitigate risks and align all activities to business goals.
Plus, multiple factors are reshaping the risk terrain, including:
- Increased digitization of risk management
- Rising pace and scope of regulatory compliance
- Evolving sophistication of analytics
The increase in cybersecurity threats attacking businesses is also pressuring business executives to make smart decisions about risk management. Business executives and security leaders, in turn, are relying on many tactics to identify and manage risks.
To increase cybersecurity and steer their organizations towards success, leaders need to access facts quickly and draw valuable insights from them. A well-planned GRC strategy can pave the way by mitigating risks, enhancing collaboration, reducing silos, and contributing to higher quality information and better coordination.
GRC is a relatively new corporate management system that seeks to align IT activities to business goals, manage risk effectively, and stay on top of compliance.
The approach, which emerged in the early 2000s, aims to reduce corporate risks, costs, and duplication of efforts. GRC also works to correct the "silo mentality" that leads departments within an organization to hoard information and resources.
So, if you want your company to achieve a competitive edge, mitigate risks, and stay ahead of compliance, a GRC strategy is a must-have. In order to help you carry out this strategy, it is ideal to have a comprehensive risk management platform in place to help you manage each aspect of your GRC approach.
That is why Accountable exists - to help you simplify the process of handling governance, risk management, and compliance with all data privacy requirements in one intuitive, easy-to-use platform. Schedule a call to learn more about how we can help you handle each component of your GRC strategy and inherit each benefit this corporate management system can offer you.