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Every organization, irrespective of size and industry, has systems in place to evaluate and address risk, comply with government and industry regulations and manage the people, processes, and technology. However, most often these capabilities work in silos leading to organizations facing multiple challenges as they deal with a constantly changing business environment. GRC management offers a solution to these challenges through a structured, agile, and integrated approach.

What is GRC?

Governance, risk, and compliance (GRC) is an integrated strategy that empowers organizations to effectively manage organizational governance, risk, and compliance. A comprehensive GRC program includes two elements: an integrated strategy that helps organizations manage governance, risks, and compliance with industry standards, and the tools and processes used to centralize, manage, and deploy a company-wide GRC solution.

According to OCEG, GRC is defined as “the integrated collection of capabilities that enable an organization to reliably achieve objectives, address uncertainty and act with integrity.”

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To break GRC down further,

  • Governance is the system by which an organization operates, including its organizational structure, rules, processes, and controls, as well as the mechanisms by which it, its people, and its leadership are held to account. Effective governance provides leadership with a perspective on its people, purpose, and performance while giving its employees the structural and process clarity, resources, and tools needed to succeed in their individual roles. Risk management encompasses all risk management strategies, policies and processes

  • Risk management encompasses all risk management strategies, policies and processes deployed by the organization. All organizations are exposed to risks, including financial risks, legal risks, privacy and security risks, reputational and strategic risks. As a result, the risk profile of an organization can be complex, diverse, and ever changing. Effective risk management should include stakeholder communications, risk forecasting, security risk mitigation, and more.

  • Compliance refers to the systems, policies, and documentation that enable organizational adherence to applicable laws and regulations, as well as the development and distribution of relevant internal policies. This includes compliance with laws, regulations, and policies applicable to the organization’s industry, locations, people, processes, and status, as framed by the organization. The cost of non-compliance with established rules and regulations can severely impact an organization’s ability to operate.

The term GRC came into use in the early 2000s, when leadership at large organizations felt an urgent need for better internal controls and governance. The Sarbanes-Oxley (SOX) Act of 2002, which made compliance management mandatory for all public company boards, management, and public accounting firms in the United States, elevated GRC to a standard practice. Over time, the term GRC grew and encompassed the many different initiatives designed to improve internal controls, corporate governance, and risk management.

Today, GRC best practices have enabled organizations to thrive on risk. Whether it is expanding the organization’s geographical footprint, choosing to implement a new tech solution, or dealing with the evolving regulatory landscape, a mature GRC framework empowers an organization to accelerate growth with the confidence that its governance, risk, and compliance is well-managed and delivering competitive advantage.

Why is GRC Important for Organizational Success?

Structure is vital for organizational success. GRC offers the organization a structured approach to align its governance processes and policies with business objectives, while effectively managing risk and meeting the necessary compliance requirements.

A robust GRC program is agile and integrated. It can provide a unified view of risk and compliance requirements from across the organization. As a result, every stakeholder is empowered to make better business decisions faster and with the support of quality data and intelligence. These practices work as a performance driver and competitive differentiator, shaping the organization’s culture around ethics and integrity—making it easier for it to confidently pursue new growth, find new opportunities, and streamline operations.

When employees of an organization embrace integrity and ethical values in their work culture, they build a strong foundation and strive towards organizational success together. It is proven that companies that pursue ethical practices attract and maintain the best talent and attract desirable customers, business partners, and suppliers.

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What are the Drivers of GRC?

  • Increasing regulations: The regulatory environment across the globe is active and showing no signs of slowing down, and businesses must be aware of and have GRC programs in place to best adapt to and absorb ever changing regulatory requirements.

    Because they standardize accepted best practices for GRC, and because they holistically address governance (how a business is structured and who’s accountable), risk management (reducing the likelihood of surprises), and compliance (reducing the likelihood of shady practices), GRC programs are increasingly recognized as the best solution for organizations to be aware of, align to, and absorb regulatory changes – as well as to defend themselves if and when risk and compliance issues arise.

    While some may see regulation as the enemy of business, most legislatures create business regulations to solve key problems or too common lapses in good behavior. Organizations looking to do business in any jurisdiction must comply with its regulations. Regulation is a fact of life and businesses cannot defensively claim ignorance or defiance. The best approach is a comprehensive GRC program that allows the organization to both preemptively align to conduct expectations and prepare for and adapt to emerging regulations.

  • Constant awareness and adaptation: More regulations in more places around the world requires constant awareness and adaptation. Keeping up with regulations and evaluating their possible application to your organization is not a simple thing and virtually impossible without a GRC program in place.

    As more governments around the world learn how compliance and enforcement actions can play a role in reducing corrupt business practices – and how important honest business practices are to those interested in doing international business in an increasingly globalized market – they are enacting more regulations that define and address appropriate conduct, with the expectation that businesses will comply with these laws or face consequences for not doing so. Business leadership, boards, and shareholders expect the businesses over which they have oversight or investments to comply with applicable governance and compliance rules, no matter where the regulation originated if they apply to the business. An avoidable lapse in governance, risk management, and compliance is unacceptable, and increasingly more businesses – and GRC solution buyers – understand this. It is a “must have,” not a “nice to have.”

  • Need for a unique GRC profile: People purchase GRC solutions – whether individual elements or the full suite of solutions, and whether from a single vendor or multiple vendors – to address perceived threats to their livelihood. And we’re living in an increasingly connected world, with ever expanding threats and risks beyond the visible horizon.

Every business needs to be aware of their own unique risk profile and understand what external and internal factors may affect their ability to continue doing business. In many cases, legislators set criteria for the application of new rules – by industry, location, number of employees, expected effort toward and dates by which affected organizations need to comply – as well as processes and penalties for non-compliance. Businesses need to know to what degree these changes may impact their organization and their means to ensure compliance. And an active and connected GRC program allows them to gain awareness of and assess the impact of regulatory changes to their unique GRC profile.
 

What is a Governance, Risk, and Compliance Framework?

A governance, risk, and compliance framework identifies the key policies that every organization must implement in order to be a truly GRC-enabled organization. In other words, a GRC framework defines the tenets of governance, risk, and compliance requirements to enable the organization to comply with the many regulatory requirements in operation today.

A framework such as this also helps differentiate between solutions that are truly GRC oriented and those that are labeled as such. This difference is extremely important for businesses because a robust GRC solution should help achieve consistent growth, steady compliance, and risk mitigation in a proactive manner — something that several organizations continue to struggle with today.

To summarize, a GRC framework should identify a comprehensive set of capabilities, providing a benchmark to evaluate a GRC solution against it.

Key capabilities of a robust GRC framework should include:

Governance

  • Corporate management, which includes how relationships within the organization are structured and the organization’s hierarchy.
  • Mapping the organization’s goals with individual responsibility and accountability.
  • Policy management for everyday activities. As organizations grow, standardizing everyday processes is one way to ensure smooth operations.

Risk Management

  • The identification of existing and potential risks that an organization faces.
  • Risk assessment, wherein all assets and risks are inventoried and assessed for potential gaps.
  • Managing risks by classifying them based on their likelihood of occurrence and potential business impact. As an extension, risks that are more likely and have a larger business impact can be prioritized for faster mitigation.

Compliance

  • Alignment and best practices around applicable regulations, conduct rules, and expectations
  • A means for an organization to pursue demonstrable integrity, trust, and legal compliance
  • Internal and external auditing and controls to comply with set standards
  • Implementing security measures and protocols
  • Reporting tools, metrics, and formats that ensure clean records for both internal and external compliance.

How Can Companies build a Robust and Effective GRC Framework?

Building a GRC framework is not a one-time activity, but more of a journey that can help organizations move up the GRC maturity curve, till they have an integrated and optimized GRC framework in place. Instituting the right strategy can go a long way to optimize GRC investments

Below are a few steps that can help organizations build a robust and effective GRC framework.

  • Take an integrated approach to GRC

    To establish a robust GRC framework in an organization, one must view it as a series of tasks and processes to achieve a common goal. Often, the key challenge with developing and implementing an integrated GRC framework is the lack of enterprise-level coherence in data gathering and classification.

    The ideal way to approach GRC is to identify it as a strategic and holistic initiative that plays a key role to the growth and success of the organization. This includes securing executive buy-in, leading by example, and cascading a culture of compliance to managers and employees throughout the organization.

    Improving the internal controls will encourage people to work in unison, making the organizations more efficient and profitable in the long run.

  • Map processes to controls and audit regulations

    It is important to avoid multiple compliance information silos. A matrix should be created to identify the relationships among the various business processes, risks associated with the processes, the internal controls for mitigating the risks, the tests to be conducted to validate the effectiveness of the controls, and the regulations to which the controls apply. By mapping these crucial parameters, an organization can deploy a single, standard control and audit test for multiple regulations.

  • Rationalize and prioritize risks 

Any organization, small or big, should implement a process to quantify and prioritize risks based on severity, frequency of occurrence, and timely detectability. The process should be mutually agreed on by all the business owners and the audit committee. Risks with the highest scores can then be mitigated using increased effort and checked against process and technology improvements.

  • Increase standardization and automation of controls

    Using manual controls can be ineffective and expensive. Switching to automated controls can save time while lowering the costs and risks involved. It is equally important to work on process improvement while you switch towards automating controls. Auditing automated controls is much easier than auditing manual controls.

    Organizations should view the improved internal controls as an advantage and not as an additional burden to the company. Though the improved controls come with associated costs, they are often a great investment in the long run.

  • Implement effective tools and technology

    Data is everywhere today. Tools and technology can help make the gathering and processing of data – and deriving insights from this data - more effective at scale. Indeed, using the right tools for GRC implementation can automate redundant tasks and help make data handling more user-friendly, providing every stakeholder with a clear perspective on the business.

  • Build a risk-aware culture

The culture of an organization changes over time. New people enter the workforce, existing employees depart, and the character and culture of the company adapts along the way. Building and maintaining a risk-aware culture ensures more than business continuity during change. It also helps frontline workers, new leaders, managers, and team leaders understand what is expected of them to maintain or improve organizational culture. Empowering a GRC-driven culture is an initiative that must begin at the top and must be consistent over time, changes in personnel, and as the company scales and diversifies. It is up to every business leader to ensure that reporting formats, decision frameworks, and operations are streamlined towards GRC.
 

What are the Advantages of GRC at an Organizational Level?

An integrated GRC framework, built on a strong foundation and with a focus on achieving higher levels of GRC maturity can help organizations reap benefits. A high-value and sustainable GRC program can provide several key benefits.

Enabling reallocation of resources to strategic imperatives - A well-run GRC program anchored by a GRC technology platform that automates critical elements of governance structures, risk identification, prioritization and mitigation, and compliance alignment with applicable regulatory requirements allows an organization to confidently commit resources to strategic initiatives, build their business, and serve their customers. Yet, GRC systems are not designed to just enable GRC professionals to collect data and run programs efficiently, but to allow them to actively identify and focus on solving urgent risk and compliance matters. A good GRC solution allows professionals to apply their intelligence and expertise to address business-critical topics (instead of repeatable processes and irrelevant topics).

Streamlining revenue and expenditure management – Improved GRC directly relates to benefits from business activity and impacts both existing and new revenues streams that are to be generated. GRC initiatives can also impact the investment contributed by the organization towards development efforts and the expenses in running business operations. When GRC measures are carefully planned, the organization can operate in a more streamlined fashion leading to beneficial investments. An integrated approach to GRC can help the organization achieve maximum financial benefit by cutting down on unnecessary spending. Moreover, it can sharpen the focus on revenue enhancements and help teams work towards reducing losses.

Enhancing and supporting business strategy – An organization with a strong GRC framework will have a clear strategic vision for the road ahead. With business goals and objectives clearly identified, the organization is empowered to move towards achieving the desired business value.

Reducing redundancy and losses – An integrated GRC framework is key to reducing duplicate work and data. Operations are streamlined with a conscious approach towards time and cost. The elimination of redundant work further boosts productivity and improves morale among the employees.

Boosting innovation –A mature GRC framework that continuously monitors operations can help detect the need for process improvements, leading to quicker identification and analysis of innovation opportunities. The organization is empowered to find new ways to tackle competition, solve real challenges, and monetize the effort effectively. A connected GRC approach can aid in making informed innovation decisions with greater confidence as the processes deployed to gather information are accelerated.

Augmenting brand value – Managing GRC in an effective manner improves the brand reputation of the organization in the industry, and within the company itself. Well-governed organizations have a competitive advantage over their peers. They attract and retain higher- level talent in the industry. Employees are likely to find the environment a positive one and job satisfaction rates go up.

Facilitating business transformation – A robust GRC process in place paves the way for the improvement of business processes that directly impact the capability of an organization to deliver the desired business value. An organization with a GRC framework at its core moves away from a fragmented and siloed approach to one that is integrated and future-ready, thus supporting overall business transformation.

Easy integration during mergers and acquisitions – An additional benefit of an established GRC framework is the easy management of the integration of various business functions and other organizational entities if a merger and acquisition takes place.
 

What are the Common Challenges Faced by Organizations when Adopting a Governance, Risk, and Compliance Framework?

While implementing a GRC framework, it is common for organizations to face certain challenges. Identifying such challenges in advance can help organizations be prepared and take adequate steps to address them. Listed below are a few common challenges.

Managing change - The very element that makes GRC implementation difficult is also its greatest driver. Organizations are always exposed to several variables within and outside their systems. For example, with the pandemic, the workforce and its operations have changed significantly, growth forecasts are tentative, and leaders are being asked to make several important, often interdependent and quick decisions. When implemented robustly, a GRC framework can help provide the data that enables faster, better decisions even in uncertain scenarios. A comprehensive GRC framework needs to be implemented along with a robust change management program.

Dealing with information present in silos – Organizations often attempt to resolve non-compliance issues on a regulation-by-regulation basis. While doing so, they generate pockets of information scattered across the organization, leading to the storage of duplicate data. When controls are applied to check for non-compliance, it leads to highly painstaking and redundant testing procedures. Over time, the situation worsens, with all that duplicated information making it difficult to access timely and accurate governance information. A GRC framework strategy will have to ensure the integration of all relevant data while prioritizing high-impact audit activities and critical tasks.

Developing a culture of integrity – Building an organization’s integrity level is vital to the successful implementation of a GRC framework. Since culture depends on not just a few key individuals but on the entire organization, it is often a challenge to ensure that everyone from the frontline workers to the management team and board of directors understand the role they play. Building a deeply embedded risk-aware and compliant culture across the organization along with leveraging the right tools and technologies that makes it easier to capture and manage disclosures will help organizations discover greater success.
 

How to Access GRC Maturity? What are the Benefits for GRC Maturity?

GRC programs are a critical strategic element in business performance. Too often, organizations view GRC as a separate solution or a burdensome requirement on the business.

While there are organizations that acquire GRC solutions to do the bare minimum and satisfy governance and compliance specifications, these programs are not typically robust enough to adapt with a changing GRC environment, nor are they defensible.

The first position in GRC maturity is therefore recognizing the importance and urgency of a GRC program. Taking first steps includes acknowledging the regulatory and risk profile of the organization and taking concrete steps to assess and quantify potential risk and compliance failures. Many companies can take this step without investing in a GRC software solution.

Yet, as the world in which the organization lives changes and the scale and diversity of its risk and compliance needs evolves, an adaptable and flexible GRC solution becomes increasingly necessary. Managing the scope of risk, governance, and compliance “on paper” or with an office productivity solution can rapidly become untenable as the volume and variety of GRC demands escalates. At this point (before this point), the organization should set budget and milestones to invest in and assess the impact of a purpose-built software solution.

Siloed solutions start to show wear as the business requires accurate reporting, audits its systems, discovers additional risks, or experiences GRC failures. At this point, a diversity of solutions for GRC demands can no longer suffice. A GRC platform and strategic program becomes necessary to enable the organization to embrace its own risk and mitigation initiatives.

Company boards and executive leadership must buy-in and champion GRC programs, leading by example and ensuring governance and compliance is delivered fairly and equitably. This is a key factor for success.

Accurately identifying and evaluating the organizational risk profile is another maturity factor. Too many organizations deploy static programs that do not adapt to changes in the marketplace, changes to their business, and changes to their global operations footprint. Including partners and third parties in a GRC program is a critical element in deploying a comprehensive and defensible program. But many (less mature) organizations (with less mature programs) do not do so adequately.

The more comprehensive a program, the more protected from risk an organization can be.

GRC strategies and the software solutions that enable organizations to build and deliver effective and efficient GRC programs are purpose-built to solve for multiple GRC challenges. These may include the governance structure and reporting standards boards of directors expect, the proactive identification and mitigation of internal, external, and emerging risks shareholders insist on, and the compliance assurances the entire business needs to continue operating within the law.

While organizations may invest in multiple solutions to address their GRC needs, separate solutions do not typically address (increasingly) applicable GRC interdependencies or deliver the full program reporting required to best identify needs, threats, or performance metrics.

GRC maturity protects an organization from regulatory enforcement actions.

It is in an organization’s best interest to invest in, manage, and build effective GRC programs not only because they tend to ensure good governance and compliance, but because they protect the organization from avoidable regulatory scrutiny and punishments.

While it’s not a universal truth that investing in software to manage a GRC program will result in risk reduction and protection from enforcement action, we see that companies that have invested in and use GRC software as intended face fewer audits, investigations and / or enforcement actions and see better outcomes.

The US Department of Justice and other regulatory agencies that investigate failures in organizational governance and compliance can be subjective in how individual prosecutors evaluate programs and apply judgements and penalties. A well-designed and actively executed program – GRC with intent – can protect an organization from severe enforcement action and associated reputational damage.
 

What to Ask Before you Consider GRC Software?

Ask if the GRC software is built to scale. An organization’s risk profile is unique to their people, processes, industry, locations, and regulatory environment. And risks and compliance requirements change on a continuous basis. Smart companies purchase software that can grow and adapt with them as their needs diversify within a changing market and regulatory environment. While they may not require every element of a GRC software solution today, assurances of capacity and configurability can provide confidence that the GRC solution will remain viable and valuable in the long run.

Ask about integrations. . Most organizations have some degree of software investments already in place when they acquire a GRC solution. In some cases, these solutions are more intrinsic to how the organization operates than the GRC solution will be, and therefore, the buyer will have expectations on whether and how the GRC solution can fit within their existing (and planned) software solutions. Can it work in conjunction with SharePoint, can it deliver reporting through a BI tool, can it integrate with an existing component of another GRC solution, delivering a more holistic experience?

Ask about the vendor’s reputation. Particularly as more people are attuned to and companies are increasingly aware of their own reputations in the market and how those with whom they choose to do business may affect them, they want assurances on who they choose to do business with. For many more traditional industries, an evaluation of whether a vendor is a conscientious partner, a good corporate citizen, and believes in fostering a culture of compassion, inclusion, and diversity may seem unnecessary or irrelevant, but increasingly more buyers are evaluating vendors based on these criteria.

When evaluating a GRC vendor, especially as it is selling a methodology for good governance, risk awareness, and good conduct, it makes sense to ask about its own GRC practices and performance. Do they believe in what they’re saying?
 

How to Evaluate GRC Software?

Organizations need to ask the following questions.

  • Does it do what it’s supposed to do? Am I able to effectively identify, prioritize, mitigate and reduce my risk with this solution? Are others in my industry using this software solution successfully? Can I assess my risks and mitigation plans and activities easily and comprehensively, and can I easily share reporting and analytics to my bosses and the board? With that kind of visibility into my GRC program and its performance, can I refocus my energies away from worry about GRC / risks and on to more strategic and performance-oriented tasks and tactics? Does it allow me to be more strategic, productive, confident in my job?

  • Does the software scale and is it flexible enough to handle unforeseen changes in the business? What happens if the business opens new operations or adds third-party engagements in different areas of the world? What new challenges would there be if the business gets acquired or merges with another business? Is it comprehensive enough to not need to be removed and replaced in the next five years, no matter what changes happen to the business or the risk and compliance environment? Offer me assurances that I am not buying something I will grow out of in a short time.

  • Does it fit and is it customizable to my organization’s distinct needs, regulatory and risk environments? I live in a world where I depend on multiple software solutions and have an IT team investing in more. I can’t have a solution that requires constant IT configuration and reconfiguration to fit my needs. Does it allow for do-it-yourself adaptation?
     

What are some of the essential tips in implementing GRC?

  • Define your program objectives, timelines, and success measures.
  • Implement the most critical elements first and build on successes. Communicate broadly across the organization (as well as to partners and third parties), extend your GRC practices and expectations across locations, teams, subsidiaries, partners and third parties.
  • Identify key early adopters in the business (by team/division/location/role) that can champion the solution, celebrate accomplishments and wins, and drive employee awareness and engagement.
  • Keep detailed records, maintain due diligence, and adapt the program as reporting, analytics, and analysis dictate. It is sure to change over time as the business grows or changes. And accessible records on GRC program structure, activities, and efforts are essential for audits, investigations, and potential enforcement activity.
  • Recognize that a GRC program is dynamic – a living program – that must be nurtured, adapted, and delivered and adjusted consistently and constantly.
     

How Can an Agile and Integrated GRC Framework Help Your Organization Become Future-Ready?

An agile and integrated GRC framework is designed to respond effectively to today’s business environment, namely, the growing complexity of business processes, frequent process modifications, and increasing regulations. When properly structured, enforced, and managed, an agile and integrated GRC framework further offers the potential for future success by:

  • Providing a consolidated view of the organization
  • Offering timely intelligence and insights
  • Engaging all three lines of defense
  • Improving risk identification and control monitoring
  • Facilitating the embedding of business, IT, and security processes
     

What is the difference between a GRC and Integrated Risk Management (IRM) solution?

While GRC focuses on governance, its associated challenges, compliance requirements, and risk in the context of business operations, IRM focuses primarily on the ‘risk’ aspect, advising on ways to manage and mitigate risk intuitively in every part of the organization.

Although the differences are minimal, they are quite important in the changing business landscape where the nature of risks along with complex regulatory requirements have necessitated this change. Businesses today are making the functional shift to a connected governance, risk, and compliance program to manage and mitigate risk.
 

What are the top-listed GRC certifications available?

  • GRCP (Governance, Risk and Compliance Professional)
  • CRISC (Certified in Risk and Information Systems Control)
  • CGEIT (Certified in the Governance of Enterprise IT)
  • ITIL (Information Technology Infrastructure Library) Expert
  • CRMA (Certification in Risk Management Assurance)
  • Risk Management Professional (RMP) from Project Management Institute (PMI)
  • Managing Risk for Competitive Advantage from JBS (The University of Cambridge’s Judge Business School)
  • IIA Award in Compliance Audit and Assurance from the Chartered Institute of Internal Auditors
  • CGRC (Certification in Governance, Risk, and Compliance) from the GRC Group
  • CSSBB (Certified Six Sigma Black Belt)
  • Leading Quality Strategy & Planning from the CQI (Chartered Quality Institute)
  • Certified Information Systems Security Professional (CISSP

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