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:
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.
Listed below are a few steps that can help organizations build a robust and effective GRC framework.
Take an integrated approach to GRC
In order to establish a robust GRC framework in an organization, one must look at 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 initiative that plays a key role to the growth and success of the organization. This involves leading by example from the top level of the organization and then cascading it to the managers in the hierarchy, assigning responsibility for the process.
Once this pattern is established, the lower-level processes of risk management and adherence to compliance standards will fall in place. Improving the internal controls will encourage the members 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 the ability to detect on time. The process should be mutually agreed on by all the business owners and the audit committee. The 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 the controls. Auditing automated controls is much easier than auditing manual controls. The latter requires a lot of effort and is less effective.
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 an associated cost, they can be a great investment in the long run.
Implement effective tools and technology
Data is everywhere today. Tools and technology 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, help make data handling more user-friendly, and provide every stakeholder with a clear perspective on the business entity as relevant to their function.
Build a risk-aware culture
The fabric of an organization changes with time. New people enter the workforce and grow within the system to occupy leadership positions. Building a risk-aware culture ensures more than business continuity. It helps frontline workers, new leaders, managers, and team leaders understand precisely what is expected of them and why. Enabling a GRC-driven culture is an initiative that must begin at the top. It is up to every business leader to ensure that reporting formats, decision frameworks, and operations are streamlined towards GRC.
An integrated GRC framework, built on a strong foundation, and with a continued commitment to achieving higher levels of GRC maturity can help organizations reap several benefits. A high-value and sustainable GRC program can provide several key benefits.
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. GRC 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 migration – 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.
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 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.
The following checklist can help in selecting the right platform and tools while implementing a GRC solution.
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:
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 governance and compliance in the context of the risk environment.