What is GRC? Governance, Risk and Compliance Explained

Michael Nyhuis
GRC stands for Governance, Risk and Compliance, and is a system used by organizations to structure governance, risk management and regulatory compliance. The concept is to unify and align an organization's approach to risk management and regulatory compliance. Strengthening and rationalizing these processes can help improve business performance and enhance decision-making within corporate governance boards.

Companies face and overcome a huge range of risks in everyday business, and increasingly must track compliance with various regulations and laws. IT security, financial stability, business disruption plans, and workplace hazards are all areas which are regularly monitored and audited. The GRC model encourages organizations to unify processes across these often siloed areas. By integrating risk management and compliance monitoring within governance decisions, strategic aims are kept realistic and achievable. Evidence and records should be centralized, so that insight and analysis is accessible to key decision makers.

The GRC model is particularly useful for organizations that perform regular internal audits around risk or compliance. It can be utilized by the IT or finance department, or to inform strategic decisions in the boardroom. This guide explores the concept of GRC, what it stands for, and how it can help organizations.

What is GRC?

A GRC system unifies an organization's approach to legal compliance, governance and risk management. It helps organizations rationalize the relationship between different compliance teams, financial officers, or internal auditors. It is the process of unifying the siloed groups dealing with risk management, making trends and insight accessible to strategic decision-makers. GRC was first coined as a concept by the think tank Open Compliance and Ethics Group (OCEG), which aimed to integrate compliance, risk and performance management.

The processes behind compliance monitoring and risk management can often overlap. Different teams or departments within an organization will be performing internal audits to assess both business risk and compliance. Overall, these teams will have the same objective: to ensure business performance is not hindered by serious incidents such as data breaches. IT services, financial departments, legal compliance advisors, and the board itself will continually review risk and compliance.

The GRC system helps to unify each area's approach, helping to make the resulting evidence accessible for decision-making. Otherwise, an organization may have disconnected compliance and risk activities, hindering overarching business objectives. Internal auditors, compliance officers, and risk management teams are encouraged to share evidence and processes under the GRC framework. This develops and improves the expertise of key stakeholders across the organization. Management of risks and compliance monitoring backed up by strong governance is vital to the success of complex organizations. The three main concepts of GRC are governance, risk, and compliance.

What is GRC governance?

The governance part of GRC represents the strategic decision-makers in the organization, such as the senior executives or members of the board. Efficient governance relies on the use of evidence to inform decisions and make effective changes. This will consist of assurance reports, internal audit results, risk assessments, and records from compliance monitoring. Strong governance keeps the organization on track and aligned with set business aims. By setting the overall objectives for a GRC system, good governance can improve processes across the organization.

What is GRC risk?

The risk element of GRC represents the organization's risk management processes. The process usually relies on risk assessments and internal audits to identify potential hazards and risks to the organization. This could be risks within internal operations or processes, or external changes to the wider sector or market. Organizations will usually perform a risk assessment when considering wider business aims and objectives. Risk assessments are important when identifying potential issues throughout the business operation. Examples include financial risks, cybersecurity threats, or commercial liabilities. Teams dealing with risk management may include business analysts, finance officers, IT security executives, and the governance board. A GRC framework ensures these different teams are all working towards the same objectives.

What is GRC compliance?

The compliance part of GRC means the measurement of an organization's continued delivery of legal obligations. This may include legal requirements or regulations, contractual agreements, or local environmental laws. An example would be a compliance officer monitoring the organization's ongoing compliance with a legal regulation like GDPR. An organization may perform regular compliance monitoring to understand the risk of non-compliance or the current state of compliance. Risks of non-compliance are generally financial and reputational, for example from GDPR fines. Through the GRC framework, organizations are encouraged to centralize the results of compliance monitoring.

Who can use GRC?

GRC frameworks can be used by any type or size of organization seeking improvements to compliance policies or risk management processes. Commonly, the GRC approach will be used by large or complex organizations which need to rationalize their approach to risk management and compliance. The processes or data might currently be siloed within teams, departments, or even individual roles. GRC can be used to realign these elements with overall aims of the organization. IT security departments or organizations often utilize GRC to improve their risk assessment processes. The approach is also compatible with other frameworks and standards. IT security standards like the ITIL Framework provide specific guidance to enhance cybersecurity procedures, and the GRC helps to position it within the wider organization.

Five tips when implementing GRC

Implementing a GRC model can seem complex, as it will generally include internal auditing of existing processes and procedures. It's likely that each established area of the organization will have its own way of performing risk assessments or compliance monitoring. But a unified approach with shared expertise is the best way to achieve the overall aims of the organization. With this in mind, there are ways to make the launching of the GRC program more straightforward. Here are five tips for implementing a GRC framework in an organization.

1. The discovery phase is important

Spending time taking stock of existing processes is vital if the GRC program is to be a success. Organizations should perform an internal audit of the processes and procedures used by the risk assessment and compliance teams. Approaches in departments and teams' fields will of course be different, but the aim is to establish the similarities and shared processes. The results of the internal audit will help shape the direction of the whole GRC project. It's also important to define all relevant regulations, contracts, laws and legislation the organization may need to be compliant with. For example, organizations that process cardholder data will likely need to be compliant with the Payment Card Industry Data Security Standard. Once highlighted, the scale and scope of the GRC program can be decided.

2. Senior management should be fully onboard

The benefits of a unified GRC approach should be clear to any members of senior management. After all, it means better access to reports, analytics and evidence which help shape strategic decisions. Plus, improved risk management processes mean those strategic decisions are well-informed in the first place. Senior management should provide a clear idea of the organization's overall aims and strategy, which in turn will set the tone of the GRC project. If the board can decide on a unified GRC strategy, it will be easier to embed the project in the wider organization.

3. GRC tools can streamline the process

GRC tools such as compliance software or reliable board portal software will help streamline the project. GRC software will provide one area to record all the different risk assessments and internal audits. In addition, it can help directly with compliance monitoring. This centralized data can then be accessed and visualized remotely, for instant access to trends and records. The GRC software will also help to trace the different processes and procedures used within different teams or roles. By centralizing processes within one piece of software, organizations can explore the trends found within different silos.

4. Make improved business performance a core project aim

When assessing existing processes and procedures the question should be asked: can it be improved? The main aim of a GRC program is to drive improvements to risk assessment and compliance monitoring. Both aspects are integral to the ongoing success of an organization. Risk management directly informs decisions on the growth of the organization, or the improvement of services and products. A project to unify GRC programs should aim to improve processes for risk assessment and management. This can be through efficiency savings by sharing resources across teams and departments, or through the refining of processes. The overall performance of the business should improve as a result.

5. Communication is key

There should be regular communication about the project to all members of the organization. GRC by its very nature is far-reaching and comprehensive, as the process will review the breadth of an organization. The launching of a new GRC system will require training and engagement campaigns, so project communication is important. Questionnaires, surveys and interviews are useful ways of gaining insight into different processes across teams and departments. Plus, any changes in process will need to be announced and managed. This is particularly true if the organization is introducing a new tool or piece of software to deliver the GRC system. Any changes in technology will require an element of engagement or training.

The benefits of GRC

Compliance monitoring and risk management are vital parts of any successful organization. In the modern business world, organizations will face many rules and regulations affecting their operation. Non-compliance with regulations or laws can bring hefty fines and loss of reputation. Organizations will need to identify and overcome a constant stream of financial, operational and logistical risks to function. Calculated risks are a big part of business, but a lack of risk management processes means these decisions are made in the dark. All large organizations will perform some form of risk management or compliance monitoring. Likewise, internal audits and reports are usually a mainstay of governance decisions in all settings. However, organizations may have many different teams and roles performing these internal audits. Unnecessary silos and disconnected processes make it difficult to gain insight and trends in the organization's data. There is also the financial cost of inefficient processes because of lack of overarching infrastructure. The GRC concept unifies the organization's approach to risk management and compliance monitoring. This way, organizations can bring together GRC reports to make informed decisions which take into account all areas of the organization. The benefits of the GRC approach includes:

  • Streamline internal auditor processes for both compliance and risk management.
  • Encourage collaboration across the organization, combining expertise from different teams and departments.
  • Develop an organization-wide view of risk and compliance levels, collecting accessible insights in one place.
  • Avoid internal audit activities from being duplicated by different teams.
  • Keep track of regulators, compliance and enforcement.
  • Lower the costs of internal auditing processes and risk management by combining resources.

What is GRC certification?

GRC certification can be achieved by individuals within an organization that deal with governance, compliance, or risk management. These accreditations attest that individuals have best practice understanding of compliance, risk management and good governance practice. Certification can be a good way of training project leaders ahead of launching GRC within an organization. Compliance officers, internal auditors, or quality assessors can all benefit from achieving a GRC certification. There are many different GRC certifications, each with different levels of experience required. There are also specific courses available for GRC in industries like IT or finance. Each will develop insight into internal audit processes, driving continuous improvements to compliance monitoring.

Using GRC software

A successful GRC program relies on the combination of compliance and risk management data and evidence. Diligent Compliance software can store internal audit documents and compliance monitoring results in one place.'' Governance boards can access the compliance software across the full range of devices, giving leaders important GRC data at their fingertips. Risk assessments and internal audits from different areas of the organization can often seem complex. But the aim of any GRC program should be to simplify access to vital business data and evidence. Diligent Compliance software can help. Unearth trends in data from different areas of the organization. Keep records in one place, and access detailed reports on the move. Book a demo with Diligent today to understand how compliance software can revolutionize GRC.
Related Insights

The Rising Tide of ESG – Navigating the Road Ahead

video

The Board's Role in Leading and Enabling GRC

article

Board and Executive Collaboration: Components of a Secure Platform for the Evolving Workplace

White Paper
Michael Nyhuis
Michael Nyhuis, Director of Audit & Compliance at Diligent, is a modern governance expert with over 25 years of experience. Michael helps organizations manage their compliance with both internal and external obligations, identify gaps, and drive continual improvement.