Governance, risk and compliance (GRC) is a framework that combines risk management, good governance and regulatory compliance practices into an integrated approach. Although these three components are often managed as separate activities, using a GRC framework creates a unified system that allows for more efficiency, coordination and strategic alignment.
Holistic management approach
A holistic approach allows for consistent policies, procedures and controls to be applied across departments and business units. By operating cohesively, the organisation can better understand how decisions in one area impact another.
Promoting responsible practices
By integrating these three functions, GRC helps organisations ensure that their operations are conducted ethically, sustainably and in compliance with laws and regulations. It streamlines practices around shared values, guiding strong organisational development.
Reducing risk
GRC practices help companies improve their risk management and mitigation strategies by coordinating efforts with other business units. Through cross-functional collaboration, teams can share insights and expertise to ensure that risks are handled from multiple perspectives.
Improving decision-making
Effective GRC initiatives help leadership set policies guided by shared viewpoints and create a unified vision for the organisation. This encourages shared understanding and leads to more informed decision-making.
Key components
Governance: The set of practices, policies and accountability structures designed to guide an organisation’s approach to control and manage its operations and ensure alignment with business goals and values.
Risk management: The framework for identifying, evaluating and mitigating all types of risks, including financial, operational and cybersecurity risks, that could hinder the organisation’s efforts towards its goals.
Compliance: The process of adhering to applicable laws, regulations and industry standards to avoid penalties and uphold the organisation’s reputation. It involves setting strong internal controls to prevent, detect and correct violations.
Benefits of a GRC framework
Organisational efficiency: Helps centralise policies, procedures and controls, reducing redundancy and improving communication across departments.
Improved compliance: Streamlines compliance monitoring and management processes, ensuring the organisation stays informed of the latest standards and applicable laws.
Risk mitigation: Improves risk management practices across departments, positioning organisations to proactively spot and handle emerging threats and reduce the likelihood of legal liabilities.
Strategic alignment: Aligns governance, risk management and compliance activities with the organisation’s business strategy, ensuring that decision-making processes are based on a clear understanding of risks and compliance obligations.
How GRC works in practice
The implementation of a GRC programme falls into three stages:
Stage 1: Assessment and planning
Collaborating with key stakeholders to gain a clear picture of company goals and mission.
Identifying the legal and regulatory requirements based on the area of operation, and assessing current processes to identify inefficiencies.
Identifying and evaluating potential risks in key business units and establishing the company’s risk profile.
Stage 2: Strategy development
Creating actionable plans to mitigate risks and implementing necessary internal controls.
Establishing a governance structure by defining roles and responsibilities for GRC initiatives.
Training employees on GRC responsibilities and establishing open communication channels for reporting issues.
Stage 3: Monitoring and improvement
Leveraging GRC software and data analytics to inform decision-making.
Regularly monitoring compliance and risk mitigation efforts.
Assessing GRC maturity to identify areas for improvement and advancement in GRC practices.
Challenges
Requires companies to act to adapt to GRC insights, demanding investments in change management initiatives.
Merges siloed departmental data, which may lead to duplication and complicate information management processes.
Requires a unified strategy that integrates all business activities, including open communication, collaborative policy development and ongoing training, to prevent fragmentation.
May increase costs when organisations do not allocate adequate resources for technology upgrades, training and ongoing maintenance.
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