Governance, Risk, and Compliance, also popular as GRC, is a framework that organizations use to assess risks related to their business rules, strategies, and goals and align them with the law and regulations. IT teams in enterprises are assigned with the responsibility to assess business actions and maintain compliance with laws and regulations. When GRC capabilities are properly integrated in the business model, organizations can achieve their goals and act decisively.
Although the term GRC was introduced by Forrester in 2002, the idea of governance, risk, and compliance was always present in the business market. Before the birth of the digital era, every organization always had some sort of GRC capabilities underlying their business model, though they were not referred to as such.
As the corporate infrastructure became complex, the need for GRC capabilities as a tool was inevitable. The enterprises required some sort of utility to contain risk and manage their business processes digitally.
The Governance, Risk, and Compliance framework was formally announced after the publication of a research paper in 2007. Research was conducted on typical “keep the company on track” practices among departments such as compliance, risk, audit, finance, HR, IT, and legal, as well as some business environments such as the executive suite and the board.
According to the formal definition of GRC, GRC is a framework that includes integrated capabilities that can be used to ensure an organization achieves its objectives, acts with integrity, and addresses uncertainty. GRC helps enterprises ensure that their IT controls are compliant with their business objectives. Organizations can also use GRC controls to maintain risks that are already identified. According to the 2016 reports of Gartner, the GRC framework was introduced after several highly publicized enterprises faced financial losses. Consequently, corporations improved their governance processes and internal controls as a result. Following is a brief explanation of GRC components:
Governance refers to the approaches, processes, rules, and policies established by the executive or higher management and implemented by the organization’s structure. The governance model assists enterprises in aligning their business rules and activities to support their future goals and ideas. Information flows across the enterprise fairly, accurately, and comprehensively, enabling higher-ups to make decisions, highlight risks, and plan the business strategy based on accurate and comprehensive information.
Governance creates a corporate environment where employees can feel empowered and have a sense of accountability. Furthermore, it provides higher management a better control across different layers of the organization as well as over the facilities and infrastructure.
Risk management provides a set of controls to the top management to identify, assess, and mitigate any risk that can hinder the progress of an organization to achieve its goals. Managing risks involves making coordinated and fiscally responsible decisions to allocate resources to the risks that can impact a business on a daily basis. Risk management also includes sharing risk information with stakeholders and properly delivering services while containing the identified risks.
The effects of a risk depend on the approach taken by higher management to control, avoid, accept, or transfer it to a third party. Different corporations have to face different types of risks such as commercial risks, financial risks, information security risks, and technology risks, it depends on the business type and potential of the business.
Compliance refers to the alignment of your business model with the stated laws and regulations set by regulatory bodies such as HIPAA, GDPR, other Privacy or Financial Regulations as well as reflecting the internal policies of the organization. Usually, every federation has some defined set of rules, standards, laws, and policies for all working firms in its region, and organizations have to abide by these rules in order to legally operate in the region. Operating against such policies or avoiding them can lead to legal penalties and lawsuits.
Enterprises also have well-defined internal policies for the business that are reflected by the business model as a whole. An organization can only stay in compliance with external rules when its own business model respects internal policies. An effective policy implementation requires management to identify high-risk areas, develop a compliance strategy, and propagate it across the organization.
A PRC (Process Risk and Control) solution provides a structured way to understand, evaluate, and optimize the business processes within an organization in order to highlight and contain risks. Integrating PRC capabilities in the business environment allows organizations to track the health of their operational activities and financial reports while aligning business operations with internal and external policies. The businesses can utilize PRC capabilities to identify and contain risks by evaluating current internal controls and implementing new and improved versions of them.
You might have probably heard of the term “business process” but you will be wondering what exactly it means. Business process consists of a series of steps that are taken by stakeholders in order to achieve any solid goal or objective. A stakeholder is assigned a specific task at each step. Business Process serves as a dependency for several other corporate frameworks such as process automation, business process management, etc. You simply cannot ignore the importance of business processes in an enterprise. It helps businesses to allocate their resources effectively and align individual activities in the favor of enterprise’s goals.
Process Risk, a subset of operational risk, is a risk that you encounter during the completion of any process in a corporate environment. Process risk appears when the business process is not efficient and effective to achieve desired results.
This type of risk can be found at any stage of the business process and, if not handled properly, can lead to financial and reputational losses as well as affect the relationship with customers and trade partners. The inefficient and ineffective business processes can hinder the goal achievement process of an organization, and even if the organization does achieve the goal, it may not be up to the organization’s expectations.
Down below are some of the types of Process Risk:-
Business risk controls, or risk controls, are designed to keep organizations on track while protecting their environment from unseen threats and risks. When the environment of an organization is secure from inside and outside risk, its management can make better decisions to grow the company. Every organization wants its business processes to get completed without any interruptions. To achieve that, the organization must put some risk controls. Here we have listed some of these controls that you can integrate into your business environment
The IT infrastructure of an enterprise plays a huge role while preparing the risk controls. The risk controls, with the integration of IT, can be categorized as follows:-
The GRC is a powerful tool, especially for the IT teams of organizations, to develop strategies and policies that will help them achieve their objectives without hindrance, whether it be internal or external. As well as complementing the efforts of management teams, the framework is especially designed to help them share the burden.
There are many software tools available to help streamline GRC capabilities, however, GRC goes beyond just a software implementation. Organizations usually seek guidance from available frameworks for developing and improving their GRC operations. Control Frameworks and standards may not be suitable for every enterprise, but they could be modified based on the environment. ISO 27001, NIST CSF, SOC1, SOC2, CMMC, COSO, ITIL, and COBIT are among the prominent players in this space.
An AI-based GRC solution that offers an easy-to-use platform for managing risks and adhering to regulations is the way forward. The high scalability and cloud integration GRC solutions makes it suitable small to medium size companies. In addition to providing centralized controls for risk management and compliance management, GRC Solutions are incredibly simple to use and highly functional. In addition to reducing user training, the objective of GRC Tools is to assist organizations in implementing and standardizing responses to GRC challenges.
There are many GRC-based software solutions for small businesses that can be integrated into the business environment to mitigate risks and maintain strategies. These solutions, also known as Enterprise Risk Management (ERC) solutions, can provide financial, strategic, operational, and hazard risk management, track company-wide incidents, and modify operations to comply with internal and external policies.
Usually, these software tools are operated by roles such as analysts, managers, and compliance officers within an enterprise hierarchy. GRC Solutions are not the same as cybersecurity software, which deals with digital security and privacy issues and doesn’t deal with other types of risks.
Due to the rapid demand for GRC software solutions, there are plenty of developers that are offering top the chart software designed and developed to meet needs of maximum organizations. You can pick one that meets the specifications of your organizations. For a quick start, we have compiled some of the most popular GRC software solutions available in the market. Examples of GRC Tools include but not limited to:-
Modern organizations are becoming more complex which makes it more difficult for management teams to maintain the integrity of business policies while achieving their goals.
GRC Framework offers some guidelines and practices that organizations can adopt in order to keep their business model in compliance with not only internal policies but also with regulatory bodies. If your enterprise is well aware of its risks and has a well-defined set of policies to follow, it can take decisive actions towards its future goals and projects.