Leadership, management, risk control assurance and compliance with laws and obligations are key features that must work together to achieve the desired performance of the organization. Such a structure includes units such as inspection, risk, legal, financial, IT, human resources and the board. Organizations have been run for a long time and risk and compliance with laws and requirements are being managed, but the method used is not necessary for maturity, and these activities have not co-operated with each other and have not been in line with the goals of the organization. To solve this problem, GRC is recommended.
Governance, Risk Management, and Compliance (GRC) are three related facets that help assure an organization reliably achieves objectives, addresses uncertainty and acts with integrity. Governance is the combination of processes established and executed by the directors (or the board of directors) that are reflected in the organization’s structure and how it is managed and led toward achieving goals. Risk management is predicting and managing risks that could hinder the organization from reliably achieving its objectives under uncertainty. Compliance refers to adhering with the mandated boundaries (laws and regulations) and voluntary boundaries (company’s policies, procedures, etc.).
GRC is a discipline that aims to synchronize information and activity across governance, risk management and compliance in order to operate more efficiently, enable effective information sharing, more effectively report activities and avoid wasteful overlaps.
Although interpreted differently in various organizations, GRC typically encompasses activities such as corporate governance, enterprise risk management (ERM) and corporate compliance with applicable laws and regulations. Organizations reach a size where coordinated control over GRC activities is required to operate effectively. Each of these three disciplines creates information of value to the other two, and all three impact the same technologies, people, processes and information.
Substantial duplication of tasks evolves when governance, risk management and compliance are managed independently. Overlapping and duplicated GRC activities negatively impact both operational costs and GRC matrices. For example, each internal service might be audited and assessed by multiple groups on an annual basis, creating enormous cost and disconnected results. A disconnected GRC approach will also prevent an organization from providing real-time GRC executive reports. Like a badly planned transport system, every individual route will operate, but the network will lack the qualities that allow them to work together effectively.
If not integrated, if tackled in a traditional “silo” approach, most organizations must sustain unmanageable numbers of GRC-related requirements due to changes in technology, increasing data storage, market globalization and increased regulation. Today, most organizations, even nonprofits and small companies, face the following challenges:
- Stakeholders’ demand for high efficiency and transparency
- Inspection agencies and regulators are unpredictable
- Logarithmic growth of relationships with third parties and related risks
- The high cost of identifying hazards and meeting the requirements of upstream organizations
- Consequences of high risk aversion and requirements
When these activities are tumbling, the likelihood of defining misplaced and ineffective goals, undesirable strategies, and ineffectiveness increases.
Integrating management, risk, and compliance activities does not mean creating a very large organizational unit, but rather an approach to ensure that the right information is available to the right people at the appropriate time, so that the goals of the organization are properly formulated and implemented and appropriate controls to identify uncertainties. The implementation of this solution includes the following advantages:
- Reduction in costs
- Reduced parallel activities
- Reduce damage to activities and impact on organization operations
- High quality information
- Faster and more effective access to information
- Proper implementation of organization processes