What Exactly is Governance, Risk, and Compliance?
Scott L. Mitchell of the Open Compliance and Ethics Group, currently known as OCEG, introduced the notion of an integrated Governance, Risk, and Compliance (GRC). The OCEG was formed in 2002 by a group of professionals that comprised board members, compliance managers, risk managers, IT auditors, attorneys, accountants, and audit executives in the aftermath of the dot-com bubble burst. The team defined that organizations, such as those involved in the dot-com bubble, were failing due to antiquated management strategies – important data was siloed in different departments with separate responsibilities and a lack of supervisory avoided organizations from uncovering and fixing disputes until it was too late.
An OCEG working group of over 100 specialists created the GRC framework to help organizations better meet their aims, identify and manage risk, and comply with the required regulations. It is designed to break down silos and establish closer supervision and integration of six key areas of business:
- Strategy and governance
- Management of risks
- Internal and external auditing
- Legal and regulatory compliance
- Culture and ethics
What is the Significance of Governance Risk and Compliance?
As businesses expand in size, they eventually require a structured, integrated framework for governance, risk management, and compliance in order to function at peak efficiency. These activities may be managed individually by siloed departments or business units in the absence of such a framework. This results in significant inefficiencies, such as duplication of activities and effort, extra expenditures, taking on too much (or not enough) risk, and compliance difficulties with a range of repercussions.
The GRC framework is based on the premise that achieving business objectives necessitates an integrated strategy that successfully integrates company goals and objectives with risk management, compliance, and ethical behavior.
The GRC framework describes a five-step approach for avoiding the negative effects of inadequate governance, risk, and compliance management:
Commit: Obtain buy-in and commitment from all key stakeholders to integrated capabilities.
Plan: Use the GRC capability model to identify your organization's present state of GRC, determine a future target state, define the roles, build and coordinate capability procedures, and define a method for monitoring outcomes.
Do: Execute the GRC strategy through a regulated change management approach, communicating with workers and stakeholders effectively with new expectations.
Check: Compare the performance of new GRC processes and capabilities to the objectives to see if the new improvements are producing the desired results.
Act: Using the findings of continuous assessments, work to enhance GRC procedures and capabilities.
This five-step approach applies the Plan-Do-Check-Act (PDCA) cycle to corporate governance, providing businesses with a clear route to creating an effective corporate governance framework while avoiding the risk of disjointed governance, risk management, and compliance procedures.
GRC includes three major components in the IT environment:
Governance is the process of ensuring that organizational activities, such as managing IT operations, are aligned with the organization's business goals.
Risk management entails ensuring that any risk (or opportunity) connected with organizational operations is identified and managed in a manner that supports the organization's business objectives. In the context of information technology, this entails having a complete IT risk management process that is integrated into an organization's enterprise risk management role.
Compliance: Ensuring that organizational operations are carried out in accordance with the rules and regulations governing those systems. In the context of information technology, this entails ensuring that IT systems and the data stored inside them are utilized and secured correctly.
Meeting compliance necessitates the implementation of IT controls as well as the auditing of such controls to verify they are functioning properly. Authorities are also used by organizations to handle recognized hazards. In reality, the term "GRC" arose in the early 2000s as a result of a number of publicly publicized corporate financial disasters, which caused businesses to scramble to strengthen their internal control and governance systems.
What Factors Contribute to a Successful GRC Implementation?
A GRC framework's decision-making, asset and portfolio management, risk management, and regulatory compliance activities will be ineffective unless the organization's top leadership truly supports cultural change.
Implementing a framework can never be successful until the culture of the organization changes to accommodate GRC operations.
Who Makes Use of GRC?
Governance, Risk, and Compliance (GRC) may comply with any company – public or private, large or small – that wishes to align its IT activities with its business goals, efficiently manage risk, and maintain compliance.
You may use an IT GRC solution to build and coordinate policies and controls and equate them to regulatory and internal compliance requirements. These technologies, which are typically cloud-based, automate numerous operations, increasing efficiency and reducing complexity. If you want to comply with the AML regulations, you can contact us and request a demo.