ERM vs. GRC: What’s the Difference?
Today, organizations face a variety of operational risks. While ERM and traditional GRC programs aim to solve the same problems, they approach them from different angles.
LogicManager’s ERM approach, for example, is based on the use of regular, standardized risk assessments. These assessments help align governance, compliance, and other initiatives.
Our software and mentoring creates a repeatable, sustainable process that:
- Links risks to consequences across functional silos
- Connects process-level activities to strategic goals
- Has all the framework content you need to provide transparency into operational activities, linking them directly to board objectives
On the other hand, traditional GRC systems takes a controls-based approach typically focused on just one compliance area.
The result is that traditional governance, risk and compliance software cannot prioritize operating controls and business metrics by the degree of risk they protect against. This increases costs due to duplication of effort. More importantly, it blocks a direct connection to the achievement of business goals.
What is GRC?
GRC stands for “governance, risk management, and compliance.” Traditionally, the term “GRC” has been used as a wide-ranging classification of an organization’s efforts – across these three distinct disciplines – to ensure continued satisfaction of short- and long-term objectives.
The traditional approach involves classifying GRC components as their own sets of processes. Naturally, this means each component –risk, compliance, and each governance function, such as audit, IT security, and policy management – is treated as its own silo, with its own practitioners, subject-matter experts, and managers.
More recently, GRC programs have begun to diverge from the traditional siloed approach. An enterprise approach (“eGRC”) keeps the overall program more in line with enterprise risk management solutions, which aim to break down silos and eliminate redundancies and other inefficiencies.
What is ERM?
Enterprise risk management, or ERM, is a business discipline that shares the same end goal as GRC: the continued achievement of the host organization’s objectives. ERM’s main distinction from GRC is the fact that it “encompasses all areas of organizational exposure to risk (financial, operational, reporting, compliance, governance, strategic, reputational, etc.),” according to the Risk Management Society.
Enterprise risk management addresses every function, including governance and compliance, and boils it down to a common framework approach. This common framework includes the identification and assessment of a series of goals, requirements, and root-cause risks, which are the common denominator of every organizational silo. It then helps document mitigation strategies and lets the user monitor their effectiveness. By doing this, ERM programs encourage the development of an enterprise-wide risk culture.
When every department is able to use its own risk assessment tools, perform risk reporting, and design controls – while at the same time easily granting access to the appropriate individuals – identifying and eliminating duplicative work is simple. Some risks have cross-functional implications, which means that certain mitigation activities can have benefits for more than one department. With an ERM framework, for example, compliance managers can easily be made aware of a beneficial initiative, even if it originated in operations.
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Enterprise Risk Management (ERM) vs. Governance Risk and Compliance (GRC)
ERM and ERM Software
- Focus on performance management
- Engage managers across silos and levels
- Links risks to activities and the goals they impact
- Forward looking view on risk
- Pay as you go with results in less than 90 days
GRC and GRC Software
- Myopic compliance structure
- Lack of transparency to business process level
- Lack of alignment across business silos
- Historical view on risk
- High start-up costs and long delivery time frames