Bonus Material: 5 Steps To Better Risk Management
What Is GRC: Introduction
Many of the games we enjoy playing in our personal lives are mirrored in aspects of our professional lives. This is also evident when asking yourself ‘what is GRC?’. Whether it’s organized sports, cards or video games, there is always a level of competition, strategizing, teamwork and wins and losses where parallels can be drawn to various aspects of our job. One of the worst games to compare your work to is Whack-A-Mole.
If your job resembles Whack-A-Mole, it’s likely that systemic problems are driving everyday, enterprise-wide chaos. For those of us who have played the game, we know that as it progresses, the moles start popping up faster and faster and offer shorter windows of opportunity to be whacked down back into their holes. It’s notoriously infuriating, as the reactionary whacking becomes less and less effective over time. An organization that reflects the nature of Whack-A-Mole has the following characteristics:
- Follows an “out of sight, out of mind” mentality, where upcoming problems are not on anyone’s radar, therefore there is no foresight into when and where problems will arise.
- Has one person responsible for solving too many problems (the mallet holder, if you will) leaving them overwhelmed and making it impossible to address problems in a timely manner.
- No differentiation on how or why certain problems are solved, but rather a method of making issues disappear as quickly as possible using whatever resources can be gathered in the shortest amount of time.
To be able to operate efficiently and ensure success in your business, it’s crucial to be able to anticipate problems ahead of time, strategically defer responsibilities amongst team members, and solve issues with long-term goals in mind. The only way to accomplish this is by breaking down silos.
Before 2002, company policies, government strategies, regulatory and code of conduct enforcements were needed to scale your business, but there was not yet a term to refer to those collective efforts. After the compliance requirements that were born out of various 2002 business scandals became a part of everyday business operations for organizations nationwide, the idea of “GRC” came about: a method of achieving business objectives while simultaneously addressing risk and acting with integrity.
In this guide, we’ll answer the question what is GRC, the GRC meaning, GRC compliance, how GRC has evolved over the years and provide information about how a GRC platform can be integrated into your business.
What Does GRC Stand For?
“GRC” stands for Governance, Risk Management and Compliance.
What is GRC?
GRC is a high-level term that addresses an enterprise’s method of execution for each of the three elements (governance, risk management and compliance). GRC activities are designed with many goals in mind, but are often aiming to increase efficiency and communication at the organization.
The main purpose of GRC, as a business practice, is to offer a synchronized approach to all three areas it represents (governance, risk and compliance) so that you eliminate repetition, redundancies and inefficiencies. To gain a holistic understanding of GRC, it’s important to understand what each of its elements are comprised of:
Governance refers to the way in which an organization manages its mechanisms, processes, relationships and more on a high level. It’s defined by the ways in which you make and implement decisions. So long as an entity of some sort has been delegated any amount of power over another, there exists a certain type of governance.
The most recognizable example of governance is how it was taught to us in history class: pertaining to a state, and using method terminology like “monarchy,” “democracy,” “oligarchy,” “authoritarianism,” and “totalitarianism.” But HR professionals also govern; their methods may include instructing employees how to prioritize their work, holding an ethics council, deferring to a board of financial advisors or clearly defining operations.
The role of governance within GRC refers specifically to corporate governance. Corporate governance refers to the framework of practices by which a company or organization ensures fairness and transparency with its stakeholders. These stakeholders most likely include customers, employees and their associated community. There exists both explicit and implicit agreements between the corporation and its stakeholders in order for responsibilities to be properly distributed. There also must be procedures in place for resolving conflicting interests, proper supervision and various other controls in order to properly impose a system of checks and balances.
The world will always be filled with uncertainty, and with uncertainty inevitably comes risk. Risk, in its simplest form, is the possibility of something bad happening as a result of something else; i.e. “If I take this action, will it result negatively?” Every aspect of every business has the potential for risk. So how do we manage it? Implicit risk management is not enough to successfully operate a business.
A formalized risk management process is an essential part of GRC. There must be a set of explicit processes that identify, analyze and respond appropriately to every potential risk your organization faces. The ideal risk management plan serves as a roadmap for improving performance by helping you understand key dependencies and control effectiveness. With proper implementation of your plan, you ultimately should be able to better allocate resources toward what matters most.
Since every business has its own unique set of risks, it’s important to create a customized plan for your organization. Profit motive, brand, size, industry, market share and many other characteristics all prescribe your risk management program. That being said, all plans should be standardized, meaningful and actionable.
Managing risk is one thing, but it’s also important to make sure that the right decisions are being made when mitigating those risks. This is where compliance comes in. Businesses are required to comply with various laws, regulations and standards in order to protect themselves from penalties (and ultimately, protect their consumers and stakeholders).
Compliance should also be thought of as governing and working with integrity. A company’s mission drives its values, which then translate into ethical standards. When the members of an organization are following their ethics, they are essentially complying with those standards. Interpreting compliance may feel like it should be subjected to your own personal set of standards. However, from the standpoint of a compliance officer, there are rarely shades of grey, and failure to allocate the appropriate resources to maintain compliance can have dire consequences.
Compliance should not be viewed as an end goal; doing so assumes “compliant” is synonymous with “secure.” Meeting set requirements should be viewed as a bare minimum for safe operations and resistance to external threats. Compliance should be viewed as an ongoing effort to meet the needs and expectations of a variety of stakeholders. In the finance industry this can be seen by achieving Sox Compliance. Compliance touches every corner of an organization, so it should be viewed as an integral subset of risk.
It’s possible that your GRC program is focusing on the wrong issues. Over time, this can lead to the company falling out of compliance in some capacity. This is why it’s essential that your GRC program is built to keep your company compliant.
No one falls out of compliance overnight; take for example Johnson & Johnson, who after a series of product recalls in 2009, fell out of compliance and faced permanent FDA injunction and were placed under five years of severe FDA oversight. While they took their product recalls seriously, they took the wrong approach towards correcting the problems at the source. As a result, their manufacturing plants fell out of compliance and ultimately they lost money and had to win back public trust.
If your boat is quickly filling up with water, rather than working extra hard to pump it out, the most effective solution is to repair the leak itself. This is where GRC can help. GRC helps you meet compliance goals by focusing on performance management and predicting impact on an enterprise-wide level. By assessing risks at the root and understanding their consequences, you can better ensure that your company does not fall out of compliance.
Where GRC is Headed
Traditionally, GRC entails responding to published and legally binding regulations. However, the expectations for your GRC program are evolving with the times. Our social and technological climate is changing at a rate that regulators can’t keep up with. Therefore, GRC must be approached considering the company’s customer base, reputation and ethical conduct.
Today, we live in a see-through economy where consumers are empowered to impact a company’s reputation using the various forms of social media at their disposal. Consumers have become the new regulators, as they can respond to and amplify corporate missteps within seconds of encountering them. This adds a layer of importance to the job of someone responsible for GRC at their organization. A diminished reputation equals diminished market value, so companies today are more susceptible than ever to risk events that damage market perceptions.
The Role Of GRC & ESG
GRC has developed over the past couple of decades, heeding the consumer’s voice, the business reputation and their ethical conduct whenever a scandal arises. In order to comply with the changing climate, governance, risk and compliance solutions must account for the consumer and take ESG considerations seriously.
We mentioned earlier about the Whack-A-Mole approach to running a business, and how this fosters a chaotic and inefficient environment. To break down the silos that create that difficult environment, it’s essential to execute your GRC efforts using a robust technology platform.
LogicManager’s software offers tools that will simplify your process while enhancing performance. With these tools, you can be sure that your business goals are achieved. No matter what area of governance, risk or compliance you’re looking to simplify, our enterprise GRC has the solution. Here are some of the ways you can address all of your pain points at once using our GRC system:
- Store all of your data in one centralized framework.
- Leverage GRC dashboards and real-time risk intelligence reports.
- Identify your organization’s most critical risks with configurable risk assessments.
- Keep the right people engaged in every step of the risk process with tasks, alerts and reminders.
- Use easily accessible to-do lists to track the status of all your responsibilities at once.
- Break down silos to discover connections between risks and goals using our taxonomy technology.
- Detect vulnerabilities across your GRC program to ensure complete protection of your company.
- Deliver engaging presentations using custom dashboards and reports, featuring GRC tools like heat maps, risk controls matrices and summaries.
With LogicManager, you never have to feel rushed to learn the entire GRC system at once. Instead, you have the ability to master the essentials first while ultimately adding new GRC tools as your risk management program expands.
Our GRC risk metrics reports and dashboards help you prioritize your goals and focus on risks, projects and initiatives that truly impact your company and its bottom line. Our risk reporting capabilities are built on powerful taxonomy technology that aggregates and relates all your information so your next audit, regulatory review or board meeting is a success. Engage any audience with intuitive, accurate reports that enable better decision making and improved business performance.
Not only do we offer ERM software, but we also offer a team of dedicated analysts to help answer any questions you have while learning the ins and outs of our solutions, all at no extra cost.