Governance, Risk, Compliance (GRC), the 3 Pillars of the modern business

Governance, Risk, Compliance (GRC), the 3 Pillars of the modern business

When part of a broader operational governance strategy, Governance, Risk and Compliance (GRC) practices ensure continuous oversight and help businesses strike the right balance between cost optimization, risk management, and capacity for innovation.

Effective GRC management means organizations need to gather important risk data, validate compliance, and report results to management.  Definitions of GRC vary, as do the potential applications, uses, and organizational approaches to implementation.

GRC Components – the 3 Pillars:

·       Governance describes the overall management approach through which senior executives direct and control the entire organization, using a combination of management information and hierarchical management control structures.

·       Risk Management is the set of processes through which management identifies, analyses, and where necessary, responds appropriately to risks that might adversely affect the realization of the organization’s business objectives.

·       Compliance means conforming to a set of requirements, as defined by laws, regulations, standards, contracts, strategies, and policies.

With a constantly changing regulatory environment and the increased risk exposure, organizations are beginning to work towards a holistic and integrated GRC framework, that views all these three lines of defence as mutually related and interdependent functions.

There are three key aspects to successful GRC implementation:

·       Developing the policies and framework holistically in consultation with all stakeholders involved

·       Training all relevant employees in relevant topics

·       Communicating the framework with all employees and gaining their acceptance and execution

Companies will often focus on the first area, devoting both time and resources in ensuring that the framework is well designed, but unfortunately, the other essential areas of effective training and communication, are not given the required attention and are not executed in a manner that will ensure positive results.

Appropriate GRC training is an inevitable component for employees, management and board members, forming an important part of their continuous learning that will lead to the success of the GRC design and implementation process.

Good communication across the organization is critical to avoid misunderstanding among stakeholders of the nature of GRC and what it is being brought in to achieve. GRC is meant to be a positive step in the right direction, but poor communications can turn it into a potential – and completely unnecessary – problem.