The most dangerous threat to your success is usually something you are unaware of. Quite simply – you never know what you don’t know, and therein lies the reason for many business failures. A Governance, Risk Compliance (GRC) framework can be a very effective way to identify and mitigate risks that you might otherwise have been unaware of. No company wants to be surprised by a problematic audit, a charge of noncompliance, or a belated realization that something should have been done differently. Compliance risk management helps avoid this.
However, GRC systems are expensive and time-consuming. They require upkeep, and if they are not carefully crafted to serve your particular business needs, they might not provide the data that your company needs at the time that it is needed.
Not all businesses need to implement specific systems for Governance, Risk, Compliance. And if you don’t need it, you should avoid the unnecessary costs and time it takes to implement GRC frameworks. This article helps you determine whether or not your company should create a GRC framework.
But first, what exactly is GRC?
In short, a GRC framework sets out a company’s strategy for managing the organization’s overall governance processes, enterprise risk management, and compliance.
Your company’s governance process ideally integrates all of the following elements into a single, coherent procedure: the communication of management’s control, key policies, compliance risk management, general management and oversight of business processes, as well as the evaluation of business performance. Given the trends towards increased scrutiny from regulators and activism from shareholders, the visibility of governance processes can be very important to a company.
The risk management that your company necessarily engages with, whether implicitly or not, can include financial, operational, IT, asset, or brand related risks. These risks are the ultimate responsibility of company leadership, and for that reason companies often opt for transparency in risk management in the form of a Governance Risk Compliance framework.
Compliance is a continuous process, and in most cases a complex one as companies deal with multiple regulations and contractual obligations simultaneously. This part of the company’s GRC ensures that organizational activities are operated in a way that meets all legal and contractual obligations.
Does your company need a Governance Risk Compliance framework?
It is important to realize that your company, in all likelihood, already has a structure within which governance, risk, and compliance is being dealt with – these business functions tend to develop organically as a business grows. If your company is in a position where GRC is being dealt with in a cohesive, transparent, and readily reportable manner, you might not need a more formal framework right now.
Typically, companies need a to implement a formal GRC structure when they:
Operate in an industry that is heavily regulated or where non-compliance with regulation is associated with high risks and costs.
Are in contractual and business relationships that require of them to meet multiple or complex performance or compliance requirements and report on it
Face a series of risk, compliance and/or audit processes (usually with investments, or acquisitions)
Need to give senior executives a better way to view and evaluate business risk and performance.
In summary: As a rule, governance will necessarily involve risk management, and effective risk management will produce compliance. This tends to happen with or without a GRC framework. However, as soon as this starts taking up organizational bandwidth, time, and energy that could be better spent growing your business, it is time to formalize Governance Risk Compliance.
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