The Dynamic Connection and Action Between Governance, Risk Management, and Compliance
Managers need to know the processes that ensure quality, mitigate risk, and manage regulatory relationships. In addition to the above, managing GRC across the organization depends on compliance within each department and project. Are you GRC ready?
What Managers should consider
People
Process
Technology
In today's VUCA world, businesses must constantly balance the management of governance, risk, and compliance. Getting the balance right can be hard. Business is complex. Organizations face many challenges and risks that can impact their reputation, financial stability, and legal compliance. To navigate these complexities, businesses must establish a robust framework encompassing Governance, Risk Management, and Compliance (GRC). Let's shed light on the intricate connection between GRC. Let's review how organizations can effectively integrate these three elements to enhance operational efficiency and ensure long-term success.
What is GRC?
Governance: Governance refers to corporate oversight that sets and monitors processes, practices, and structures. The oversight committee's goal is to ensure good management throughout the organization. The committee and its sub-teams define the rules, policies, and procedures that guide decision-making, accountability, and transparency at all levels of the organization. Effective governance ensures that the organization operates responsibly, ethically, and lawfully, aligning its actions with stakeholders' interests. Learn more about governance models, complete with examples, here.
Risk Management: Risk management involves identifying, assessing, and prioritizing risks that may hinder the achievement of organizational objectives. It encompasses the processes and methodologies employed to mitigate, monitor, and control risks, minimizing their potential negative impact. A comprehensive risk management strategy enables organizations to anticipate and proactively respond to emerging risks, ensuring business continuity and protecting the organization's assets and reputation.
Compliance: Compliance refers to adhering to laws, regulations, industry standards, and internal policies that govern the organization's operations. It involves ensuring that the organization meets all legal and regulatory requirements applicable to its industry and internal policies and guidelines. Compliance mitigates legal and reputational risks, fosters trust among stakeholders and promotes ethical behavior within the organization.
Compliance issues also include Corporate Social Responsibility (CSR). Businesses create value for their stakeholders, but they are also responsible for contributing to society and the environment while pursuing profits. CSR involves integrating social and environmental concerns into a company's operations and stakeholder interactions.
Why is GRC Important to Organizations and Projects?
It takes less time to do things right than to explain why you did it wrong
Henry Longfellow
GRC programs are often required by law to promote compliance within business operations. GRC can also improve employee morale and engagement. Employees who feel that their company is positively impacting society are more likely to be motivated and satisfied in their work. Companies prioritizing transparent sustainability are more likely to attract and retain top talent.
Likewise, CSR focuses organizations on fair employment, trade practices, and sustainable development. By implementing responsible business practices, companies can reduce their environmental footprint, support local communities, and contribute to society's well-being.
Good GRC and CSR programs help businesses build a positive reputation and enhance their brand image. By demonstrating a commitment to ethical practices and social causes, companies can attract and retain customers, employees, and investors who align with those values.
GRC and CSR can also have financial benefits. Companies that are socially and environmentally responsible often experience long-term success and profitability. They can also mitigate risks associated with reputation damage and regulatory compliance.
How to implement GRC?
Here are 6 steps to managing GRC to support the process, people, and technologies. These steps impact the organization from top to bottom: from the Board to the divisions, departments and their related projects. Data shows that implementing GRC effectively and efficiently improves the brand and the companies return on investment.
Companies can set and monitor clear objectives with metrics generated from a GRC platform. This will help increase their performance and improve their ROI.
Governance, Risk Management, and Compliance are interconnected and mutually reinforcing. Effective governance sets the tone and establishes the framework for an organization's risk management and compliance efforts. It provides the structure and oversight necessary to identify and manage risks effectively, ensuring compliance with applicable laws and regulations. Conversely, risk management helps identify potential compliance gaps and enables organizations to mitigate these risks proactively. Compliance, on the other hand, ensures that the organization's actions are in line with established governance policies. At the same time, risk management supports compliance by identifying potential violations and implementing mitigating controls.
Implementing a robust approach requires organizations to build a 'top-down" and "bottoms-up" scenario. Oversight boards appointed by Senior Management should create the overarching roadmap, which is detailed and deployed into the departments and teams executing the day-to-day work. Teams need to be able to escalate issues and risk mitigation requirements back to Senior oversight to address serious issues, adjust the GRC scope and solutions, and provide direction related to new issues. This “Define from the Top”, “Execute in the Team” should be take into consideration during implementation of each of the steps below.
Establishing a GRC Framework: Organizations should develop a comprehensive GRC framework that outlines the roles, responsibilities, and processes for governance, risk management, and compliance. This framework should be aligned with the organization's strategic objectives and supported by appropriate policies, procedures, and tools.
Identifying and Assessing Risks: Conduct regular risk assessments to identify potential organizational threats and vulnerabilities. This involves evaluating operational, financial, legal, and reputational risks. Risk assessments help prioritize risks and allocate appropriate resources to mitigate them effectively.
Implementing Controls and Monitoring: Implement controls and safeguards to manage identified risks and ensure compliance with applicable laws and regulations. This includes establishing internal controls, conducting regular audits, and monitoring key risk indicators. Leveraging technology solutions can enhance the efficiency and effectiveness of these processes. Systems such as SAP and SalesForce
Training and Communication: Provide employees with ongoing training and awareness programs to ensure they understand their responsibilities and the importance of governance, risk management, and compliance. Effective communication channels enable employees to report potential issues or violations without fear of retaliation.
Continuous Improvement: Regularly review and update the GRC framework to adapt to changing regulations, industry standards, and emerging risks. Foster a culture of continuous improvement by conducting lessons-learned exercises, sharing best practices, and incorporating feedback from internal and external stakeholders. Long-term thinking is critical to the success of GRC management.
Transparency: Make the policies, processes, people’s responsibilities and decision-making transparent within your organization. And share externally to shareholders, customers, and suppliers, when appropriate. This can include sharing organizational goals and GRC and CRS KPI’s. Companies willing to be open about aspirations and their execution of goals are more likely be to believed when they say their goal is to "do no harm."
The interconnectedness of Governance, Risk Management, and Compliance can be a differentiator in the quality and speed of execution. It will also improve the organization's reputation and ensure the projects run with these considerations and corporate needs in mind. Learn more about protecting your project from VUCA here. If you want to use my models for project quality, risk, and mitigation scenarios, download my free Project Manager Workbook here.
Do you use GRC at your company? If so, what's working, and what needs to be changed? Is there something I missed? Please let me know in the comments below!
