Governance, Risk and Compliance - GRC Explained

Once upon a time, a week was only a long time in politics.

Now a week is a long time for most of us – especially in the business world.

The rules that were in place on Monday morning could be quite different by Friday.

It’s harder than ever to keep pace with changes in governance, risk management and compliance (GRC). Keeping up with – never mind staying one step ahead of – stakeholder expectations is demanding.

What is governance?

Governance is all about how your business is directed and controlled by those with authority.

Good governance takes the needs and expectations of all stakeholders into account, balancing these through policies and business processes. 

The UK Corporate Governance Code (2018) addresses five specific areas:

• Leadership – the role and responsibilities of the board.
• Effectiveness – the appropriate balance of skills, experience, independence and knowledge.
• Accountability – financial and business reporting, risk management, audit and internal controls.
• Remuneration – how much and how it’s structured.
• Relations with shareholders.

The purpose of governance is to protect the organisation’s long-term success. It’s about prudent management that doesn’t hold the organisation back from being effective and entrepreneurial.  

What is risk?

Risk is the chance that an event could prevent your company from achieving its financial goals.

It’s generally accepted that events rarely turn out exactly as planned, but this doesn’t mean that goals can’t be achieved, even if the route is a little different from expected. Part of planning means taking risks into account.

There are three general causes of risk in business:

• Economic causes – such as competition, labour shortages or rising raw material costs.
• Human causes – these include negligence, mismanagement or criminal activity.
• Natural causes – like flood, fire or subsidence.

The entrepreneurial nature of business introduces risks – not every investment your company makes will generate a profitable return.

Effective risk management means identifying as many risks as possible, assessing their likelihood of occurring, and estimating their potential impact. Having quantified a problem that could occur, you’re then able to plan how to avoid it or mitigate the impact should it happen.

What is compliance?

Compliance is about ensuring your business abides by the rules, guidelines, laws and other relevant practices.

The weight of regulation, particularly in financial services, increases all the time. It seems that every time something goes wrong, a new set of rules is introduced to protect against it. Rules overlay rules, although from time to time regulators take action to rationalise them.

Areas, where firms must be aware of their compliance obligations, include:

• National and local laws.
• Oversight of regulatory bodies.
• National and international standards.

Compliance touches every aspect of business life and business processes, from how data is held using information technology, through health and safety, to how employees are treated for performance assessment and remuneration purposes.  

The benefits of GRC for organisations

Implementation of a thorough GRC strategy helps build resilience in your organisation. The measure of that resilience is how well the company stands up to the issues and challenges that will inevitably arise. Something will go wrong and that’s the point at which your GRC strategy is put to the test.

A well-designed and integrated approach to GRC can deliver huge improvements to communication both inside and outside your business. This helps to break down barriers between teams and departments. Without strategic guidance, businesses typically become siloed, with limited communication across different arms of the operation. The flow of information demanded by a comprehensive GRC solution assists with breaking down these walls.

A third, and very significant, benefit of robust GRC is improved decision-making. Because it pulls together so much information from across the business, it raises the visibility of both issues and opportunities. If it’s well managed, this information will flow into the decision-making processes at various levels across your company. The outcome is faster, higher quality decisions that help improve overall business performance.

Integrated GRC from 1RS

Enterprise-wide GRC management isn’t easy without a strategy and a system. Many businesses still rely on independent documents, often Excel spreadsheets, that are manually updated when required.

The result is inconsistency, out-of-date information and a huge input of resources when it comes to reporting.

Having worked in the GRC space for years, our team have developed a comprehensive digital solution to the problem of managing all this information, and keeping up to date with regulatory changes.

Using the latest technologies, we have automated many of the GRC processes. Our solution captures all data required in a way that keeps it consistent and current.

The result is a ‘single version of the truth’ that can be relied upon by everyone, from strategic leadership to other managers across the organisation.

Innovation and automation also help to make our tools accessible even to small businesses and startups.

We’re making GRC simple, allowing businesses to spend more time on the operations that drive profit.

To learn more about how this could work for your business, get in touch today.