What is GRC?
The Complete Guide to Governance, Risk, and Compliance
In this guide
If you’re here, you might be learning about governance, risk, and compliance (GRC) for the first time or wondering the best way your organization can use GRC to address an increasingly complex and ever-changing business climate.
This introductory guide will cover everything from the definition of GRC and its history to frameworks and technology. We hope you walk away with the information you’re looking for to either jump-start or mature your organization’s GRC program. Let’s get to it and answer the question, "what is GRC?"
All in all, GRC is about empowering stakeholders to make informed decisions. This strategic focus on maturing GRC and integrating all three practices of governance, risk, and compliance has become increasingly important as risks continue to rise, introducing more uncertainty and complexity.
Okay so—what is GRC?
Governance, risk, and compliance is a structured approach that helps organizations meet industry and government regulations, manage risks, and achieve business objectives. A comprehensive GRC strategy involves a combination of people, processes, and technology. Ultimately, effective GRC management helps organizations break down silos, operate more efficiently, and enable leaders to take action faster.
Let’s dive into the goal of each GRC practice area:
Governance
Risk
Compliance
Benefits of GRC implementation
When done correctly, organizations see several benefits from GRC implementation, including reduced costs, less duplicate work, greater visibility into risks, increased data accuracy and consistency, and more alignment across stakeholders.
Compliance vs. governance
While we discussed the goal of each GRC practice area, it can still be difficult to differentiate between the three. When it comes to compliance and governance, there are certainly commonalities, but the major difference is that governance has a broader, long-term outlook.
Governance focuses on the long-term strategy to drive business results and protect stakeholders while compliance is focused on keeping up with existing and new regulations, which could include meeting annual or more frequent requirements.
Think of governance as the overarching way a company approaches risk, ethics, and business practices. Compliance, on the other hand, is the day-to-day, practical approach companies take to meet regulatory requirements and applicable laws.
Compliance vs. risk management
And what about compliance vs. risk management? While also closely aligned, there are notable differences. Risk management focuses on identifying, assessing, and mitigating any risk that poses a threat to an organization, which could include risks stemming from non-compliance with laws and regulations. Compliance, and any compliance process, focuses on meeting established regulations, which can help organizations avoid certain risks.
Though compliance is sometimes thought of as a checklist of items to meet requirements, audit and risk professionals can add greater value to their organizations by tackling compliance from a strategic perspective—they can identify opportunities to reduce the effort and cost to comply or provide insights that can streamline operations and improve profitability. When teams use their creative and problem-solving skills, they can add value and help their organizations navigate regulatory compliance in a complex landscape.
What is a GRC framework?
Now that we’ve covered the definition of GRC and how it can help organizations drive better business results, let’s discuss what a GRC framework is and how your organization can use one.
A GRC framework is a model to manage governance, risk, and compliance processes at an organization. A framework can help guide organizations in establishing the proper policies and procedures to minimize potential risk and ultimately meet goals. A few of the frameworks commonly used in GRC are COSO, COBIT, and ISO 27001.
GRC teams and skills
GRC tools and technology
The Total Economic Impact™ Of Workiva
Workiva commissioned Forrester Consulting to conduct a Total Economic Impact™ study on the Workiva platform for audit and risk management, ESG, and financial reporting.
Here are just a few of the results for a composite organization:
- 47% of controls eliminated by Year 3
- 60% reduction in testing time per control
- $2.9 million saved in compliance testing and reporting over 3 years
- 95% reduction in time spent responding to clarifying questions per internal or external audit
Why does GRC matter for ESG?
It’s likely your organization has started thinking about ESG reporting or already has an ESG program in place. Given evolving regulations across the globe, including the Corporate Sustainability Reporting Directive (CSRD), many organizations are looking to streamline assurance over financial and non-financial reporting.
To help organizations meet ESG goals, one of the most critical things to think about is governance over ESG. This might be a bit confusing since there is already a “G” in ESG, but this is centered around establishing program governance over your ESG strategy. For example, here are some questions you should consider:
- Who should be involved with your ESG program?
- How will your organization define policies?
- What will your process look like to set ESG targets?
- Do you have the right roles, responsibilities, organizational structure, and processes in place to support ESG and manage associated risks?
- How will stakeholders communicate regularly to measure progress toward ESG goals?
- If your organization needs to comply with the CSRD, how will you prepare for the new requirements?
In addition, internal audit teams will play a crucial role in ensuring the integrity of their organization’s ESG reporting program. ESG encompasses a broad group of risks, making it challenging to pinpoint where to start. Here are a few areas for teams to consider as you kick off your ESG internal audit initiative:
- Familiarize yourself with the ESG risks that are most prevalent in your industry
- Understand your organization’s current ESG posture
- Include ESG risks in your entity-wide internal audit risk assessment
- Audit the completeness and accuracy of the metrics and the underlying data in any existing ESG report your organization creates
- Determine what regulations or standards apply to your organization
- Apply practices developed from internal controls over financial reporting (ICFR) to internal controls over sustainability reporting (ICSR)
- Use COSO's guidance and ICIF-2013 framework, which is applicable to ICSR, as a starting point to design, implement, and maintain a system of controls
The intersection of ESG and GRC
If you want more information on ESG and GRC, OCEG developed an infographic series to help organizations understand how they can apply the GRC Capability Model™* to integrate ESG risks into overall risk management plans. Download the intersection of ESG and GRC infographics to learn how you can take an ESG-minded approach to each of the four components of the GRC Capability Model.
In conclusion
As you can see, there are a variety of ways you can tackle your GRC strategy and increase your organization's GRC maturity. It all comes down to what’s most important to your business. Having flexibility to adapt and make changes is crucial to effective GRC management.
The GRC platform that puts flexibility first.
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