GRC, as an acronym, denotes governance, risk, and compliance — but the full story of GRC is so much more than those three words.
The acronym GRC was created by OCEG (originally called the "Open Compliance and Ethics Group") as a shorthand reference to the critical capabilities that must work together to achieve Principled Performance — the capabilities that integrate the governance, management, and assurance of performance, risk, and compliance activities.
This includes work done by departments in governance, strategy, risk, compliance, security, audit, finance, legal, IT, and HR. But it also includes operators in lines of business, the executive suite, and the board itself.
While the acronym was used as early as 2003, the first peer-reviewed academic paper on the topic was published in 2007 by OCEG founder Scott Mitchell in the International Journal of Disclosure and Governance.
This groundbreaking paper influenced the related software and services industry and began open-source GRC standards.
What is Governance Risk and Compliance (GRC)?
Nothing New. Totally Revolutionary.
It is important to remember that organizations have been governed, and risk and compliance have been managed for a long time — in this way, GRC is nothing new.
However, many had not approached these activities in a mature way nor supported each other to enhance the reliability of achieving organizational objectives.
In a forward-thinking organization, GRC is viewed as an integrated collection of all capabilities necessary to support Principled Performance.
GRC doesn't burden the business; it supports and improves it.
Organizations must address today’s challenging business climate. Even small businesses, nonprofits, and government agencies are facing issues that only large companies had to face in the past.
Think of how many of these factors you have to deal with:
Stakeholders demand high performance along with high levels of transparency
Regulations and enforcement are ever-changing and unpredictable
Exponential growth of third-party relationships and risk is a management challenge
The costs of addressing risks and requirements are spinning out of control
The harsh (and scary) impact when threats and opportunities are not identified
GRC Done Wrong
Our GRC Maturity Survey finds that disjointed GRC activities cause a number of problems.
To address these drivers, organizations develop departments and programs such as: performance management; risk management; compliance; corporate social responsibility; and so on.
Unfortunately, these departments and programs are often siloed, ineffective and yield troubling drawbacks:
Lack of visibility into risks
Inability to address third party risks
Difficulty measuring risk-adjusted performance
Too many negative surprises
When these activities are siloed, it is highly likely that counter-productive objectives are established, sub-optimal strategies are selected, and performance isn't optimized.
GRC Done Right
Integrating GRC capabilities does not mean creating a mega-department of GRC and doing away with decentralized management. Nor does it call for the use of only one GRC software system to manage it all.
Rather, it is about establishing an approach that ensures the right people get the right information at the right times; that the right objectives are established; and that the right actions and controls are put in place to address uncertainty and act with integrity.
When GRC is done right, the benefits accrue. Organizations that integrate GRC processes and technology across all or many silos have:
Reduced duplication of activities
Reduced impact on operations
Achieved greater information quality
Achieved greater ability to gather information quickly and efficiently
Achieved greater ability to repeat processes in a consistent manner
With the help of a panel of 100+ experts, OCEG studied 250+ organizations to document best practices in the GRC Capability Model (commonly called the OCEG Red Book).
Unified vocabulary across disciplines
Defined common components and elements
Defined common information requirements
Standardized practices for things like policies and training
Identified communication for everyone involved; including strategic decision-makers.
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