I often get asked ‘what is it again that you do?’ or ‘what is governance, risk and compliance?’ and I thought that it was a great opportunity to create a resource to help small business owners, not for profits and social enterprises understand what it is and why it is just as important for them as it is for large corporations.
This article is part one of a two part series, covering off what Governance Risk and Compliance (or GRC) is and how a GRC framework can help your business and how you can get started.
GRC can seem really overwhelming when you first look, like an impossible destination without a clear path. I am here to tell you though, its not rocket science, its doing things the right way with the right intentions and is completely manageable.
What is Governance, Risk and Compliance?
Fist lets break it down, GRC is an integrated approach to (Corporate) Governance, Risk (Management) and Compliance to align activities in these areas to support strategic objectives and effectively mitigate risk while ensuring your organisation maintains legal and regulatory compliance.
Scarily, overlooking GRC can see a smaller organisation unknowingly face risks or threats that may be easily manageable with some forward planning.
Having effective GRC practices is essential for ensuring your business or organisation is sustainable in the long term.
Lets look at each of the GRC components individually to get a better understanding.
Governance refers to the system of rules, practices and processes that govern the management of an organisation. It encompasses the way the board of directors, owners and senior staff make decisions and ensure accountability. Key aspects of governance include defining roles and responsibilities, setting strategic objectives and monitoring performance.
Governance is inward focused and essentially provides the structure and oversight necessary to achieve an organisation’s goals while ensuring ethical behaviour and transparency.
Risk Management is the process of identifying, assessing and mitigating potential risks that could affect an organisation’s ability to achieve its objectives. Risks come in many forms including financial, operational and strategic risks and cybersecurity threats. Effective risk management involves understanding the likelihood and consequences of these risks occurring and implementing strategies to remove the risk or minimise the impact if the risk occurred.
Good risk management ensures an organisation can navigate uncertainty and respond to challenges while safeguarding its interests.
Compliance involves adhering to the laws, regulations, industry standards and internal policies that are relevant to an organisation’s operations. Being non-compliant can result in legal and financial consequences, reputational damage and operational disruptions.
Compliance efforts typically include documenting policies and procedures, monitoring and reporting activities and events to demonstrate adherence with compliance requirements.
Whilst Governance is inwardly focussed, Compliance generally originates from external sources and may be required to maintain a license to operate, such as in the case of a financial services license or in the healthcare sector.
The GRC Framework
The GRC framework brings the three components together to create a cohesive and systematic approach managing governance, risk and compliance within an organisation.
The framework includes documentation of key business processes, policies and controls, incorporating operations and activities carried out in the IT, finance and human resource areas.
How does a GRC framework benefit your business?
There are many benefits to having an intentional approach to manacing GRC for your small business, not for profit or social enterprise, some of which include:
Better Decisions: A clear governance structure helps businesses make informed decisions and set strategic goals.
Risk Mitigation: Smaller organisations are susceptible to risks that may cause financial challenges, disrupt operations and endanger the viability or your business. Implementing GRC practices allow you to proactively identify, assess, and mitigate these risks.
Operational Efficiency: Well designed GRC practices are aligned with the organisation’s goals and values and streamline your operations. This creates efficiency by identifying bottlenecks and reducing redundancy, which in the end saves you time and money.
Compliance with Regulations: Laws and regulations vary by industry and location. Ensuring you comply with these regulations is the right thing to do AND a legal requirement, GRC practices manage this.
Building Trust: GRC practices create a culture of responsibility and accountability within your organisation, which in turn builds trust with customers, partners, and stakeholders.
Now that you understand what GRC is and why it is important, take a look at part two of this series - Practical steps to establish a governance, risk and compliance framework for practical tips to get started.
Need some help?
If you need any help identifying or prioritising your GRC practises, or preparing plans, Elouise from Ellevate Solutions is here to help you with what ever you need.