At its basic level, corporate governance is the set of rules, policies, and processes that ensures corporate activities are aligned to support business goals. It encompasses ethics, resource management, accountability, and management controls.

Governance also ensures top management can direct and influence what is happening at all levels of the corporation and that business units are aligned with customers’ needs and overall corporate goals.

Effective governance creates an environment where employees feel empowered, and behaviors and resources are controlled and well-coordinated. One goal of governance is to balance the interests of the many corporate stakeholders, including top management, employees, suppliers, and investors.

To maintain this balance, governance can help ensure, for example, that contracts between the company’s internal and external stakeholders are in place for the fair distribution of responsibilities, rights, and rewards. This also includes procedures for reconciling conflicting interests among stakeholders and processes ensuring that supervision, control, and data flows function as a system of checks and balances. 

Governance provides control over facilities and infrastructures, such as data centers, as well as oversight of applications at the portfolio level.

Above all, governance is implemented to provide accountability for conduct and results. Conduct can be managed through enforcement of ethical business practices and corporate citizenship rules. Good governance defines jobs based on lines of business (LOB) and evaluates employees based on results achieved rather than based on responsibilities.

Risk management is the process of identifying, assessing, and controlling financial, legal, strategic, and security risks to an organization. To reduce risk, an organization needs to apply resources to minimize, monitor and control the impact of negative events while maximizing positive events.

At the broadest level, risk management is a system of people, processes, and technology that enables an organization to establish objectives in line with values and risks.

The goal of enterprise risk management initiatives is to achieve corporate objectives while minimizing the risk profile and securing value. Part of that task is prioritizing stakeholder expectations and delivering reliable information to those stakeholders.

A risk management program also applies to identifying cybersecurity and information security threats and risks—such as software vulnerabilities and poor employee password practices—and implementing plans to reduce IT risk. 

The program should assess system performance and effectiveness, assess legacy technology, identify operational and technology failures that could impact the core business, and monitor infrastructure risk and potential failure of networks and computing resources.

A risk assessment program must meet legal, contractual, internal, social, and ethical goals, as well as monitor new technology-related regulations. By focusing attention on risk and committing the necessary resources to control and mitigate risk, a business will protect itself from uncertainty, reduce costs, and increase the likelihood of business continuity and success.

Compliance involves adhering to rules, policies, standards, and laws determined by industries and/or government agencies. Non-compliance could cost an organization in terms of poor performance, costly mistakes, fines, penalties and lawsuits.

Regulatory compliance covers external laws, regulations, and industry standards that apply to the company. Corporate or internal compliance is concerned with rules, regulations, and internal controls set by an individual company. It is important for the internal compliance management program to be fully up-to-date with external compliance requirements. The integrated compliance program should be based on a process of creating, updating, distributing, and tracking compliance policies and training employees on those policies.

To create an effective compliance program, organizations need to understand which areas pose the greatest risk and focus resources on those areas. Then, policies should be developed, implemented and communicated to employees so they may address those areas of risk. Guidance should be developed to make it easier for employees and vendors to follow compliance policies.

A GRC framework helps organizations establish policies and practices to minimize compliance risk. IT and security GRC solutions are focused on leveraging timely information on data, infrastructures, and virtual, mobile, and cloud applications.

Additionally, an organization’s GRC system should improve efficiencies, reduce risks, and increase performance and return on investment (ROI). Businesses will develop and use a GRC framework for leadership, the organization, and the operation of its IT areas to ensure that they support and enable the organization's strategic objectives. This includes correlating information in the context of business processes, policies, and controls, as well as activities carried out by IT, finance, HR teams, and C-suite executives.

Efficiency

Risk assessment, compliance management, data compliance, internal audits, and other GRC activities can be time-consuming and resource-intensive when implemented without a GRC software platform. A GRC capability can help companies break down silos in processes and data, remove duplication of effort, comply with regulations, and monitor, measure, and predict losses and cyber risk events.

It also can help companies manage the lifecycle of financial and artificial intelligence (AI)-driven models and improve IT compliance and controls. Companies can even measure the impact of business and regulatory requirements to policy framework and support automated measurement and IT controls through integration with third-party products.

Risk assessment and reduction

GRC enables companies to establish, automate, and manage risk assessments and risk reduction. And data from a GRC platform enables companies to make more informed decisions and then allocate resources to mitigate risks. Enterprise risk management (ERM) is a subset of GRC that focuses on the risk factors.

Audits for regulations such as the Sarbanes-Oxley Act are the milestones by which GRC operates, and departments need to maintain and protect sensitive details—including invoices, human resources records, and financial reports—to be prepared for those audits.

An effective GRC program can be particularly helpful for companies that have already experienced a significant compliance or risk event or failure. Additionally, businesses that do not have confidence—in their compliance or internal and external financial risk reporting and visibility, or third-party risk management—can look to a GRC model to help fix and monitor redundant control sets and ineffective frameworks to avoid repeatable risk concerns. 

Strategic support for performance and ROI

At times, companies may find it difficult to allocate resources, address conflicts of interest, and measure success. This can be the result of grappling with the increasing costs of addressing risks and requirements, while facing the challenge of managing the exponential growth of third-party relationships and risk.

However, companies can set and monitor clear objectives with metrics generated from a GRC platform. This will help increase their performance and improve their ROI.

A successful GRC strategy requires smooth coordination of people, planning, processes and technology. The efforts should be ongoing: risks and regulations are continually changing and organizations need to keep up and stay ahead. The steps to success include the following:

Establish clear goals and build a GRC framework: Determining your greatest risks and challenges will determine the structure of your framework. Does the organization need to focus on government regulations or data privacy and security? A complete framework should help an organization make informed business decisions, minimize risks and help ensure sustainability.

Identify current operational shortfalls: Organizations should take a closer look at all problems that have not been fully addressed, such as third parties who have had serious security problems or failure of the organization to keep up with required regulatory reporting. Business operations processes and technology can always be improved and falling behind creates greater risk.

Get buy-in at the top: If senior management is not truly committed, it will be difficult to build momentum around implementation. Managers need to lead a risk-aware corporate culture. The point is to guide the organization to prevent GRC problems, rather than having to reactively address them after they appear.

Get buy-in across the organization: The entire organization must understand the importance of GRC. If employees feel that GRC is someone else’s job, problems can slip through, no matter how comprehensive the framework is.

Set clear roles and responsibilities:  Everyone needs to know where they fit into the cross-functional collaboration. The board of directors and chief executive officer (CEO) are responsible for oversight and approving the GRC framework. The chief risk officer (CRO) provides the daily management oversight. The chief compliance officer (CCO), chief information officer (CIO), chief technology officer (CTO) and chief financial officer (CFO) all play a role, along with the legal department, internal audit, finance, IT and LOB managers. Individual tasks and responsibilities should be clear and everyone should know how to report their GRC concerns.

Use GRC software: Using word processors and spreadsheets alone could condemn an organization to manual tracking. This process can’t ask the right questions or record results in a way that rolls up into clear and complete reports which are needed for legal compliance and the surfacing of deeper insights.

GRC framework testing: Begin with a department or two to be sure that the GRC process and interface are clear, and that all significant issues are being addressed. Correcting any issues when they are smaller will save time and potentially embarrassment, rather than rolling out an organization-wide program on day one.

Operations management should make full use of specialized GRC software to ensure a company is meeting compliance and risk standards. Tools can also help determine and mitigate risks associated with use, ownership, operation, involvement, influence, and adoption of IT within a company. GRC tools should encompass operational risk, policy and compliance, IT governance, and internal auditing. Most GRC software includes the following features:

• Content and document management that helps businesses more accurately create, track, and store digitized content.

• Risk data management and analytics that help to measure, quantify, and predict risk—and determine next steps to reduce it.

• Workflow management to help companies establish, execute, and monitor GRC-related workflows.

• Audit management to organize information and streamline processes for conducting internal audits.

• Aids for business units to coordinate their activities on a single platform.

• Connections to keep up-to-date on regulatory changes.

• Pre-built templates that enable quick set-up and customization.

• A dashboard that provides a central interface where key performance indicators relevant to business processes and objectives can be monitored in real-time.

Additionally, giving responsible units access to security information and event management (SIEM) software can help them spot security threats. Auditing software might also assist in benchmarking the success of GRC efforts and point to possible improvements.

Effective GRC tools create and distribute policies and controls, and map them to regulations and compliance requirements. They help assess whether controls have been deployed, are functioning correctly, and are improving risk assessment and mitigation.