What exactly is Gov­ernance, Risk & Com­pli­ance (GRC)?

In­ter­na­tion­ally active large companies have a complex structure, and need to work (if they are listed) not only in their own economic interest but also in the interests of their share­hold­ers. This requires re­spons­ible man­age­ment and easy co­oper­a­tion between large de­part­ments and various business locations. GRC (Gov­ernance, Risk & Com­pli­ance) exists to keep all these aspects in mind and to manage the company re­spons­ibly.

The GRC model helps to maintain an overview of complex business processes and to manage them con­scien­tiously so that the company can both be eco­nom­ic­ally suc­cess­ful and operate in com­pli­ance with all laws and reg­u­la­tions.

Corporate gov­ernance, risk man­age­ment and com­pli­ance are three aspects of corporate man­age­ment that often look at the same areas and processes from different per­spect­ives and can therefore hardly be dis­tin­guished from each other.

In order to un­der­stand more precisely what GRC's ob­ject­ives are and what methods are available, it is helpful to look at the three subject areas in­de­pend­ent of one another, to see what their sim­il­ar­it­ies and dif­fer­ences are, as well as their focus points.

The area of Corporate Gov­ernance refers to re­spons­ible lead­er­ship for the benefit of the people as­so­ci­ated with the business, and the various external interest groups (e.g. share­hold­ers). Special emphasis is placed on the con­sid­er­a­tion of mandatory internal reg­u­la­tions and com­pli­ance with national and in­ter­na­tion­al le­gis­la­tion.

Trans­par­ency, ef­fi­ciency and trust are the corner­stones of good lead­er­ship, and for this reason the reg­u­la­tions for corporate gov­ernance in­cor­por­ate this as well. Good  corporate gov­ernance therefore provides the framework for every single man­age­ment decision, re­gard­less of whether these decisions relate to internal or external processes.

The aim of risk man­age­ment is not a small task. Risk man­age­ment aims to identify any risks that could jeop­ard­ise corporate goals being achieved suc­cess­fully, and to get rid of, or at least limit issues which could stand in the way of business as usual by taking ap­pro­pri­ate measures at an early stage.

These can be internal risks that arise, for example, due to com­mu­nic­a­tion errors, lack of employee com­pet­ence or rivalries between de­part­ments or locations. However, risk man­age­ment also deals with possible external risks that may be caused by changes in the market (falling demand, in­creas­ing com­pet­i­tion, economic crises).

The aim is to ensure the continued existence and economic success of the company in the long term.

Com­pli­ance deals with laws and reg­u­la­tions that regulate the flow of all business processes. For this reason, it is difficult to dis­tin­guish the two terms from corporate gov­ernance and they are often used syn­onym­ously. However, there is a reason why the two terms are listed sep­ar­ately in GRC.

In contrast to gov­ernance, however, com­pli­ance is not only about the re­la­tion­ship between companies and interest groups or between corporate man­age­ment and employees, but about the entire ethical and moral canon of values on which a company bases its activ­it­ies.

Although com­pli­ance with legal re­quire­ments and the avoidance of criminal pro­ceed­ings are also the primary concerns, corporate social re­spons­ib­il­ity also plays an in­creas­ingly important role. This concept aims to ensure that companies assume re­spons­ib­il­ity for society and the en­vir­on­ment beyond the minimum legal re­quire­ments.

Within a business, all de­part­ments and man­age­ment levels are obliged to act in ac­cord­ance with the prin­ciples of gov­ernance, risk and com­pli­ance. Nev­er­the­less, above a certain company size there is a risk that de­part­ments may pursue their own interests or make mistakes due to mis­un­der­stand­ings in com­mu­nic­a­tion. To check this and correct it if necessary, an Internal Audit may provide a good solution. An internal audit checks all company processes for their optimal and rule-compliant course; this also includes the GRC measures them­selves. Ideally, the employees entrusted with internal auditing report ex­clus­ively to the man­age­ment, so that they can report neutrally and in­de­pend­ently of processes.

When it comes to business, there is rarely a ‘one size fits all’ option. Using tools to help you is usually only necessary when the task at hand is something that needs a lot of or­gan­isa­tion­al input, or if it would take a lot longer without one. A lot of busi­nesses will use an in­teg­rated GRC approach to stream­line their own business, and optimise its function. Ad­di­tion­ally, using lots of different systems can sometimes cause confusion rather than help it, so using an in­teg­rated GRC process approach can whittle down un­ne­ces­sary frills, and help you focus on the task at hand. Using a single system across your company, rather than different styles in different de­part­ments, means that you might find that your business is better organised because you have a single process and therefore reference point for your business. It also means that you probably will cut down on the software you use, because you will use one solution. The in­teg­rat­ive, single process approach may be fa­vour­able as it could be more straight­for­ward and un­am­bigu­ous.

Please note the legal dis­claim­er relating to this article.