Basics of Governance, Risk and Compliance | Rajeev Sareen
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The combined word governance, risk, and compliance are made up of three constituent parts. Here the first part governance implies corporate governance signifying administration of corporate affairs through the board of directors that direct and control the entire company and convey the management information among organisational hierarchy to run the company smoothly achieving the business objectives. The governance structure of a company includes processes, policies, controls, values, mission, vision, and culture.
The second part risk implies risk management that ensures business objectives does not impede by unexpected risks including legal, financial, technological, or information security risks that might crop up while running the business. The effect of uncertainty on business objectives or risk can be taken care through coordinated activities of risk management that help a company in realising opportunities while controlling adverse events.
Moreover, the last part compliance signifies compliance management that intends to align the company per stated standards, which can be governmental laws and policies, contractual agreements, regulatory and industry mandates, and company’s internal policies and procedures. Compliance management can facilitate adherence or demonstrate adherence to compliance requirements through coordinated activities, thereby ensuring that a company stays within the external and internal mandated limits. Governance, risk, and compliance together form an indispensable element in providing strategic solutions, information security, unified monitoring, and audit solutions in a globally acceptable manner.
The importance of the three terms namely governance, risk, and compliance can be understood individually. Corporate governance is necessary to manage the business, augment access to capital, improve performance, avoid the occurrence of a disaster, increase company’s accountability and responsibility, and eliminate problems that may occur due to prejudice. Risk management is essential to identify and assess the cumulative risks that threaten the existence of a company and implement a strategy to manage those risks. It thus forms an integral part of the company’s strategic management and helps an organisation to methodically address the risk associated with each activity with the aim of acquiring sustained benefit.
Governance, risk, and compliance shortened as GRC can be implemented quickly and rigorously using automated application software, which can identify, analyse, notify, and report the security controls, risks, and compliance requirements in real-time. Governance, risk, and compliance is the expansion of the widely-used acronym GRC that has formed one of the essential element in providing strategic solutions to organisations in managing roles and processes to decrease business risks, structured evaluation and monitoring of regulatory and business risks, and adherence to external regulations and internal policies. A formal definition of GRC is as follows: “GRC is an integrated, holistic approach to organization-wide governance, risk, and compliance ensuring that an organization acts ethically correct and in accordance with its internal policies, risk appetite, and external regulations through the alignment of strategy, processes, technology, and people, thereby improving efficiency and effectiveness.
In true sense, Governance, Risk and Compliance (GRC) has become critically vital for the organisations to follow due to a lot of insecurities and lack of sufficient security awareness training programs. On the contrary, many organisations are functioning with many busy “teenagers” those who are being influenced by their peer workgroups and need to be educated in the light of costs involved in noncompliance to the security controls. Therefore, organisations are required to adopt a control framework to handle various security issues.
The Compliance Dilemma
Compliance has become a widespread business concern, partly because of an ever-increasing number of regulations that require organisations to be watchful about maintaining a complete understanding of their regulatory compliance requirements. Compliance focuses on management of compliance that intends to align the company per specified standards, which can be governmental policies and laws, regulatory and industry mandates, contractual agreements, and company’s internal policies and procedures. Compliance management can simplify adherence or demonstrate adherence to compliance requirements through harmonised activities, thereby safeguarding that a company stays within the external and internal mandated limits. Therefore, effective compliance management is essential to maintain the security posture of the organisation.
Indeed, a sustainable and practical compliance management system follows several goals and objectives. The goals and objectives of the compliance violation can easily have judged on the basis of delegated compliance responsibilities. The degree of compliance management depends on its effective and efficient implementation and delegation of duties. If it is not appropriately implemented for the sake of the organisation or it is not delegated with a high degree of responsibility, then the organisation is bound to failure and unable to address the threats and vulnerabilities. Organisations face plenty of problems due to the misutilization of information asset.
There is a classic attempt to transfer compliance responsibility to compliance areas or even to a single Chief Compliance Officer. However, studies show, and the ongoing compliance cases suggest that management’s attitude towards compliance is often not as expected or that there is a lack of serious implementation. It makes little sense, however, to imply that managers tend to an attitude to breaking the rules as a principal. It is more enlightening to look at things from different angles.
