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 jeop­ar­dize 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 or­ga­ni­za­tion­al 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 optimize 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 organized 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 favorable as it could be more straight­for­ward and un­am­bigu­ous.

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