Request a demo
January 21, 2022

Governance Risk and Compliance (GRC): A Complete Guide

Mike Puterbaugh Mike Puterbaugh

What Is Governance Risk and Compliance?

Organizations employ a governance, risk, and compliance (GRC) strategy to handle interdependencies between corporate governance policies, regulatory compliance, and enterprise risk management programs.

GRC strategies aim to help organizations better coordinate processes, technologies, and people and ensure they act ethically. A well-coordinated GRC program can address many of the challenges of the traditional, siloed approach to risk and compliance: these include miscommunications, interdepartmental tension, and inefficiencies.

GRC offers advantages for organizations of any size. However, it is especially valuable for large enterprises aiming to effectively implement cross-organizational governance, risk, and compliance programs.

In this article:

  • GRC Concepts
    • Governance
    • Risk Management
    • Compliance
  • What Are the Challenges of GRC?
  • What Is the GRC Capability Model?
  • GRC Implementation Roadmap
    • Establish GRC Requirements
    • Choose the Right GRC Technology
    • Prepare Software for Integration
    • Keep Track of GRC Progress
  • GRC Software and Tools
  • GRC Cloud vs On-Premises
    • GRC On-Premises
    • Cloud GRC
  • GRC Automation with PathLock

GRC Concepts

Here is an outline of the three core concepts of GRC:

Governance

Governance refers to a set of policies, rules, and processes that organizations implement to ensure their activities align with their business goals. It covers resource management, ethics, management, and accountability.

A successful governance strategy balances various stakeholder interests, maintains control of resources, and empowers employees to work correctly. It provides accountability for all behaviors and outcomes, managing worker conduct by encouraging a corporate citizenship approach and enforcing ethical business practices. Good governance involves clearly defining jobs and responsibilities and evaluating employees according to their results.

Risk Management

Risk management refers to identifying, evaluating, and managing various risks, including legal, financial, and security-related risks. Organizations must employ resources to minimize risks by monitoring and controlling the impact of security events.

A risk management system encompasses personnel, technologies, and processes that establish and enforce risk mitigation objectives. Effective risk management requires keeping stakeholders informed and incorporating legal, contractual, and business requirements.

A risk management program should include the identification of security threats like unsafe practices and software vulnerabilities. The program can then assess the risks and implement plans to mitigate them and ensure business continuity.

Compliance

Compliance refers to an organization’s adherence to government regulations, industry standards, and internal policies. Failure to comply with these obligations can impact business operations and result in legal and financial penalties.

A successful compliance strategy integrates external and internal compliance requirements. External compliance refers to industry standards and laws (such as Sarbanes-Oxley) that apply to an organization, while internal compliance refers to the organization’s corporate policies and internal controls. Organizations should regularly update and track compliance policies and provide adequate training for employees.

What Are the Challenges of GRC?

Here are main difficulties organizations can encounter when employing a GRC strategy:

  • Ineffective GRC implementation can make data silos worse—integration and cross-enterprise coordination is an essential part of a successful GRC strategy. If an organization doesn’t have a comprehensive framework, its departments could work towards their individual aims without consideration of the whole. The GRC strategy should provide a unified view into data insights, permitting organizations to make well-informed decisions.
  • Manual processes can cause wasted time and human error—some GRC processes are manual. A lack of automation can lead to inefficiencies, human error, and difficulty locating required documentation. Manual processes can also limit the organization’s visibility into data monitoring and collection.
  • An organization’s work culture can be a barrier—after an organization defines a GRC framework, there is a need to constantly update and maintain the framework. Mitigating risk and staying compliant is an ongoing task that demands effort from all stakeholders. It is critical to ensure the organization is committed and supports the GRC strategy.
  • The cloud changes everything—organizations are readily adopting cloud computing, resulting in major changes to organizational structures, networks, attack surfaces, and access control systems. GRC must adapt to this new paradigm.

Related content: Read our guide to cloud governance

What Is the GRC Capability Model?

OCEG created an open-source GRC Capability Model that integrates risk, governance, audit, ethics/culture, IT, and compliance. Organizations can apply this holistic approach to different compliance subject areas and situations. Organizations can also use it with specific functional frameworks, including COSO, NIST, ISO, and ISACA.

Over 100 specialists guided the creation of the GRC Capability Model. It was based on a study of over 250 large organizations with documented best practices.

Here are the four components of the GRC Capability Model:

  • Learn about organization culture and stakeholders to inform strategy and action—this step involves learning about core influencing factors in the internal and external business environments to define purposeful objectives.
  • Align actions with strategy and strategy with objectives—work to ensure the decision-making process addresses opportunities, values, requirements, and threats.
  • Perform actions that encourage and reward desirable behaviors—discover events as soon as possible and dissuade and remediate undesirable behaviors.
  • Evaluate strategy and actions—on an ongoing basis, evaluate objectives and update them to improve organizational processes.

When talking about compliance efforts and risk management with board members, executives, and others, organizations can use the GRC Capability Model as a common language.

GRC Implementation Roadmap

Organizations can follow these steps to implement their GRC strategy:

Establish GRC Requirements

The key to successful GRC implementation is understanding and prioritizing the organization’s exposure, and creating a roadmap for continual improvement. Most companies have likely done some of this work already, so the next step is to assess the overall enterprise and identify existing risk management and compliance activities. An organization can consult operating executives and management to gain a clear understanding of current GRC performance.

Management should compare existing policies and practices with the organization’s GRC objectives, considering the business areas most sensitive to compliance issues and security risks. This allows the organization to establish long-term goals and incorporate any industry or regulatory requirements that apply.

Choose the Right GRC Technology

Finding the right GRC software can be time-consuming and expensive, but it is key to managing risk and implementing strong GRC. First, the organization should identify which technologies can improve its existing business model and how. Organizations should identify the tasks they can automate and any security or compliance gaps they need to address.

Ideally, there should be a single solution for all the company’s GRC requirements to avoid the complexity of managing different technologies with different data formats.

Prepare Software for Integration

After choosing a GRC solution, the organization needs to integrate it with its current policies and processes. GRC software providers typically offer consultations and demos to test the product. An account manager can provide guidance in using the software and implementing it in the organization.

Next, management should assign internal roles and responsibilities for employees in the organization to implement GRC, defining the specific steps that each employee must take to implement and use the software.

Keep Track of GRC Progress

No GRC product or implementation roadmap is flawless, especially at the start. Organizations must continuously monitor the progress of their GRC implementation to evaluate performance based on metrics they specify. They should regularly assess risks, reevaluate existing controls, and update their policies to keep up with changing regulations and industry standards.

Related content: Read our guide to GRC audits (coming soon)

GRC Software and Tools

Governance risk and compliance solutions typically combine technologies to manage core GRC functions via a unified platform. Organizations can use a GRC platform to implement a systematic GRC management approach to monitor compliance and enforce policies.

An effective GRC solution lets administrators reduce management complexity, keep track of risks, and minimize costs by implementing a single, comprehensive installation. GRC software should provide risk examination and assessment tools to identify risks affecting business processes and internal controls. The software should identify the tools and processes controlling these risks and integrate them with the organization’s existing enterprise management software.

GRC tools can also provide an organized compliance management approach to help organizations ensure compliance with laws and regulations requirements, including SOX and GDPR. GRC platforms often provide features that help manage audits and documentation and operational, IT, and third-party risks.

Given the wide range of tools available in the GRC market, it may be difficult to choose the right solution. When selecting a GRC tool, organizations should consider the type of tool they require:

  • Integrated GRC software – provide an enterprise-wide GRC.
  • Targeted GRC tools – focus on specific areas like IT, finance, or business risk.
  • Point-solution tools – target a single aspect of GRC.

The GRC market has seen an increase in cloud-based tools, although there are also freeware and on-site products. GRC providers have been incorporating AI-based and automation capabilities (i.e., natural language processing, machine learning) to make their tools easier to use and help enterprises stay on top of the evolving risk landscape.

Related content: Read our guide to GRC Software

Hosting GRC Solutions: On-Premises vs. Cloud-Based

Let’s review the advantages and disadvantages of GRC solutions on-premises compared to cloud based solutions.

GRC On-Premises

The GRC approach is the foundation behind a company’s compliance and risk management team. So it’s essential that the technology doesn’t have any interruptions of service or security lapses and can be updated when required.

When a company hosts a GRC platform on-premises, it needs to use in-house IT infrastructure and servers to run the software. While this may have benefits related to the security of the data, it has other drawbacks related to the uptime and availability of the software.

Maintenance and storage

The organization is entirely responsible for server uptime, application configuration, and updates. These tasks require technicians who know how to manage updates and maintain the servers. There is also a limit to the load each server can handle, so it may be necessary to add more servers if the GRC program expands in scope.

Deployment of an on-premise GRC solution, including both servers and clients installed on user workstations, can be time consuming.

Costs

The organization needs to purchase a software license instead of paying a monthly fee for usage. The license cost could be high up-front. Also, the customer is responsible for the ongoing cost of energy consumption and server upkeep.

In the long run, licensing fees will typically cost less than a monthly SaaS subscription. However, there are additional fees related to hosting software on-premise, including maintenance, hosting, and troubleshooting.

Security

Organizations often believe that on-premises software is more protected than cloud-based software. However, this isn’t always true. Staff is responsible for completing software updates on-premises, meaning security patches are not automatically installed. Also, cloud data centers have cutting edge security which is usually not matched by an organization’s data center.

Cloud GRC

Certain organizations could need on-premises software because of compliance requirements. However, many organizations can now freely move to the cloud. Many cloud-based software vendors have worked to ensure their solutions are stable and secure enough for the use of governments and large enterprises.

When moving to a cloud environment, organizations rely on the vendor’s servers to host their applications. These applications are accessible from any location or device.

Maintenance and storage

Given that the vendor retains responsibility for hosting the application, it is possible to achieve deployment within hours or days. Furthermore, there is no need for physical installation on a server, or procurement of required hardware. The vendor also manages updates, which should happen automatically. Because each organization utilizes server space alongside other customers, they can scale up or down readily.

Costs

Instead of buying a license from the start, organizations generally pay for a SaaS solution in monthly payments. Vendors calculate pricing based on the number of users the organization has and the level of service required. There are no upfront capital costs, and pricing is generally fixed for a timeframe of 12-24 months. The customer can easily initiate upgrades and add extra services or users without making manual updates to the application.

Security

Security for a cloud-based GRC tool varies according to the provider. However, many software has higher security measures than on-premises tools. The vendor instantly installs security patches across all user applications. This way, there is no need to rely on in-house employees to perform updates. Organizations should select a platform that encrypts its information and has the required compliance certifications.

GRC Automation with PathLock

GRC can be a hassle, with seemingly endless amounts of manual work piling up by the day. Organizations typically have 200+ key internal controls to prove each type of compliance, and each control takes 40 or more hours to test. Furthermore, testing on these controls may only be done once a year. This is an error prone process that only looks at 3-5% of the activity in a given enterprise.

Pathlock shifts organizations towards a continuous compliance approach, which proactively monitors controls and reports on violations of those controls in real-time. Organizations can have complete visibility to their risk and compliance status at all times, so they are always prepared for the next audit.

Complete Visibility

Pathlock radiates GRC information to the most critical tools in your landscape for real-time status on your key controls. Pathlock integrates with ServiceNow, MetricStream, Archer, SailPoint, Okta, SAP GRC, and more.

Comprehensive Rulebook

Pathlock’s catalog of over 500+ rules, Pathlock can provide out-of-the-box coverage for controls related to SOX, GDPR, CCPA, HIPAA, NIST, and other leading compliance frameworks.

Real-time Risk Mitigation

Pathlock allows user to quickly investigate and respond to potential risky transactions by reviewing access, deprovisioning users, forcing 2FA, or even allowing Pathlock to respond intelligently in real-time, terminating suspicious sessions and blocking transactions in real time

Out-of-the-Box Integrations

Pathlock’s out of-the-box integrations have your key business applications covered. Monitor and enforce controls across SAP, Oracle, Salesforce, Workday, NetSuite, Dynamics365, and more.

Lateral SOD Correlation

All entitlements and roles are correlated with a user’s transactional behavior, consolidating activities and showing cross application SOD’s between financially relevant applications

Continuous Control Monitoring

Pathlock identifies the largest risks by monitoring 100% of financial transactions from applications like SAP in real-time, surfacing violations for remediation and investigation

Table of contents