GRC Maturity: Measuring a New Paradigm for Risk and Compliance

Lacking an integrated view of GRC results in business processes, partners, employees and systems that behave like leaves blowing in the wind. Modern business requires a new paradigm for tackling risk and compliance issues across the enterprise. No longer can organizations afford to focus on single risk and compliance issues as unrelated projects; nor can they allow software Band-Aids that are not integrated with the business to masquerade as GRC. A targeted strategy addressing GRC through common processes, information and technology gets to the root of the problem.
With changing and diverse risks bearing down on the organization, there is a clear need to tackle the problem at its root and develop a mature approach to GRC. Instead of treating each risk and compliance issue as an individual problem, organizations need to define a common process, information and technology architecture to manage GRC across the range of issues.
To address these issues, leading organizations have adopted a common framework, information architecture and shared processes to effectively manage risk and compliance, enable risk-aware decision-making, increase efficiencies, and be agile in response to the needs of a dynamic business environment.
The questions organizations must ask:
  • Does the business have the information to make risk-based decisions about the future of the company, when they don’t have a clear view of the risk landscape?
  • Does the business know its risk exposure at the enterprise, business process and control levels, and how they interrelate?
  • How does the business know it is taking and managing risk effectively to achieve optimal operational performance and hit strategic objectives?
  • Can the business accurately gauge the impact of risk-taking on business strategy?
  • Does the business get the information it needs so it can take timely action on risk exposure to avoid or mitigate negative events?
  • Does the business monitor key risk indicators across systems, relationships and processes?
  • Is the business optimally measuring and modeling risk?
  • Is the business meeting its regulatory and other obligations?
A well-defined GRC environment will not only do risk assessment and modeling, but will also deliver definition, communication and training on risk-taking and accountability. The organization must map the interrelationship of risks to controls, policies, enterprise assets (e.g., business process, employees, relationships, physical assets and logical assets), and incidents to business strategy, objectives and corporate performance.
Mature GRC delivers better business outcomes because of stronger integrated information, which will:
  • Lower costs, reduce redundancy and improve efficiencies by rationalizing the information architecture.
  • Deliver consistent and accurate information about the state of risk and compliance initiatives, to assess exposure.
  • Improve decision-making and business performance through increased insight and business intelligence.
Architect integrated GRC systems and processes 
A properly defined GRC architecture is built upon common process, information and technology components that are adaptive to a dynamic business environment and integrate with critical enterprise applications. No longer is risk and compliance about an annual audit; it now involves continuous monitoring in an ever-changing environment. GRC has to be sustainable as an ongoing and integrated part of business processes. A successful and mature GRC strategy has a symbiotic influence on the variety of business stakeholder roles and their common requirements.
Organizations need to be intelligent about what processes and technologies they deploy. The goal is to make an effective decision once, and comply with many regulations, manage a range of risks and maximize value from the convergence of technology, people and process. A sustainable approach to GRC results in an organization looking to the future and mitigating risk in the course of business, as opposed to putting out fires by reacting to risk and control issues as they arise.
Mature GRC enables the organization to understand performance in the context of risk and compliance. It achieves the definition of GRC, which is “a capability that enables an organization to reliably achieve objectives [GOVERNANCE] while addressing uncertainty [RISK MANAGEMENT] and acting with integrity [COMPLIANCE].”  Effective and mature GRC delivers:
  • Holistic awareness of risk: There is defined risk taxonomy across the enterprise that structures and catalogs risk in the context of business and assigns accountability. A consistent process identifies risk and keeps the taxonomy current. Various risk frameworks are harmonized into an enterprise GRC framework.
  • Establishment of culture and policy: Policy must be communicated across the business to establish a risk and compliance culture. Policies are kept current, and reviewed and audited on a regular basis. Risk appetite and tolerance are established and reviewed in the context of the business, and are continuously mapped to business performance and objectives.
  • Risk-intelligent decision-making: This means the business has what it needs to make risk-intelligent business decisions. GRC strategy is integrated with business strategy — it is an integral part of business responsibilities. Risk assessment is done in the context of business change and strategic planning, and structured to complement the business lifecycle to help executives make effective decisions.
  • Accountability of GRC: Accountability and risk ownership are established features of GRC. Every risk, at the enterprise and business-process level, has clearly established owners. Risk is communicated to stakeholders, and the organization’s track record should illustrate successful risk tolerance and management.
  • Multidimensional GRC analysis and planning: The organization needs a range of GRC analytics, correlation and scenario analysis. Various qualitative and quantitative risk analysis techniques are in place and the organization has an understanding of historical loss to feed into analysis. Risk treatment plans — whether acceptance, avoidance, mitigation or transfer — must be working and monitored for progress.
  • Visibility of risk as it relates to performance and strategy: The enterprise views and categorizes risk in the context of corporate objectives, performance and strategy. KRIs are implemented and mapped to key performance indicators (KPIs). Risk indicators are assigned established thresholds and trigger reporting that is relevant to the business and effectively communicated. Risk information adheres to information quality, integrity, relevance and timeliness.

Please share your comments, thoughts, experiences, and reflections on managing GRC in scattered silos.

To understand what GRC is all about, please see these OCEG videos:

This posting is from my most recent paper – GRC Maturity: From Disorganized to Integrated Risk and Performance.

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