GRC 4.0 – Agile GRC in a Dynamic & Disrupted Organization

Written by The GRC Pundit

Published on2019-11-19Updated on2020-01-20Discussion2 Comments on GRC 4.0 – Agile GRC in a Dynamic & Disrupted Organization

Governance, risk management, and compliance (GRC) is the capability to reliably achieve objectives [GOVERNANCE] while addressing uncertainty [RISK MANAGEMENT] and act with integrity [COMPLIANCE]. The components of GRC provide the three legs of the stool that offer support and stability to the business and its operations. You take one leg away and the stool is no longer stable. It takes all three elements of governance, risk management and compliance working together to provide stability and balance for the organization.

Every organization is doing GRC, no matter what they call it. The question is, how mature is the organization’s GRC capability? Is it a reactive and disconnected process with departments going in many directions with much redundancy? Or is it mature, integrated and coordinated across the organization that aims to deliver on agility, efficiency and effectiveness of GRC-related processes in the context of organizational strategy, performance and objectives?

Organizations need a mature GRC capability that is supported by strong information and technology architecture that provides an integrated view of objectives, risks, compliance, controls, events and more. However, what confuses organizations is that they think GRC is about technology. That is putting the cart before the horse. GRC is about a capability delivered through a coordinated strategy and processes across the organization. Technology enables these processes to work together and function, but it does not define them. Too many organizations think GRC is something they purchase. GRC is not something you buy; it is something you do: GRC is the actions and activities of governance, risk management, and compliance.

There is technology for GRC and we often call this integrated or enterprise GRC platforms. However, these solutions are not GRC in themselves. Nor is there any single technology solution that does everything GRC. There can and should be a central core GRC platform that connects the fabric of governance, risk management and compliance processes, information and other technologies together across the organization. This architecture is the hub of GRC management and requires that it be able to integrate and connect with a variety of different systems and enterprise applications to deliver on GRC.

In my previous article, From GRC 1.0 to GRC 5.0: A History of Technology for GRC, I outlined the history of technology for GRC. From GRC 1.0 to the present of GRC 4.0 – Agile GRC, to the future of GRC 5.0 – Cognitive GRC. Today we focus on the present, what is GRC 4.0 – Agile GRC?

First to note that Agile GRC is not just about an enterprise/integrated GRC platform. Agile GRC is about the broader GRC architecture and encompasses many focused and deep solutions that do things like policy management, third party risk management, audit management, regulatory change management, and more. There are 20 segments to the GRC technology market that I have defined (which are at the bottom of this article). It is critical to understand that what is Agile GRC applies to the breadth of these segments and not just to a centralized all-encompassing platform that tries to promise to do everything and may do some things well, but often does other things only mediocre or not at all. This brings in where we came from in GRC 3.0 which was about GRC architecture and expansion of GRC beyond one platform to the integration of capabilities across best of breed systems when and where it makes sense.

The core concept of GRC 4.0 – Agile GRC technologies – is the capability to engage the entire organization on GRC and do so at a much lower cost of ownership of technology than we had in the past. Agile GRC is about the front office of the organization as much as it is about the back office GRC functions in the business. Frontline employees are making risk, compliance, and control decisions that impact organization strategy, objectives, and performance every day. Agile GRC is focused on bringing technology and engagement on GRC to the front office as well as the back office.

However, Agile GRC is also about new technology that has a much lower cost of ownership. Just because other analysts label someone as a ‘Leader’ in the upper right of their quadrants, does not mean that the solution is delivering value and is a modern solution. There are many solutions in the market that are struggling with underlying data architectures as well as user experiences that are going on being two decades old. This is not agile GRC software. Some put a fresh coat of paint on the user experience but have an underlying application and data architecture that is rotting with bloated code and complexity. This is not agile GRC software. It is critical to look deep under the hood and see what the solution is delivering and how it has evolved.

If the solution provider is not investing in updating the data/information architecture, the application architecture, and user experience – run away no matter what other analysts say. You do not need to be purchasing GRC software that is 20 years old under the hood (which is over 100 years old in human terms). It is expecting senior citizens to be competitive against twenty-year-old athletes. Buying old software that is not agile does not do the organization any good. Technology has changed. Established GRC solutions may still be very relevant, but it is critical to understand how they have evolved their underlying data and application architectures over the years. If the core code under the hood is 10 or more years old, you are dealing with a behemoth of age, complexity, bloat, and rot. I would argue that you should be concerned if the core code is over 5 years old. It is critical to understand how the solution has updated its application and data architecture over time.

This also leads to cost of ownership. Old GRC technology is expensive to implement, build-out, and maintain. One global financial services firm told them they are tired of having to have an army of ‘certified’ experts on staff for over $100,000/year each and any simple change takes months to get done. A LinkedIn post from last year described a legacy GRC implementation to the lyrics of the song Hotel California, that they are stuck and cannot get out. After having spent $500,000 in software license, and $2 million on implementation and build-out, three years later they are getting some basic functionality working. I have done an analysis of the RFPs I have worked on over the past three years. For every dollar you spend in software license for legacy GRC solutions that have not updated their data/information architectures, you are spending between $3 and $5 on implementation and buildout. For Agile GRC software, for every dollar you spend on software license you are spending between 50¢ to $1.50 in implementation and buildout. Organizations need to look at the total cost of ownership from software license to implementation to ongoing maintenance/management costs in making their decision for GRC software. Ironically, those that major analysts firms tend to rank as Leaders are the bloated dated software that are the most expensive to own and maintain. Not all of the ‘Leaders’ have kept their applications up to date and relevant.

Key factors of what defines an Agile GRC solution are:

• Usable. The solution has a modern user experience. It does not look and feel like a solution that is 10 years old. It has a modern flat user experience design. It is contextually relevant to the role that the user logs in and sees the information most pertinent to them without having to dig through the solution. It has user-configurable dashboards and reports so the user can arrange the portal/experience to their needs that is easy to do by the user. It is also user-friendly for the front-office of the organization as well as the back-office of GRC functions.
• Cost of ownership. The solution must have a low cost of ownership. From software licensing in relation to implementation and ongoing management. The solution should provide a compelling business case of value from efficiency (e.g., time saved, money saved), effectiveness (e.g., accuracy, thoroughness, more getting done, fewer things slipping), and agility (e.g., agile to a changing business, regulatory, and risk environment and responsive to identify and contain issues).
• Configurable. The solution should not require custom coding where things break on upgrades. The solution should be highly configurable, even to the point of the ‘citizen developer’ where the average user in the business can understand how to configure, extend, and build out the system (Note: citizen development is great but comes at risks if the underlying data and process architecture are not thought out, so it also needs to be controlled). Things like visual workflow buildings, process diagraming, very visual forms and field buildout and placement are all part of this. But the key thing is if customization and coding are needed – CAUTION.
• Scalable. The solution must be able to grow and adapt to the organization. The solution should streamline expansion to other departments and areas, be able to grow with the business, handle the breadth of data today but also in five years as the solution is expanded upon.
• Adaptable. The solution combines the features of configurability and scalability to then become adaptable to the business. Where it is easy to configure and extend the solution. When there are mergers and acquisitions or business restructuring, this is easily mirrored in the GRC solution.
• Integration. The solution must be able to integrate with other solutions. No solution does everything GRC, and GRC solutions also need to integrate with other business systems. The integration interfaces (e.g., APIs) should be easy to use and understand, and provide data integrity with the integration.
• Analytics. The solution has a robust reporting, analytics, and dashboarding mechanism. Analytics is easy to configure and build out reports, scenarios, and comparisons and by the end-user.
• Artificial intelligence/robotic process automation. The solution should be ready to evolve and move toward GRC 5.0 which is Cognitive GRC. This requires that the solution is starting to evaluate, leverage, and use artificial intelligence and robotic process automation capabilities to prepare for the future of GRC in the next couple of years. A solution that does not have an A.I. and robotic strategy is a caution.
• Future proof. The solution should be easy to keep updated to the latest version. This particularly looks, again, at customization. If the solution requires so much customization and coding where things break on upgrades or upgrades are not even possible – run from it.

I am curious, what other data factors are important to you, the reader, for Agile GRC?

As we move to GRC 5.0 – Cognitive GRC, organizations need to ensure that their GRC 4.0 solutions have a strategy to embrace artificial intelligence and robotic process automation. Early adopters are starting to use these features today, but we are two years from these capabilities being broadly used for GRC. Cognitive GRC is where the solution

• Learns from experience
• Uses what is learned to draw conclusions
• Identifies images and patterns
• Solves difficult problem
• Understands different languages
• Creates new perspectives

When I look at the GRC market, I break it out into the following categories of solutions that I monitor and differentiate. Any solution in the market might just operate in one of these areas, or across several. But no one does it all. But there is a range of solutions that GRC 20/20 monitors, differentiates, and follows in our market research that span:

• Integrated GRC Platforms. Capability to manage an integrated architecture across multiple GRC areas in a structured strategy, process, information and technology architecture. These are the hubs that bring multiple areas below together into one overall view of integrated GRC reporting across the enterprise.
• Anti-Money Laundering/KYC, Fraud & Corruption. Capability to manage AML, KYC, bribery, corruption, and fraud in the organization.
• Audit Management & Analytics. Capability to manage audit planning, staff, documentation, execution/fieldwork findings, reporting, and analytics.
• Automated Continuous Control Management/Enforcement. Capability to automate the detection and enforcement of internal controls in business processes, systems, records, transactions, documents, and information.
• Business Continuity Management. Capability to manage, maintain, and test continuity and disaster plans,  and implement these plans expected and unexpected disruptions to all areas of operation. 
• Compliance & Ethics Management. Capability to manage an overall compliance program, document and manage change to obligations, assess compliance, remediate non-compliance, and report. 
• Environmental Management. Capability to document, monitor, assess, analyze, record, and report on environmental activities and compliance.
• Finance GRC Management. Capability to manage the financial risks, controls, and reporting of the organization.
• Health & Safety Management. Capability to manage, document, monitor, assess, report, and address incidents related to the health and safety of the workforce and workplace.
• HR GRC Management. Capability to govern and manage risk and compliance in employee relationships, training, activities, and issues/incidents.
• Internal Control Management. Capability to manage, define, document, map, monitor, test, assess, and report on internal controls of the organization. 
• IT GRC Management. Capability to govern IT in the context of business objectives and manage IT processes,  technology, and information risk and compliance.
• Issue Reporting & Management. Capability to notify on issues and incidents and manage, document, resolve, and report on the range of complaints, issues, incidents, events, investigations, and cases.
• Legal Management. Capability to manage,  monitor, and report on the organization’s legal operations, processes, matters, risks, and activities.
• Physical Security Management. Capability to manage risk and losses to individuals and physical assets, facilities, inventory, and other property.
• Policy & Training Management. Capability to manage the development, approval, distribution, communication, forms, maintenance, and records of policies, procedures and related awareness activities.
• Quality Management. Capability to manage, assess, record, benchmark, and track activity, issues, failures, recalls, and improvement related to product and service quality.
• Reputation & Responsibility Management. Capability to manage the sustainability, ESG, and corporate social responsibility program of the organization.
• Risk Management & Analytics. Capability to identify, assess, measure, treat, manage, monitor, and report on risks to objectives, divisions, departments, processes, assets, and projects. 
• Strategy & Performance Management. Capability to govern, define, and manage strategic, financial, and operational objectives and related performance and risk activities.
• Third Party GRC Management. Capability to govern, manage, and monitor the array of 3rd party relationships in the enterprise, particularly risk and compliance challenges these relationships bring.

While these are categories/buckets of capabilities that GRC 20/20 maps solutions in the market into, the reality is that one solution can go across many of these areas, or be confined to just one area. But no one does everything that is why it is about GRC information and technology architecture.

GRC 20/20 is here to answer your questions on strategy, solutions, and technology for GRC. We are a research organization so it is our job to objectively understand and differentiate solutions in the market and the problems they solve. 

Feel free to ask an inquiry.