As the world becomes increasingly connected and complex, the need for interdisciplinary risk management and a framework for monitoring and managing compliance only grows. A risk can quickly become a supply chain issue, which in turn interrupts organizational productivity, spilling over into many other vital aspects of your business.
Now more than ever, a plan for addressing uncertainty, keeping organizational objectives within reach, and managing regulatory compliance is paramount for long-term success and business continuity. GRC, which is shorthand for Governance, Risk, and Compliance, is the best way to instill solid business practices that protect your organization and keep things moving as smoothly as possible. This article features a comprehensive breakdown of the GRC system, what a GRC program entails, the benefits of implementing GRC software, and the best practices to reliably achieve objectives.
What is Governance, Risk, and Compliance (GRC)?
Governance, risk, and compliance (GRC) is the collective set of procedures that help organizations maintain their integrity and address uncertainty with respect to their business objectives. A well-planned GRC strategy with an integrated approach goes a long way. Think of it as an internal auditing system that helps companies manage risk.
First, let’s break down the acronym GRC into its three main components.
Governance
GRC Governance is making sure that the day-to-day organizational activities and critical capabilities are aligned with the overall business goals of the organization. Usually carried out by senior management, governance involves providing control mechanisms, policies, and procedures that allow management decisions to be effectively and systematically executed.
Risk
The goal of risk management is to identify any threats to the company’s objectives. Whether these are cybersecurity threats or regulatory mistakes, the objective is to foster a unified approach that puts your business units in a position to succeed. The response of a given risk depends on its perceived gravity and possible impact and can involve controlling that risk, avoiding it, or transferring it to a third party, through standardized practices.
Compliance
Compliance considers the laws and regulatory requirements that impact each system within your organization. Compliance requirements ensure that your business processes follow standard operating procedures and protect itself from legal action or financial penalties.
In summary…
These three pillars of GRC processes work in tandem to create an environment that manages risk and keeps organizations safe and honest. There are many ways your business will benefit from a governance, risk, and compliance framework. This is especially important for meeting corporate social responsibility goals. Each role in an organization is affected by governance, risk management, and compliance management in various (yet equally important) ways.
Organizational Roles and How They Benefit from GRC Processes
Chief Compliance Officers: Gain confidence in compliance and governance by deploying a centralized, configurable command center approach to enterprise RCM to monitor compliance status in real-time.
Chief Risk Officers: Mitigate the risk of non-compliance using workflow to assign change tasks to the lines of business and automatically track to completion.
General Counsel: Use expert guidance and save time with advanced analysis of regulatory documents that identify the impact on controls, policies, and processes.
Regulatory Change Managers: Save the many hours it usually takes to manually classify regulatory content – our GRC program generates AI-powered integrated collection technology to provide summaries with key document data already extracted.
AML Officers and Financial Crimes Team: Easily respond and quickly identify trends with automated summaries of key information, such as the penalty amount, respondent, and violation of enforcement actions.
Regulatory Consultants and Legal Advisors: Stay on top of the compliance data changes that affect your clients and their varying legal and regulatory requirements with real-time updates, summarized weekly emails, and personalized alerts.
Why Managing Governance, Risk, and Compliance is Necessary
Regardless of the industry, your organization operates in, a competent GRC program can mean the difference between success and failure. Whether your organization exists in the insurance industry, banking, or finance, risk is always right around the corner. Not to mention stakeholders have more demands than ever before.
Businesses in Every Industry Should Implement a New GRC System
Ransomware and data breaches plague business units both small and large. This is just one example of widespread risk in today’s digital world. Let’s not forget about how the influence of social media can affect your business. Here are the key reasons your organization needs to develop its GRC functions.
Rising pace and scope of regulatory compliance: With respect to personal data privacy issues, compliance regulations are on the rise in multiple countries around the world. As long as technology continues to evolve, so will our need to have safeguards and prepared compliance teams in place that reduce risk and address uncertainty.
The rise of ransomware: External risks from digital threats are on the upswing, whether they’re delivered by individuals or are state-sponsored, third-party risk management is vital. In 2021, the average total cost of a ransomware attack was $4.62 million, not even including the ransom. No entire industry can be safe from ransomware attacks, and 37% of all industries suffered a ransomware attack in 2021. GRC software can help protect you from ransomware attacks and data breaches. However, there’s still variation in which industries are more likely to be targeted.
Increasingly complex business structures: Organizations are becoming networked with an ever-growing number of third parties on both a local and regional basis. Address uncertainty by using GRC tools.
Stakeholders’ expectations are evolving: Stakeholders seek more transparency from their companies. Consumers also now have more of a voice when it comes to the brands and companies they support. Show your audience know they can trust your organization.
Integrated GRC Programs Statistics
Is it time to restructure everyday business practices at your company? Are your compliance risk management methods outdated?Many executives seek better implementation of GRC activities at their organizations. Take a look at a few head-turning integrated GRC approach statistics…
57% of senior-level executives rank “risk and compliance” as one of the top two risk categories they feel least prepared to address.
Only 36% of organizations have a formal enterprise risk management (ERM) program or GRC software.
69% of executives are not confident that their current risk management policies and practices will be enough to meet future needs.
62% of organizations have experienced a critical risk event in the past three years
44% of organizations plan to implement or expand/upgrade their existing implementation of GRC software or risk management software
Where does your company fall in these statistics? Does your organization also feel unprepared to address risk and compliance? Don’t wait too long before implementing GRC practices to help your organization achieve its goals. Partnering with a RegTech company like compliance.ai to assist your business with a strategic GRC program is advised for achieving principled performance.
What is RegTech?
Compliance.AI specializes in providing Regulatory Technology (aka RegTech) software solutions specifically for the financial sector. RegTech technology uses information technology to enhance regulatory monitoring, reporting, and other compliance processes for the financial services industry.
Benefits of Compliance Risk Governance withCompliance.ai Software
Wondering how RegTech can be an asset to your organization? Financial institutions, like asset management firms or banks, that adopt RegTech will surely gain a competitive edge. Do your current work processes feel disjointed and inconsistent? It may be time to take advantage of that will turn pre-existing compliance activities into a seamless, innovative process with automated tools.
Deliver transparency and streamline your transition
Mitigate compliance issues by deploying an RCM command center to gain insight into the regulatory change management and compliance management functions. Leverage the industry’s proven and trusted implementation methodology to move away from manual processes and meetings to adopt standardized and repeatable regulatory change management processes aligned to your specific compliance model.
Scan the horizon and filter out the noise
Compliance.ai is a robust GRC software that automatically monitors regulatory updates from government agencies, such as the CFPB, DOJ, DOL, FDIC, FRS, OCC, TREAS, FFIEC, and OFAC – but delivers only the content that is relevant to you. The information also includes guidance on topics important to you – such as Payments, Privacy, Securities Cybersecurity, Privacy, Payments, Securities, and Crypto-currency – published by FPA, AFT, and WFA.
Analyze impact and take action
Compliance.ai’s Obligation Analysis tool is a GRC software that relieves the burden of line-by-line analysis. Instead, we provide a summarized list of obligations for each regulatory document and identify jurisdictional differences.
Initiate workflows and break down silos
Compliance.ai improves budgeting and resource planning by helping managers get an accurate read into workloads and important deadlines. Our intuitive workflow technology promotes collaboration and ensures that all activities are monitored and completed.
Improved operational efficiency
Creating a GRC framework often leads to automating common processes due to the continuous monitoring of controls, KRIs and exposures to risk. This results in more efficient ways of running operations and helps reduce the amount of substantial duplication across your organization.
Collect evidence and speed audits
Audits and exams are a fact of life, but findings and enforcement actions don’t have to be. Our solution automatically collects evidence that obligations have been met and delivers accurate, third-party-certified reports to provide auditors with the assurance they need.
Utilize higher quality information
By following an integrated approach to governance, risk, and compliance, your management team will have a holistic view of the organization as a whole and therefore, be in a better position to make more intelligent and productive decisions.
Experience reduced costs
By defining business rules, reviewing and consolidating controls, and visualizing your GRC roadmap, your organization will experience lower costs due to implementing effective governance risk management activities.
When Governance, Risk, and Compliance is Mismanaged
When GRC programs aren’t properly implemented, it can mean bad news for any organization. Choosing to ignore or use underdeveloped GRC practices will result in…
Increased unpredictability and the inability to be flexible when surprises happen
Being ill-prepared for risky third party relationships
Higher costs and high risk
Little to no insight on how to mitigate risk, even if you see it coming
Potential damage to your business reputation
Legal penalties and financial retribution
The most common indicators of poor GRC…
Poor Governance and “Tone”: The organization has a tunnel vision-like focus on the short term that causes them to mortgage future success on small short-term gains. There is evidence of undeliverable strategies, extreme performance pressures, unrealistic expansion plans, inadequate executive experience and/or a “warrior culture” and unhealthy internal competition creating incentives for bad behavior.
Reckless Risk Taking: The organization’s incentive compensation structure and culture drive and rewards inappropriate risk-taking behavior. In 2016, Wells Fargo was sanctioned to pay $3 billion in fines to the US for a fake account scandal. It was found that top-level executives had created a toxic sales culture that pressured employees to open new accounts by any means necessary – even if those means were illegal.
Inefficient Risk Assessment: The organization conducts subjective and often biased assessments that are influenced by past experience, foster groupthink, and are skewed to meet the desired results.
Assessing GRC Maturity
There is no single correct way to manage governance, risk, and compliance, however, your system must be able to keep up with constantly changing industry needs. Otherwise, it may be time to reconsider your business approach. Even the most proficient risk management solutions can have room for improvement as the environment and capabilities continue to evolve.
The best way to assess an organization’s GRC framework is to adopt a risk maturity model. The model will help you compare your current level of risk management to where you want to be. It provides a benchmark for your business units and helps you decide whether to invest more money and resources into risk management as the environment changes.
There are multiple models to choose from. The governance, risk, and compliance model we’ll discuss in this article contains 5 levels of maturity: Ad hoc, preliminary, detail, integrated, and principled performance.
GRC Capability Model
Ad hoc: The management of risk is undocumented, chaotic, and depends on individual heroics. Risk is dealt with in a state of panic, leaving your organization vulnerable. There is no synergy or game plan for addressing challenges.
Preliminary: Risk is defined in different ways and managed separately from goal setting. Process discipline is unlikely to be rigorous. Roles and responsibilities might be assigned to specific people within the organization (e.g. Compliance Officer). However, in many cases, these people also have other, sometimes conflicting, areas of responsibility.
Defined: A common risk assessment/response framework is in place. Roles are largely defined and carried out. The entire organization has been educated on risk management. Action plans have been prepared and are activated in response to high-priority risks.
Integrated: GRC activities are coordinated across business activities. Common risk management tools and processes are used where appropriate, with enterprise-wide risk monitoring, measurement, and reporting. Alternative responses are analyzed with scenario planning and other techniques, such as Monte Carlo simulation.
Metrics are in place to measure response time and the efficacy of risk mitigation. But the emphasis remains on managing a list of risks. Discussions of risk at the executive committee and board levels are separate from the discussion of strategy and performance.
Principled Performance: Managing risk shifts from merely anticipating a list of potential threats under integrated GRC, to wholly adopting strategic planning and capital allocation in order to reliably achieve objectives. A reasonable amount of risk is taken to succeed instead of striving only to avoid failure. ERMs are in place to notify risky events before they happen. Strategy and performance conversations do not happen separately.
The ever-growing need for GRC
Risk is more prevalent than ever, from ransomware and social media influence to interconnected business departments, and the overall globalization of commerce. A successful organization is one that invests resources into developing an effective means of governance, risk management, and compliance management, otherwise referred to as a GRC framework.
Effective GRC establishes the processes and systems that enable risk-aware decisions at every level. Investing in the best GRC software for your company, such as Compliance.ai’s Regulatory Change Management software, will reduce costs, improve agility, eliminate vulnerabilities, help reach strategic business goals, and guide performance management. If your business is in the FinTech industry, Compliance.ai has the right GRC system for you.
Compliance.ai is the only regulatory change management software that is designed to mitigate risk, reduce costs, and increase confidence in compliance status for the entire enterprise in the banking, financial services, and insurance industry.
Don’t leave something this important up to chance or employees without experience in this business function. Our customers use Compliance.ai to automatically monitor regulatory updates, identify obligations, and ensure required changes are completed.
There’s no longer a need to stress about keeping up with constantly changing regulations and spending hours analyzing endless data. Leave it to the experts with innovative, proven technology that can get the job done properly. Enjoy peace of mind knowing we can help you improve your operational environment and how you conduct your day-to-day business.
Asif Alam is the Chief Executive Officer at Compliance.ai. A leader in shaping disruptive technology, his experience includes building products using AI and natural language processing for GRC, payments, lending, risk, trading, and new solutions, from Fortune 500 companies to startups.
In his most recent role, he served as the Chief Strategy Officer of ThoughtTrace, unlocking new revenue streams and markets, and reignite portfolio growth. ThoughTrace was then acquired by Thomson Reuters in 2021.
He brings more than 20 years of management and business experience; increasing profitability, unlocking new revenue streams and markets, and reignite portfolio growth for companies like Thomson Reuters, Crux Informatics, and Finastra. Asif is a forward-thinking expert driving engagement via client forums, public presentations, and white papers.
Cesar Lee is a Principal at WRV, a venture capital fund focused on early-stage investments in hardware, semiconductor, and other technology-related companies. Previously, he was an investment professional at Riverwood Capital, a technology-focused, late-stage venture capital, and private equity fund. He began his career at RBC Capital Markets, where he was part of the Mergers & Acquisitions group for two years and the Equity-linked & Derivatives group for one year. While at RBC, Cesar spent a majority of his time working on M&A advisory transactions for technology companies.
Cesar’s investment experience includes buyouts, later stage, early stage and seed rounds. Cesar has completed transaction in the U.S., Latin America, and Asia, and in technology sectors including data centers, software, semiconductors, consumer electronics, robotics, big data, and internet.
Maria Devassy is a RegTech, Content, and Technology leader with over 20 years of experience helping companies bridge the gap between technology, product, and business. Maria has held leadership positions with MetricStream, KPMG, Oracle Corporation, and other technology companies. She has launched several successful RegTech products, business partnerships, and advised Fortune 100 clients on risk management, audit, advisory, and compliance business across Industries.
Hugh Cadden is a recognized expert in derivative financial and trading markets including futures, options, and swaps. Hugh is currently a senior consultant and expert with OnPoint Analytics, Inc. an economic, finance and statistical consultancy specializing in expert testimony for complex litigation. He has been specializing in the organization, operation, and regulation of financial and trading markets for over 40 years. Hugh’s experience includes both the public and private sectors and he has held senior level positions with the U.S. Commodity Futures Trading Commission including serving as Director of the Division of Trading and Markets and Deputy Director of Enforcement. He has been qualified as an expert on financial and trading market matters before the Commodity Futures Trading Commission, the Securities and Exchange Commission, the U.S. Tax Court, Financial Industry Regulatory Authority, National Futures Association, American Arbitration Association and federal courts.
Drake Ross is a former bank regulator who specialized in compliance with consumer protection regulations while at the OCC, FDIC, and OTS. While at these agencies, he provided extensive training and guidance and developed materials to ensure full comprehension and proper application of rules, laws, policies, and guidance, and served as a Subject Matter Expert in numerous areas. Because of his expertise, he often presented at agency and industry events. He also played a significant role in successful windup of the 2008 IndyMac Bank failure, where because of his extensive knowledge of the FDIC deposit insurance regulations, he was called upon to administer highly-complex insurance determinations.
Carliss Chatman is an Assistant Professor of Law teaching Contracts, Agency and Unincorporated Entities, Corporations, and Transactional Skills. Her work is influenced by over two decades of service on non-profit boards and involvement with community organizations. Through leadership positions, she has developed expertise in corporate governance and non-profit regulation. She has also been instrumental in strategic planning and fundraising efforts. Prior to law teaching, Professor Chatman was a commercial litigation attorney in Houston, Texas. In practice, she focused on trial law, appeals and arbitration in pharmaceutical, health care, mass torts, product liability, as well as oil, gas, and mineral law. In addition to negotiating settlements and obtaining successful verdicts, Professor Chatman has also analyzed and drafted position statements regarding the constitutionality of statutes and the impact of statutory revisions for presentation to the Texas Legislature.
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Mariam is an Operating Principal at Cota Capital. Mariam has experience providing guidance on strategic and operational planning to Venture and Growth stage companies. Prior to Cota Capital, Mariam spent her career in management consulting as a Director at KPMG. She has experience leading global transformation programs and developing innovative service offerings for Fortune 500 companies in the Technology sector. Mariam has an MBA from UCLA’s Anderson school of management with an emphasis in Finance and Entrepreneurship. She has a Bachelors in Science in Finance and a Bachelors in Science in Economics from Santa Clara University.
Chris Callison-Burch is an Associate Professor in Computer and Information Science Department at the University of Pennsylvania. His research interests include natural language understanding and crowdsourcing. He has served the Association for Computational Linguistics as the General Chair for the ACL 2017 conference, as an action editor for the Transactions of the ACL, as an editorial board member for the Computational Linguistics journal, and an officer for NAACL (the North American chapter of the ACL) and for SIGDAT (the special interest group for linguistic data and corpus-based approaches to natural language processing)
Tom Ladt is an experienced executive and investor. Tom has lead and served on the boards of several public and private companies serving highly regulated industries such as technology, healthcare, real estate, and food processing. Tom has also served in key governmental roles and on numerous community boards.
Jeroen Plink is a global executive with a proven track record of developing and growing businesses, teams, and technologies with innovation and passion. Jeroen was CEO of Practical Law US during its acquisition by Thomson Reuters. He now serves on numerous boards and acts as a strategic consultants for start-ups.
Global Legal and Compliance executive with 15+ years of success in the SaaS technology and financial services industries. Partner to the CEO and executive team in corporate transactions, business development, product expansion, and regulatory navigation during periods of intense growth and organizational change. An advocate of effective risk management that starts with sound business practices and putting the customer first.
Richard Dupree has held multiple Risk, Compliance and Operations positions at regional, national, and global financial services firms including Wells Fargo, Silicon Valley Bank, Bank of the West and BNP Paribas. Rick currently advises FinTechs and RegTechs and sits on industry panels, contributes to industry whitepapers, thought leadership efforts, and speaks at industry seminars on Risk and Compliance challenges faced by banks and FinTechs.
Brian advises clients on legal and regulatory compliance in the financial, tech, and procurement sectors. His passion is helping businesses succeed in heavily regulated environments. As counsel and trusted advisor to businesses of all sizes, and as a former regulator, policymaker, and federal official, Brian acutely understands the unintended burdens that even well-intentioned government requirements can put on innovation and business growth, as well as how to create policies that strike the right balance.
Brian served as National Ombudsman in the Obama Administration, leading the federal Office of Regulatory Enforcement Fairness in assisting hundreds of startups, entrepreneurs, and small business owners in every industry and every state.
Dr. Marsha Ershaghi Hames is Managing Director of Strategy & Development at LRN, a leader in advising and educating organizations about ethics and regulatory compliance, as well as corporate culture, governance and leadership. With the focus of inspired behavior versus required behavior, LRN is a leading voice in the industry for companies to build ethical cultures instead of “check-the-box” compliance approaches. She’s advised Department of Justice corporate monitors on successful program transformation under CIAs (Corporate Integrity Agreements. With over 20 years of experience in leading multinational ethics and compliance strategies, Marsha has become a highly sought-after thought leader on leading Corporate Compliance and Ethics practices.
Carla Carriveau is currently the Senior Managing Counsel at Wealthfront, an automatic investment service firm in Redwood City, California. Carla was previously Senior Counsel, Division of Trading and Markets, at the United States Securities and Exchange Commission. As a former regulator with over 15 years of experience in helping small businesses navigate legal and regulatory needs in the financial services sector, Carla advises Compliance.ai on financial services regulation, the regulatory landscape and industry practices.
