While we witnessed the beginning of the industrial revolution 4.0 couple of decades back, it has already paved a way for the next generation technologies, which focuses on harnessing resources synergy. The technology is advancing at an unprecedented rate and, thus, we need to gear up for the next industrial revolution, i.e., IR5.0. As we advance technologically, the complexity of the data and processes we handle increases exponentially and thus arises the need for integration of governance, risk, and compliance. Adding to this, strict geographically varying regulations evolving around the globe, combined with high customer expectations has provided an opportunity for service providers to build new business models that center on governance risk and compliance (GRC) framework.
The current generation advanced technologies such as Artificial Intelligence, Machine Learning, Internet of Things, data warehousing, etc. are high-risk technologies in terms of security and thus requires a proactive GRC system in place. Various cyber threats, including viruses, malware, ransomware, and phishing emails can lead to data privacy breach and theft of confidential data from the organization, which can lead to loss of business.
Even though the GRC solution currently exists in isolation for different functions in a company, it is not efficient and generally incurs very high cost. Integrated systems aim at centralizing GRC to avoid duplication of efforts, which in turn decreases the cost of business sustenance. For example, vendor management, compliance management, risk analysis, etc., will fall under the same umbrella and a single body would govern in the organization for all the functions.
Now that we know that integrated GRC solution is important, let us understand why it is essential.
- Secures Assets: Assets in an organization can be anything, such as physical infrastructure, stored data, intellectual properties, data centers, human capital, e-assets, etc. Companies require their assets to be protected from all kinds of threats, such as natural calamity and cyber threats. There is a close competition between the data protectors and the data thieves. The point to be noted here is that as we develop more mechanisms to reduce cyber threats, cyber-crimes have evolved technologically as well. Government regulations and compliance standards help determine and implement controls to secure these assets. However, a centralized system and process that can monitor the smooth functioning of business in real time and raise a flag in case of any issue are essential to reduce the various risk exposures of the organization.
- Regulatory Changes and Control Implementation: Regulations are not simple and common anymore. Each country has different regulations in place and enforcement level of these regulations varies up to a large extent. For example, companies operating with North American health data needs to comply with HIPAA, whereas, companies dealing with European personal data needs to comply with GDPR. Since MNCs generally operate in different regions, implementing controls requires identifying commonality between different regulations and standards in order to ease the process of compliance. Hence, it becomes efficient to handle controls and control failures when the integration of GRC is done.
- Allows Process Streamlining: Businesses these days are trying to channelize their processes to reduce the redundancy of resources and wastage of time. Since USP of similar businesses tends to converge, businesses focus on process streamlining to get a competitive edge in the market. Integration of GRC gives a dashboard, which can identify irregularities, threats, and redundancies. Thus, it gives an edge over the competitors. Moreover, this standardization reduces effort by identifying common risks and implementing common controls across different functions. Thus, it helps in achieving better performance of the company.
- Cost Saving and Revenue Generation: Couple of years back, risk management and compliance were considered to be a part of the cost centre. Earlier, companies used to spend on GRC without understanding the financial benefits. Complying with standards was like a mere advantage and not a need. But the scenario has changed drastically today. GRC acts as a cost saver for the customers by ensuring automation of common processes and implementation of common controls to mitigate risks. From a service provider's perspective, it acts as a revenue generator because GRC has become a necessity for all the customers and expert services are in huge demand. Thus, it has a direct impact on the P&L statement of the companies.
- Fulfill Stakeholder Demand and Sustainability: The ultimate aim of all the stakeholders is for the business to thrive in all the circumstances, such as technological disruption, privacy invasion, data access breach, financial instability, natural disasters, and so on. These risks cannot be completely avoided always but can be definitely tackled in an efficient manner to have a minimum business impact. An important portion of GRC, which is BCP/DR, ensures the sustainability of the business. This ensures that these risks are foreseen and appropriate measures are taken to minimize the impact on business continuity. Another direct impact of not having a GRC solution in a company is on the brand reputation, which is an intangible asset of the company. Customers prefer to deal with companies that have a long-standing record of good data protection and brand image.
The main point to be noted is that integration of GRC in a company might be a one-time investment, but maintaining it is a continuous process. A company's GRC strategy must continuously evolve along with the business in order to mitigate the risks and threats associated with its different line of businesses.
The integration of governance risk and compliance (GRC) in an organization might be a one-time investment, but maintaining it is a continuous process.
Thus, rather than looking at integrated GRC as an exercise mandatory for complying with regulations, it should be looked at as a factor important for the survival and growth of the business.