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Governance can make or break an organization’s ability to navigate complex challenges and achieve its strategic objectives. A good governance framework is key to making smarter decisions and fostering accountability, thereby aligning with critical compliance standards. But what is governance in GRC, and why does it matter for your business?
The “G” component of governance, risk, and compliance refers to the policies and processes that guide an organization’s leadership and decision-making. It comprises several key elements.
Leadership is truly at the heart of governance. While each organization is different, leadership typically includes a board of directors, executive management, and other key decision-makers responsible for setting the organization’s strategic direction.
This group of people defines the goals and missions of the organization, holding the umbrella under which all other personnel fall. Good leadership aims to ensure that risk management and compliance efforts align with the company’s overall vision.
Without a set of clear policies and procedures, an organization can’t function. These cover a myriad of activities, from financial management to human resources and operational protocols. Effective policies establish boundaries and keep everyone on the same page when it comes to compliance.
One of the overarching aims of governance in GRC is to foster accountability within organizations. It’s important that everyone understand their respective roles and responsibilities, whether they’re a frontline worker or an executive. Most effective governance plans involve some type of oversight mechanism––sometimes several. For example, you might choose to perform regular internal audits or establish reporting protocols to keep everyone and everything in check.
Central to any solid governance framework is risk management, which is directly related to compliance. By identifying and mitigating organizational risks, you can align with relevant compliance standards and while keeping risk considerations part of the decision-making process at all levels rather than treating it as an afterthought.
An ethical corporate culture starts at the top and makes it way down, ideally reaching those throughout the organization. The most effective GRC governance plans outline precisely how leaders should foster a culture built around transparency and accountability.
For instance, you could host workshops that discuss how to manage processes with ethics and integrity. You should also encourage open reporting, allowing employees to highlight any issues related to risk and compliance. This creates an environment where people can openly voice their concerns without fear of pushback.
It’s important to evaluate the effectiveness of your governance framework on an ongoing basis. Your policies and procedures should evolve alongside the current regulatory environment and your business needs. Be sure to track relevant KPIs, such as compliance adherence rate and incident response time. These can give you a better idea of whether or not you are performing to standard.
Effective governance ensures accountability and consistency, whereas poor governance can cause irreparable damage. The impact of good governance––and the lack thereof––couldn’t be more clear when studying the following examples.
The early 2010s were not a good time for Microsoft. The company was stagnating and showing some clear gaps when compared to their competitors. However, when Satya Nadella took over as CEO in 2014, things began to change.
Under Nadella’s leadership, Microsoft’s culture shifted to one of transparency and collaboration. Nadella helped improve stakeholder trust by fostering a more open and ethical workplace. This led to Microsoft sharpening its competitive edge and becoming one of the most successful global companies, demonstrating the importance of strong governance.
Unrealistic goals and burnout culture are part and parcel of a poor governance framework. In 2016, it was revealed that Wells Fargo employees had been creating fake accounts to artificially boost sales for the past several years. This was a clear case of leadership prioritizing short-term, aggressive goals over long-term growth.
In the end, Wells Fargo agreed to pay $3 billion to resolve their liability, which took a toll on the company for years to come. This could have all been avoided had their leadership enacted stronger governance policies around corporate ethics.
While Microsoft’s governance story may seem like one in a million, your organization can still benefit from a strong governance framework on a smaller scale. Here’s how.
Good GRC governance serves as a solid foundation for the risk component of GRC. With a well-thought-out governance structure in place, organizations can anticipate potential issues before they reach a crisis point. Strong governance controls are key to preventing data breaches, regulatory penalties, and financial mismanagement.
A big part of governance is ensuring that stakeholders are involved in critical decision-making from day one. The idea is to create open communication channels whereby stakeholders can present ideas and share their concerns. This can improve trust and loyalty, helping to build fruitful, long-term relationships.
Effective governance allows for better resource allocation. Rather than wasting your budget on human, financial, or technological resources that fail to offer true value, you can dig deeper and find out what really matters to your organization. A good governance program makes it easier to identify areas of need.
Learning what governance in GRC is involves more than just keeping things running in the here and now––it’s ultimately about paving the way for future organizational success. Governance that aligns with company strategies and long-term goals is vital to achieving sustainability. Considering the future can go a long way in promoting business growth.
If you were to ask a dozen professionals what governance in GRC is, you’d probably get a dozen different answers. However, the fundamentals are the same: good GRC governance involves strong leadership, careful planning, and a culture of transparency and accountability. Compyl makes it easy to streamline these elements so that you can plan and execute a successful GRC strategy. Contact us today to see how our unified, flexible GRC platform can help transform your business.
