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Risk management might seem like nothing more than a buzzword, but it’s truly the foundation upon which effective business strategies are built. And there’s no doubt about it: modern businesses have their hands full. From tackling cyber threats to navigating evolving regulatory requirements, aligning with GRC standards has become more important, albeit difficult, than ever. So what is risk in GRC, and what is its importance to GRC as a whole?
In a GRC context, risk refers to the potential threats that could impact business operations. It includes everything from financial instability to cybersecurity concerns. To effectively manage risk, organizations must learn to identify and address threats and remain compliant with the regulatory standards that apply to them.
While risk describes threat exposure, risk tolerance is the level of risk an organization is willing to accept. It may seem counterintuitive that a business would tolerate any degree of risk, but the reality is that operating 100% risk-free is a pipe dream. Rather than trying to stamp out risk entirely, organizations are increasingly seeking to mitigate their most critical threats and learning to live with those that are less likely to impede their operations and objectives.
A good GRC framework recognizes that some level of risk is inevitable. That threshold is higher for some businesses than others, and where it falls for you will depend on your organizational needs, goals, and capabilities. There are a few strategies you can implement to balance risk acceptance with avoidance.
Before doing anything with risk, you need to one, understand what risk in GRC is, and two, know where you stand in terms of risk. Follow these steps to get started:
1. Identify Your Risks: Define GRC risk for your company. What does that look like? What types of risk are most applicable to your business. For example, if you are a large online retailer, you may be at risk of compromising cardholder data and running afoul PCI standards. Likewise, if you’re a healthcare organization, your primary risks might involve managing protected health information (PHI) in a legacy system.
2. Rank Risks Based on Urgency: Once you’ve compiled a list of risks, consider which ones are most urgent and rank them accordingly. This will help direct your focus to the issues that need the most attention.
3. Create a Risk Assessment Report:Next, create a risk assessment report that outlines your findings and evaluates the controls you have in place.
The information obtained from your risk assessment will help guide your overarching risk management strategy. Your risk-related objectives can and probably will change over time, but conducting an initial risk assessment can help you understand where you’re starting from and where you’d like to end up.
Once you’ve identified the most pressing risks your business is facing, it’s time to determine your risk tolerance. This should involve stakeholders from across your organization, as they can offer valuable input and insights to help inform your risk threshold.
The key is to get everyone aligned on organizational needs and arrive at some sort of consensus as to how risk should be managed. For example, your finance department may be more concerned with PCI-related risks, while your marketing department might worry about reputational harm incurred by social media activities.
Determining your company’s risk tolerance level will likely require a lot of collaboration, and perhaps some compromises. However, by coming together and reviewing the most critical risks, you can––hopefully––agree to a general level of risk you are all willing to tolerate.
At this point, you can start implementing the appropriate risk control tools to reduce the likelihood and impact of adverse events. You should establish preventative controls, which might include employee training to reduce human error, as well as controls to identify risks. For example, an automated monitoring system could alert you to potential fraud issues in your payment systems.
A good risk control plan should also outline corrective measures for responding to risks as they materialize. You might develop a disaster recovery plan, for instance, that restores access to critical IT infrastructure following an incident.
Technology is great for managing risk, but your people are the most important piece of the puzzle. Failure to establish a healthy risk culture that informs the values, beliefs, and attitudes around risk can cause a number of long-term, ongoing problems for your organization.
To get everyone onboard with the risk component of your GRC framework, it’s important to encourage open communication. Answer your team’s questions and be sure to address any concerns they have about your risk management protocols. Hearing different viewpoints can foster a more robust risk awareness program over time.
It’s important to explain why risk management matters. Instead of simply focusing on how it works, demonstrate its direct impact on organizational culture. Fewer incidents leads to reduced financial strain, which may translate to higher pay and fewer layoffs. Good risk management can also open the door to new business opportunities, benefiting the entire company.
Risk is a fact of life for businesses, but it needn’t get you down. A good risk management program can uplift your GRC framework and make you more aware of the risks surrounding your company. Integrating risk into your GRC framework aligns risk mitigation with governance and compliance. This helps balance risk exposure with regulatory requirements and organizational objectives.
So what is risk in GRC? Put simply, it describes the risks associated with business operations, from cybersecurity incidents to reputational harm. Along with governance and compliance, it makes up the GRC framework and can be greatly simplified with the right tools. Compyl offers a unified GRC platform that allows users to easily manage risk through automation, real-time monitoring, and more. Ready to see what we can do for your risk management strategy? Request a demo today.
