As businesses face increasingly complex regulatory landscapes and growing risks from globalization and digital transformation, the need for a cohesive approach to managing business operations and risks is evident. In response to this accelerated transition, the Open Compliance and Ethics Group (OCEG) proposed what we now know as governance, risk and compliance, or GRC. The concept originated with the Open Compliance and Ethics Group (OCEG) in 2002 and was formally defined in 2007.
But what is GRC? Simply put, it comprises practices and processes that organizations use to manage and oversee their operations to comply with national and international laws, privacy regulations and industry standards. It also includes the software suite required to implement and manage the GRC approach in an organization.
What is GRC in business terms? GRC is a unified approach to aligning governance activities, managing compliance risk, and improving the effectiveness of risk mitigation across all business units. Instead of treating these disciplines separately, GRC creates shared accountability for decision-making, performance and business continuity, which strengthens organizational resilience and drives cost efficiency.
As tech advances rapidly, so do risks and compliance standards. Business owners and IT professionals must stay well-versed in GRC principles to navigate these challenges and align with business goals. Let’s shed light on the three components that form the core of GRC.
GRC Explained: Governance, Risk and Compliance for Every Organization
GRC is a strategic framework that integrates governance, risk management and compliance to help organizations achieve objectives reliably, address uncertainty and act with integrity. Think of governance, risk and compliance (GRC) as the “rules of the road” for businesses. It’s a framework that helps organizations set up clear guidelines (governance), manage potential issues or threats (risk) and make sure they’re following all necessary laws and regulations (compliance).
GRC isn’t just about avoiding fines or legal trouble. It creates a solid foundation that helps the company run smoothly and stay trusted by customers, partners and employees.
Together, these three elements form a unified approach that strengthens decision-making, reduces costs and enhances risk mitigation and compliance. Most importantly, GRC applies to businesses of all sizes and industries to help reduce uncertainty, ensure business continuity and support strategic accountability across business units.
GRC synchronizes processes to streamline operations, enhance communication and enable effective reporting — minimizing errors, redundancies and wasteful overlaps.
What Does GRC Stand For? A Closer Look at Governance
GRC stands for governance, risk management and compliance, forming a strategic framework that helps organizations reliably achieve their objectives. Governance encompasses the policies, rules, frameworks and processes set by leadership to ensure the organization is managed effectively and aligned with its goals.
In the simplest terms, governance is about how a company sets its direction and makes sure everything’s running as planned.
Governance involves the key policies, rules and processes a business puts in place to keep everyone aligned with organizational business goals. It’s like having a roadmap that guides everyone towards the same destination. It strengthens decision-making, transparency and investor trust while helping organizations proactively address legal exposures.
The Organization for Economic Co-operation and Development (OECD) created one of the most well-known standards for corporate governance. Their Corporate Governance Factbook outlines the evolutions and trends in corporate governance frameworks worldwide.
According to the OECD, good governance helps businesses access capital and financing, mainly from debt capital markets and equity. Organizations can then use these funds to invest in their growth and innovation.
A sound governance plan also strengthens trust in market relationships and fosters transparency. It attracts investors, boosting confidence that their investments will be safe in the correctly functioning market.
Plus, it enables businesses to make informed, strategic decisions and respond to challenges swiftly. It provides a foundation for long-term success by promoting stability and enhancing overall organizational performance.
Common governance activities include:
• Establishing and monitoring key policies
• Providing leadership accountability and oversight
• Aligning governance with long-term business goals and performance
• Managing legal exposures linked to corporate decisions
• Ensuring integration of governance into day-to-day business activities
Risk: Managing Threats to Support Business Continuity
The “R” in GRC stands for risk management, which involves identifying, assessing and mitigating potential threats, including financial, legal, strategic and security risks, to help the organization reliably achieve its objectives.
- Financial (e.g., cash flow shortages, market volatility)
- Operational (e.g., equipment failures, supply chain disruptions)
- Reputational (e.g., public perception, PR disasters, brand damage)
- IT (e.g., data breaches, intentional fraud, hacking, system failures)
- Legal and compliance-related (e.g., lawsuits, malpractice, regulatory fines)
- Strategic (e.g., competition, changing market trends)
Some risks may be unprecedented or unforeseeable. The COVID-19 pandemic is a notable example of a risk that caught many businesses off guard and caused significant disruptions.
A proactive approach to risk management makes businesses better prepared to face and mitigate issues. Many organizations use GRC tools to detect emerging risks. These tools may have predictive models that alert businesses of potential risks based on past events and trends.
Compliance: Staying Ahead of Privacy Regulations and Legal Requirements
Last but not least, the “C” is for compliance.
Compliance is about making sure the company is following all the rules and regulations it needs to operate legally and ethically. Imagine compliance as the safety guardrails for a business—there to prevent mistakes that could lead to significant consequences, like fines, lawsuits, poor public perception or damage to your reputation.
Compliance may be related to various areas, such as:
- Industry-specific regulations
- International laws and standards
- Internal policies and procedures
- Environmental sustainability
- Employee safety and health regulations
Depending on the industry and locations you operate in, you may have stricter compliance requirements than others. For example, the healthcare industry is highly regulated, with regulations like the Health Insurance Portability and Accountability Act (HIPAA). Similarly, the General Data Protection Regulation (GDPR) applies to all industries that collect customer data and are established or have an office in the EU.
The consequences of non-compliance in highly regulated sectors are also more severe when companies mishandle or lose data. They can range from fines to legal action, loss of license or accreditation and even criminal charges. Proactive risk practices help improve preparedness and effectiveness in risk mitigation, supporting resilience across all business activities. That’s why it’s best to invest in a GRC tool for compliance issue identification and management for proactive response.
Depending on the industry and locations you operate in, you may have stricter compliance requirements than others. For example, the healthcare industry is highly regulated, with regulations like the Health Insurance Portability and Accountability Act (HIPAA). Similarly, the General Data Protection Regulation (GDPR) applies to all industries that collect customer data and are established or have an office in the EU.
The consequences of non-compliance in highly regulated sectors are also more severe when companies mishandle or lose data. They can range from fines to legal action, loss of license or accreditation and even criminal charges. That’s why it’s best to invest in a GRC tool for compliance issue identification and management for proactive response.
Compliance issues can surface more easily through visual status markers.
A modern GRC tool strengthens compliance by:
• Centralizing control evidence and audit documentation
• Monitoring privacy regulations and legal changes automatically
• Providing unified reporting across business units
• Enabling faster response to compliance risk
• Supporting consistency and maturity in compliance processes
Why Is GRC Important?
GRC is critical for businesses as it acts like a safety net and a roadmap all in one, helping businesses stay on course, avoid risks and earn customer trust. In a company without GRC, there would be no clear guidelines, so decisions could feel random or inconsistent to stakeholders like employees, investors, customers, and regulators.
For employees, unclear guidelines without GRC can lead to confusion and inefficiencies, affecting productivity. Similarly, investors may view a lack of GRC as a red flag, signaling poor management and increasing the perceived risk of investment. Customers could also lose trust if they feel the company lacks transparency or accountability.
The risk would also be unchecked, meaning financial, legal or operational issues could blindside the company. And without compliance, there’d be a high chance of facing penalties or even legal trouble.
The True Cost of Compliance with Data Protection Regulations, a study conducted by the Ponemon Institute, found that non-compliance costs businesses anywhere from $14 million to $40 million.
These costs may be the result of the following non-compliance consequences:
- Business disruption
- Productivity loss
- Revenue loss
- Fines and penalties
- Reputational damage
The same applies to the risk side of things, too. According to the Global Risks Report by the World Economic Forum, businesses are expected to have a turbulent time ahead. Risks like supply chain disruptions, inflationary pressures, rising geoeconomic tensions and cyber threats are all expected to increase in the coming years.
The Allianz Risk Barometer 2024 also highlighted similar risks and added the following to the list:
- Changes in legislation and regulation
- Natural catastrophes
- Climate change
- Macroeconomic developments
- Market developments
- Political risks and violence
- Skilled labor shortages
Without adequate preparedness for these risks, businesses will struggle to survive and thrive in a constantly changing environment. GRC facilitates this survival by implementing a governance, risk and compliance framework that organizations can employ to be resilient in these challenges.
Benefits of GRC: Improving Effectiveness in Risk Mitigation and Accountability
A well-implemented GRC program delivers multiple business advantages, from cost savings to stronger organizational resilience. Key benefits include:
- Cost efficiency: Early risk identification and mitigation help prevent costly disruptions, fines, or operational losses.
- Regulatory compliance: Maintaining strict compliance reduces the likelihood of penalties, legal exposures and reputational damage.
- Streamlined processes: GRC frameworks improve workflow efficiency, reduce silos, and minimize errors, redundancies and duplication.
- Enhanced transparency and accountability: Cross-functional collaboration ensures employees and senior executives are informed about risks and compliance obligations in real time.
- Cybersecurity protection: Proactive risk management helps to safeguard your organization against data breaches, ransomware attacks and other cyber threats.
- Increased stakeholder trust: Strong GRC practices build confidence with customers, investors and partners, supporting business growth and access to capital.
By prioritizing governance, risk and compliance, organizations can operate more efficiently, reduce exposure to risks and foster a culture of accountability and trust.
How To Implement a GRC Strategy that Aligns with Business Goals
Implementing a GRC strategy is about aligning your organization’s governance, risk and compliance activities into one cohesive framework. A well-structured GRC implementation plan ensures that policies, processes and technology work together to minimize risk, improve accountability and maintain compliance across departments.
Every successful GRC framework relies on three key components: stakeholders, framework design and GRC maturity. The stakeholders are the people responsible and accountable for everything GRC. They include:
- Senior management and internal auditors
- Legal teams
- Finance managers
- General counsel
- IT security and IT managers
- Risk officers
Once you have your key stakeholders onboard, the next step is to choose a framework. A framework is a set of processes and structures that help you achieve your GRC objectives. Plus, you’ll need GRC tools and software to streamline the management and tracking of GRC activities and provide real-time insights into risk and performance.
What is a GRC tool? It’s any software that helps you streamline, automate and manage GRC processes. Do your due diligence in choosing a GRC solution that suits your specific needs. Some factors to consider include scalability, integration with CRM and IT management tools, user-friendliness, robust reporting and real-time insights. Customer support and training are crucial, too, as proper guidance can maximize the tool’s effectiveness.
The third component is GRC maturity, which is the extent to which governance, risk and compliance are integrated within your business. Ideally, you want to have a high level of maturity to reap the full benefits of your GRC strategy.
Once these components are in place, you can start implementing your GRC strategy by following these steps.
Step 1: Build a GRC Framework
Start by identifying your most pressing governance, risk and compliance challenge, such as evolving regulatory requirements, cybersecurity threats or internal silos. Then design a GRC framework that encompasses:
- Corporate governance
- Risk management
- Compliance management
- Information security
- Operational processes
Step 2: Identify Risks and Shortfalls
What are the current operational risks and compliance shortfalls in your business? For example, do you have adequate data protection measures? Are there conflicts of interest within your organization?
Don’t forget third-party risks. Use our third-party risk assessment checklist to identify risks posed by vendors, contractors, suppliers and partners.
Also, get buy-in from all the top-level executives and their departments. This will help you identify risks and shortfalls from different perspectives, making your GRC strategy more comprehensive. Lower management may also be more willing to participate if they see executive support for the GRC strategy.
Step 3: Set Roles and Responsibilities
GRC implementation or management isn’t a one-person job. Everyone in the organization is impacted by it, so it makes sense that they all play a role in implementing it.
Assign roles to every member in the organization. For example, the chief financial officer should oversee financial risks, the chief information officer should handle data privacy and security risks and the HR department must stay up-to-date on labor law compliance.
Step 4: Automate GRC Tasks
The fast-paced and complex nature of modern business operations makes automating GRC tasks a smart choice. While many businesses still use spreadsheets and manual systems, adopting automated solutions can significantly improve efficiency and reduce errors.
Modern GRC software solutions come with many features, including but not limited to:
- Automated risk assessment and management
- Compliance tracking and reporting
- Incident management
- Third-party risk management
- Content and document manager
- Analytics and KPI dashboard
Some of them even alert you of changing regulatory requirements so that you’re always on top of your compliance game.
Step 5: Train Employees and Test the GRC Framework
Provide your employees with everything they need to know about GRC management processes and expectations. Some resources include:
- Employee training and awareness sessions
- Coursework that emphasizes specific GRC responsibilities assigned to employees
- Hands-on learning with the tools and software used for GRC
Once the GRC framework is up and running, test it regularly to see if it’s delivering the intended results. If you notice shortcomings, weed them out before they become major issues.
For example, track compliance rates, risk mitigation success, incident response times, and the overall performance of automated processes. Look out for any gaps in risk coverage, such as inconsistent reporting or delays in issue resolution. Identification is the first step in resolving these issues.
Regular audits and feedback loops with key stakeholders will help fine-tune the system. Similarly, you can streamline workflows or integrate more advanced automation to speed up responses.
Frequently Asked Questions About GRC
What does GRC stand for in business?
GRC stands for governance, risk and compliance, a framework used by organizations to manage legal obligations, operational risk and corporate oversight.
Why is GRC important for executives?
Because it gives senior executives a clear view of risks and compliance obligations so they can make informed decisions that support business continuity and organizational growth.
What is a GRC tool?
A GRC tool is software that automates compliance workflows, supports integration of governance into business processes, tracks risk and improves collaboration across business units.
How does GRC reduce cost and risk?
By improving cost efficiency, eliminating redundancies, reducing human error and strengthening the effectiveness of risk mitigation throughout the organization.
Ace GRC With Onspring’s GRC Software Solution
A GRC software solution can ease compliance burdens by automating tasks and providing valuable insights. Typically, it takes anywhere from a month to two to implement such software. However, businesses with more complex requirements and legacy data migrations might need more time.
At Onspring, we’ve developed a comprehensive GRC software solution to cater to your needs. With strict customer data management protocols and a no-code, flexible platform, Onspring stands out as a remarkable choice for your GRC framework. Since it scales with your business process and growth trajectory, you don’t have to worry about outgrowing your GRC software solution.
Plus, our tool supports risk management, compliance, legal, audit, data privacy management and third-party risk management teams, so you have a comprehensive solution in one place. Schedule a demo to see Onspring in action.
