Running a corporation comes with certain risks, as all corporate leaders know. But running a corporation without regard for proper governance, risk management, and compliance measures is a much, much riskier—and ill-advised—endeavor.
That’s where enterprise governance, risk, and compliance (EGRC) comes in. EGRC gives corporations a framework for anticipating and handling issues related to corporate governance, a corporation’s risk profile, and compliance with legal, regulatory, and ethical requirements.
A Deloitte survey of the global financial services industry found that only 65% of institutions considered themselves to be very or extremely effective at managing non-financial risks. That figure was even lower when it came to non-financial risks regarding conduct and culture (55%) and data quality (26%).
And although half of the institutions surveyed reported that risk management technology would be a very or extremely high priority for them in the next two years, the majority of those institutions had not yet implemented those technologies.
That’s where a comprehensive EGRC program can help. But what does EGRC entail?
In this post, we’ll define EGRC and discuss the difference between EGRC and standard governance, risk, and compliance (GRC). We’ll then talk about how EGRC works, its benefits and challenges, and a few things all strong EGRC strategies have in common. Finally, we’ll share some tips for successfully implementing an EGRC strategy and explain how technology can help.
What is enterprise governance, risk, and compliance (EGRC)?
What is the difference between governance, risk, and compliance (GRC) and EGRC?
How does enterprise governance, risk, and compliance work?
The benefits of enterprise governance, risk, and compliance
The challenges of enterprise governance, risk, and compliance
What all strong enterprise governance, risk, and compliance strategies have in common
How to successfully implement an organization-wide EGRC strategy
The right tools can help companies improve their enterprise governance, risk, and compliance strategies
What is enterprise governance, risk and compliance (EGRC)?
Enterprise governance, risk, and compliance (EGRC) is a set of policies and procedures that organizations use to handle governance issues, manage risk, and ensure compliance in a unified way. Let’s look at each of these components separately.
Governance relates to how an organization operates, including its power and accountability structures and how its leaders make decisions. Corporate governance can also involve environmental considerations, ethics, and business strategy.
Risk management, on the other hand, is the process of identifying and analyzing potential negative outcomes and responding proactively. Corporate risk management is essential for reducing the costs associated with certain risks and maximizing a company’s profits.
Finally, an organization achieves compliance by following relevant laws, regulations, and ethical standards. Corporate compliance typically involves creating, implementing, and monitoring internal procedures in accordance with government-imposed and internal rules.
EGRC combines these three disciplines into a coordinated organization-wide approach aimed at achieving a company’s goals.
EGRC sounds an awful lot like governance, risk, and compliance (GRC), but they’re not exactly the same.
What is the difference between governance, risk and compliance (GRC) and EGRC?
The difference between governance, risk and compliance (GRC) and EGRC lies—perhaps obviously—in the “E” that sets them apart. That “E” stands for “enterprise.”
Like EGRC, GRC is a collection of policies and procedures that employees and departments throughout an organization must follow. But while GRC encompasses varying department-specific approaches, EGRC takes a broader, more high-level business approach and applies it across the entire organization rather than focusing on its component parts.
Thus, the “E” in “EGRC” represents more than just the application of GRC to enterprises. The “E” adds a business lens through which an organization formulates and integrates its EGRC strategy.
Let’s take a closer look at EGRC in practice.
How does enterprise governance, risk and compliance work?
A company can take an enterprise governance, risk and compliance approach by identifying its main goals and developing a framework for managing governance, risk, and compliance in a way that advances those goals. This framework includes standardized policies and workflows.
Where does the framework come from? Senior executives and team leaders from key departments must work together to design and implement the framework. Those key departments include:
- general counsel,
- legal operations,
- human resources, and
- information technology.
After developing the EGRC framework, corporate leaders must work together to integrate the new policies and procedures throughout the organization, monitor outcomes, and share information.
Developing and implementing enterprise governance, risk, and compliance can be quite an undertaking. So, why do it?
The benefits of enterprise governance, risk and compliance
EGRC is important because it helps companies run smoothly, safeguard themselves against risks, and ensure compliance—which ultimately moves them closer to achieving their broader business goals.
Proper EGRC practices can benefit companies by:
- increasing efficiency by requiring departments to streamline existing workflows and thoughtfully design new approaches;
- giving corporate leaders more consistent insights into potential risks;
- insulating them from the costs associated with regulatory enforcement actions, lawsuits, and reputational damage by detecting risks earlier and preventing errors and non-compliance; and
- enhancing risk response by implementing policies and procedures designed to detect and mitigate risks.
Before a company can adopt an EGRC strategy that delivers these benefits, it must be prepared to face certain challenges.
The challenges of enterprise governance risk, and compliance
Creating and implementing EGRC policies and procedures can be very difficult, especially for large companies. Here are some of the greatest challenges of EGRC.
Disparity between a company’s culture and its EGRC framework
An EGRC framework must be more than just a collection of ideals that no one in the company believes in or cares about. An EGRC framework must reflect meaningful values and realistic goals that key stakeholders share and that the rest of the company can get on board with and adapt its practices to. When there is a large gap between a company’s EGRC framework and its overall culture, it can be very challenging—if not impossible—to integrate new policies and procedures into its business practices.
Lack of unity between different departments
A successful EGRC strategy requires unified implementation across the entire enterprise. If a company’s various departments operate in an overly siloed or disconnected way, it can be harder to integrate EGRC into each department’s operations consistently and effectively. This can result in a haphazard EGRC program, which leaves more room for poor governance, exposure to risks, and legal, regulatory, and ethical non-compliance.
Difficulty adapting to changing laws and regulations
For an organization to remain compliant as a whole, every part must concern itself with relevant legal and regulatory requirements. But laws and regulations are never static—and as they change, it can be difficult for risk and compliance teams to make each department aware of new requirements and help them change their business practices accordingly. This means that EGRC programs must include a mechanism for helping the entire company understand, respond, and adapt to shifting compliance demands.
Barriers to maintaining and accessing risk data
A successful EGRC program depends on frequently monitoring and aggregating data across all departments to spot potential risks and non-compliance. But many organizations have trouble maintaining and accessing risk data, especially when it comes to unstructured data or data that employees record in different repositories or formats, such as within spreadsheets or in the content of emails.
Monitoring can be particularly difficult when a company performs some or all of its information gathering and analysis manually. Such inconsistencies and inefficiencies can lead to wasted time, a lack of transparency, reduced accountability, and, ultimately, greater exposure to risks.
With these challenges in mind, let’s turn to what a strong EGRC strategy should look like.
What all strong enterprise governance, risk and compliance strategies have in common
There are many ways to successfully implement an EGRC program, but all strong EGRC strategies share certain characteristics, including:
- a mutual understanding of the company’s goals;
- an organization-wide commitment to legal, regulatory, and ethical compliance;
- a sense of cohesiveness and unity across all departments;
- a culture of transparency and accountability; and
- a system of checks and balances for identifying what is working and what is not.
How does an organization implement a successful EGRC strategy that has all of these traits?
How to successfully implement an organization-wide EGRC strategy
While it isn’t easy to successfully implement an EGRC strategy that reaches all aspects of an organization, it is possible. Here are our top five tips for implementing an organization-wide EGRC strategy.
Initiate a cultural shift from the top down
As we mentioned earlier, one of the biggest challenges of implementing an EGRC strategy arises when a company’s EGRC framework reflects values that aren’t consistent with the organization’s culture. In this case, a company may need to initiate a cultural shift within its ranks before it can implement a new EGRC framework.
What is a cultural shift? It’s the change that occurs when “an organization encourages employees to adopt behaviors and mindsets that are consistent with the organization’s values and goals.” In terms of EGRC, an organization’s values may be transparency and accountability, while its goals may be specific to ethical and legal compliance. Whatever these values and goals, the company—from the C-suite down to each employee—must be on the same page regarding their importance.
How can an organization get everyone on board with a new culture? A true cultural shift starts with a mindset change among senior executives. Senior executives and team leaders can then use education and training programs to influence all tiers of the organization. Without buy-in from employees at every level of the company, an EGRC initiative may amount to little more than an updated mission statement.
Take a unified approach
EGRC involves applying a set of policies and procedures to an organization as a whole, as we discussed above. Therefore, a company must design and implement its EGRC strategy consistently for it to be successful. A company can take a unified approach to EGRC by:
- ensuring that its senior executives and team leaders are on the same page,
- implementing standardized procedures and workflows,
- training staff to record data using prescribed methods and tools,
- monitoring EGRC processes by collecting data across the organization, and
- correcting any errors or inconsistencies as they occur.
Foster frequent interdepartmental communication
The success of an EGRC program depends upon transparency. To achieve and maintain transparency, a company should encourage frequent communication and facilitate information sharing between executives, departments, and risk and compliance teams. Open and honest communication can help organizations perform more effective risk management and achieve seamless compliance. It can also help corporate leaders make decisions faster and create new policies more easily.
Consistently monitor business operations
EGRC is not a one-and-done project. Rather, it requires ongoing data generation, reporting, and monitoring to be successful. Employees should routinely record EGRC-related data and have a clear channel for immediately reporting issues up the chain. The company should consistently monitor this data and its internal operations so it can quickly respond to any red flags or disruptions that may arise. Then, the company can reevaluate its EGRC strategy and processes to ensure that both remain focused on achieving its high-level business goals.
Technology is essential to implementing a successful EGRC strategy. Any company that is implementing an EGRC program can benefit from using technology that automates EGRC management. With the right tools, a company can efficiently collect and analyze different types of data across the organization, measure progress, and close any gaps in its EGRC strategy so it can deliver on the promise of a strong EGRC program: minimizing risk while achieving the company’s business goals.
The right tools can help companies improve their enterprise governance, risk and compliance strategies
Modern technology can make a company’s EGRC efforts more effective and protect its bottom line by allowing the company to measure its performance, detect risks sooner, and take immediate corrective action.
For example, Live Early Data Assessment (Live EDA) can help companies closely monitor and vastly improve their EGRC strategies. What does an eDiscovery tool have to do with EGRC? Simple: both eDiscovery and EGRC are all about gaining quick access to information and insights. The Live EDA platform enables users to take a data-informed approach to corporate governance, risk management, and compliance by providing access to real-time performance data and forecasts.
With the help of Live EDA, companies can gain actionable insights much faster and more easily than they could with manual review, at a fraction of the cost.
To learn more about IPRO, Live EDA, and our other solutions, get in touch or schedule a demonstration today.