Recent years have seen an increased focus on GRC — governance, risk management, and compliance — outside of the enterprise arena. Small businesses and midsize companies are also beginning to integrate GRC frameworks as part of their overall business plan. The reason: when implemented properly, GRC principles hold the potential to increase profits and reduce losses.
But how does an increased focus on governance, risk management, and compliance improve your bottom line, precisely? It comes down to implementing processes that mitigate losses, while simultaneously positioning an organization to be more successful and more appealing to customers, clients, investors, and the public as a whole.
What is GRC? – The Three Component
To understand how GRC solutions make your business more profitable, you need to have a solid grasp of what the three GRC components entail. Here is a look at the three prongs of GRC.
- Governance – The concept of governance refers to a company’s operations, policies, and activities, which should serve in the best interests of the organization, while simultaneously minimizing risk.
- Risk management – The risk management component refers to the identification of risks and the development of strategies, policies, and protocols that allow a company to avoid or minimize those risks.
- Compliance – The compliance prong refers to the company’s policies, procedures, and activities. The goal is to conduct business in a legal manner that is also fully compliant with all industry- or sector-specific rules and regulations.
How Can GRC Solutions Make Your Business More Profitable?
With the three prongs of GRC in mind, hints to the potential for improved profitability begin to emerge. There are a few ways that GRC practices impact profitability.
- Legal and regulatory compliance is a major component of the overall GRC equation. By focusing on achieving and maintaining regulatory compliance, you improve profitability by cutting out those unnecessary fines and penalties. And don’t underestimate the impact of those regulatory fines. They can be tremendous. For example, a web-based business that services customers or clients in the European Union (EU) must adhere to the General Data Protection Regulation (GDPR.) Failure to be GDPR-compliant carries a hefty fine of up to €20 million or 4% of worldwide turnover for the prior fiscal year – whichever is higher.
Another example can be found in JPMorgan, which recently agreed to pay $200 million in fines for allowing employees to use the WhatsApp messaging platform to discuss business matters with clients — a violation of federal record-keeping laws. This incident serves as a powerful example of how a lack of legal or regulatory compliance can potentially devastate a company’s financials. But GRC comes to the rescue by prompting organizations to pay greater attention to their practices and how they align with laws and regulations.
- Public relations and reputation should be major considerations for a business. Bad press can destroy a company’s reputation, resulting in significant financial losses. The opposite is also true; a positive reputation, transparency, and good PR can bolster sales and improve a company’s financials in some powerful ways.
GRC comes into play because by considering the components of the GRC framework in your company’s policies, procedures, operations, and other business activities, you are inherently doing “good business.” This minimizes or even eliminates the chances of seeing bad press due to something such as a data breach, a regulatory non-compliance issue or a bad legal situation. In this way, you are minimizing risk, maximizing your chances of good press, and maintaining a positive reputation. That is a recipe for profitability.
- Data security and data management are key components of a company’s GRC risk management strategy. When implemented properly, a robust data management plan will minimize risk and maximize profits. In today’s data-driven world, your data is one of the most valuable assets your business possesses. Countless business processes are data-driven. Without that data, a company may find itself floating in stagnant water, so to speak.Data is valuable; as such, it’s vulnerable to data breaches and malicious exploitations like ransomware. To reduce risk, data must be protected with backups and appropriate data security measures, among other things. Many companies are also migrating their data to the cloud, which features greater controls, better scalability and lower costs — all great for your bottom line.
As you address these GRC-related risk management issues, it serves as an opportunity to examine other aspects of your company’s data management plan. Specifically, you may discover new ways to collect, handle and leverage your data, resulting in improved profitability. Implementing GRC solutions also helps a company to avoid costly PR nightmares, such as a data breach involving customer information. Therefore, even if you don’t improve profitability per se, you can still minimize your chances of experiencing losses.
- GRC software can be instrumental for companies that are seeking to implement a robust GRC framework. GRC software platforms centralize a company’s data and promote an integrated, collaborative approach to governance, risk management, and compliance. In doing so, this increases profitability. This is achieved in a few ways, including the following.
- Departmental division and “siloing” is broken down and communication is improved across the entire business. This results in more collaboration, which, in turn, translates into new opportunities for advancement and profit.
- GRC software centralizes key data points for a business, centralizing this information in a single location for a bird’s eye view. Data analytics and data visualization tools are also included in many platforms. This spells a higher profit margin, achieved through data-driven decision-making and data analysis, which is used to identify new opportunities for profit and growth.
COVID-19 is credited with driving the increased popularity of GRC software solutions. Companies are seeking effective and cost-efficient ways to increase profits and reduce risk, as the pandemic underscored the vulnerability that faces so many organizations.
iTech’s team has extensive experience with GRC and risk management solutions. We invite you to contact iTech today to discuss governance, risk management and compliance and how our GRC solutions can give your company an advantage over the competition and improve profitability.