A Complete Introduction
GRC Tool Definition
Governance, risk management and compliance (GRC) encompasses an organization’s integrated approach and collection of capabilities that enable the organization to reliably address uncertainty, achieve objectives, and act with integrity. GRC tools assist organizations with activities commonly conducted in departments such as compliance, internal audit, legal, risk, IT, finance, HR, and the C suite.
GRC software enables both large private and publicly-held companies to manage and integrate regulated IT operations. Often, such software presents a single integrated package that includes all applications that manage core GRC functions. More specific GRC tools that satisfy targeted IT functions also exist, such as cloud compliance software for audit preparation.
What are GRC Tools?
GRC tools integrate compliance into normal business processes such as emergency access management, periodic risk assessment, role management, and user provisioning. GRC tools reduce risk from malicious activity or fraud and streamline routine audit and compliance processes in core software such as enterprise resource planning (ERP) systems.
GRC tools monitor user access and privileges, and alert the organization of users who perform actions or have levels of access that may indicate fraud or violate compliance program requirements. This type of software also facilitates risk analysis, auditing, and other GRC processes by maintaining compliance audit logs and compiling reports. Finally, GRC software and other tools form a control repository, enabling the compliance team to prove that documented procedures and policies are followed.
Typically, GRC tools standardize and coordinate controls and policies. They provide a common user interface and form a common repository for data collected from questionnaires, documents, and other IT and security compliance systems, and for information covering both internal and regulatory requirements.
GRC tools are specifically designed to help companies manage IT risk by navigating the potential benefits, pitfalls, damages, and uncertainty of risks associated with the adoption, use, and influence of IT within a company. IT risk governance is part of a larger, more comprehensive enterprise-wide risk management strategy.
GRC assessment tools provide assurance and audit professionals with GRC assessment capabilities and procedures. Audit, compliance, and risk professionals, both in-house and consulting, can apply GRC assessment tools to a review of discrete business units; specific sub-capabilities such as risk management or training; individual risk-specific programs such as privacy or anti-fraud; and the entire enterprise.
Why is GRC Important?
Through a unified, integrated approach that mitigates the effects of blindspots and organizational silos, effective implementation of GRC reduces risk and improves control effectiveness and security compliance for the organization.
Control at each level
Depending on one’s role within an enterprise, GRC has different meanings. This is principally because so many users are at least tangentially involved in accessing and processing data. Effective GRC recognizes these differences and improves compliance.
GRC is more pragmatic and operational for the IT department and related teams in compliance and security. The aim is to establish policies and practices that minimize compliance risk and enforce them. At this level, audits for regulations such as Sarbanes-Oxley (SOX) are the milestones by which GRC operates. However, business partners, clients, customers, employees, and providers all need access to some level of potentially sensitive information, such as financial reports, HR records, and invoices. This level of policy and practice ensures such access is safe for the company.
Due to the obligation the Board of Directors has to protect shareholder assets against risk, the next level of GRC concerns governance, or how the company runs. Compliance at the board level focuses on ensuring stakeholders can perform essential business processes such as counting inventory, ordering stock, and paying vendors—all while ensuring the company remains compliant with laws, such as environmental regulations, OSHA, and SEC rules.
Because enterprises rely on software, compliance policies also exist at the data and software level. In fact, in computer systems that underpin accounting and financial reporting workflows, rules are embedded.
Compliance requirements are cumulative, in that when a new law or set of regulations such as the GDPR takes effect, it does not mean other regulations such as OSHA or Sarbanes-Oxley no longer apply. For this reason, GRC tools must account for cumulative requirements.
Threats that once seemed improbable or remote now appear more concerning, for a variety of reasons. For example, in the past a system access policy for departing employees may have been sufficient control against unauthorized access; such a policy would simply revoke system access privileges for any employee leaving the company.
Today companies face additional risks, including from current employees with access who may sell their credentials. To mitigate these kinds of risks, it is essential to use both robust security tools and practices and stronger GRC monitoring.
Application and system architecture changes also affect GRC. For example, if an enterprise adopts a new data system such as SAP HANA, this should trigger changes in GRC processes because of the need to configure GRC in the SAP HANA environment.
Information technology is evolving constantly to meet the needs of users and the demands of regulatory bodies. In particular around privacy and security protocols, control over compliance is critical to ensuring updated processes. An effective GRC strategy unites various compliance, risk, and governance functions in a complex enterprise in one strategy to provide a comprehensive window into risk across the organization.
What is GRC Audit?
Although no one enjoys the scrutiny of an audit, effective GRC audit activities are designed to protect an organization’s operations and add value to the enterprise overall. A GRC audit or any internal audit is part of a multilayered strategy that defends the organization against a risk event.
Risk management strategy and organizational hierarchy
All organizations have a hierarchy starting with the CEO and Board who set broader strategies. The COO, CRO, and others in the organizational hierarchy are responsible for executing the organization’s objectives day to day and making the tactical decisions they need to do that.
To assist them in doing this ethically, the organization needs policies and procedures that identify and mitigate risk. This set of procedures serves as a comprehensive defense for the business, and works to help members of the team ensure that risk events never make it past each safeguard and into a potentially violative area. While various team members will have overlapping roles and responsibilities, each line of defense in the audit hierarchy is distinct.
In a typical organization, the first line of defense in a GRC audit is the business operations team. Comprising day-to-day employees and business leaders, business operations is responsible for identifying risks, creating policies and procedures, and ensuring that controls are in place from the start.
However, those who are fortifying this first line of defense have an on the ground, granular view. This is extremely useful in context, but it also means they may lack a bigger picture view of risk context, being so close to the action. A change in conditions or an unexpected risk can get past the business operations team in some cases for this reason.
Business support functions
At the large enterprise level, the next line of defense comes from business support functions. This includes accounting, the legal team, the risk management team, third-party oversight, or another business support function. Obviously, at this level, there is a broader view of risk.
For example, accounting may discover an issue using variance analysis that suggests a process is broken, which caused the company to fail to meet expected numbers. Once they have made this discovery, accounting can take action to prevent the risk event themselves.
Another example of business support functions comes from the CIO or IT. Leadership there may learn of a new security issue or cyberattack and simply change IT procedures proactively to guard against the new risk or adopt any necessary new tools.
In both examples, the team could see the problem before or as it was developing. In the first example, accounting was able to react and deal with the issue themselves. In the second, seeing the problem coming, the team was able to change their own procedures in advance. This is where the internal audit comes into play.
The GRC audit is the third and final line of defense against all kinds of organizational risk, and it is the most nimble. A GRC audit team is small, and must cover extensive ground as they survey a broad view of the risk that may exist. A GRC audit is designed to assist other teams in mitigating risk events and to catch risk events before it becomes the problem of an external agency or auditor.
In other words, the audit is small and flexible by design. The process is intended not to hamper other teams or function as in-house cops, but to support teams and proactively help them modify their approach as needed to ensure compliance. The GRC audit is, therefore, the last line of defense in a successful compliance risk management system.
By mastering GRC, the internal auditor guides the company toward an integrated governance, risk, and compliance capability and approach. In fact, according to guidance from The Institute of Internal Auditors, evaluating and improving the effectiveness of control, risk management, and governance processes is already an expected part of the internal audit function. Effective GRC tools can help ensure only appropriate controls are effectively operating, use resources efficiently to address risks as intended.
What is GRC Software?
Once, GRC was the realm of legal pads, boxes, and spreadsheets, but those days are over. Today, GRC software enables and automates the GRC process.
GRC software itself is made up of a set of tools designed to integrate and automate compliance and auditing into everyday business processes. It also reduces the risk of malicious activity or fraud in system applications and products in data processing.
GRC software monitors user access and privileges. When a user’s actions or access level could be violating compliance requirements, it alerts admins or flags suspected fraud.
GRC software also maintains audit logs. To assist in risk analysis, auditing, and other GRC processes, the software uses these logs to generate reports. GRC platforms are ultimately a repository for controls that the compliance team can use to demonstrate how the enterprise complies with documented policies and procedures.
What is GRC Technology?
The phrase GRC itself implies the use of technology to align governance, risk, and compliance. GRC does not increase the workload, introduce new processes or modify goals. Instead, it streamlines existing governance, risk, and compliance tasks to ensure they all support the same goal. GRC technology is not a particular tool or type of software. All technologies that assist in aligning governance, risk, and compliance are GRC technologies.
What are the Benefits of a GRC Tool?
Publicly traded companies use governance, risk and compliance software and other tools to manage IT operations that are subject to regulation and control how users access their data. Businesses need GRC to:
- Align IT strategy organization-wide and eliminate independently operating silos
- Achieve goals while safeguarding value and streamlining risk profile
- Minimize online threats, catch errors, and detect fraud
- Ensure compliance by company and staff with governmental regulations such as Sarbanes-Oxley, industry regulations such as SOC 2 compliance and PCI DSS compliance, NIST compliance, HIPAA Compliance, the GDPR and other data privacy laws, customs and export laws, OSHA and other hazardous materials requirements, and more.
There are many factors to consider when comparing GRC tools. Here are some of the most important general factors.
- User interface. User interface should be clean and attractive. Cloud based tools offer additional options.
- User experience. The GRC tool should be simple to learn and easy to master. The company should offer good tech support, user support, tutorials, and training.
- Features and functionality. There are many possibilities here, but these are most important:
- Risk analysis. Ability of the software to analyze information, assess risks, and offer suggestions for future mitigation.
- Compliance database. GRC tools should teach compliance initiatives and track their progress in a way that keeps teams informed and on track.
- Auditing tools. GRC software should be designed and built for appropriate financial, procedural, and resource audit preparation as needed. Can it provide a SOC 2 report to help achieve SOC 2 certification or drive a SOC 2 audit?
- Analytics and reporting. GRC tools should be equipped with analytical and reporting capabilities that allow for customizable, robust, flexible export of information into visually appealing reports in popular file types for review.
- Integration. Many GRC tools include pre-built integrations, but it should be simple to connect with other tools regardless.
- Cost and value. Analyze the fit between the cost and the GRC tool’s capabilities, features, and use case. Confirm that pricing is clear, flexible, and transparent.
The foundation of governance in IT is ensuring that an organization’s IT strategy and business strategy are aligned. For this reason, the ultimate goal of IT governance is to ensure that overall business strategy drives the processes controlling how competing IT investments are evaluated, chosen, prioritized, and funded.
In the first distinct phase of IT governance, the team determines, based on what drives the business, what the IT organization works on. In the second phase, the team determines how what the IT organization does supports the organization’s business goals—a CIO responsibility. With an IT governance framework in place, the team can assess the overall function of the IT department, identify key management metrics, and clarify ROI for IT.
Risk and compliance
Processes to ensure compliance with multiple regulations and to manage risk across the enterprise usually accompany IT governance. Federal statutes require some publicly traded and financial companies to complete elements of enterprise risk management (ERM). A company’s ERM score affects their S&P credit rating.
Particularly for companies operating in multiple countries, it can be a challenge to definitively navigate all applicable governmental regulations for Basel II, customs and exports, GDPR and other data privacy laws, SOX compliance, and additional financial reporting and industry regulations.
GRC platforms with risk and compliance software modules provide insight into company-wide risk, streamline testing and automate controls for improved employee efficiency, implement needed controls and paperwork to manage compliance, and reduce time to audit.
What are Typical GRC Capabilities?
Although there are many GRC tools available today, there are some typical GRC capabilities that many less specialized tools share. Typical GRC capabilities and features include:
- Access and privilege control
- Enterprise compliance audit management and inspection management
- Automation in audit to manage compliance
- Document and information management, including enterprise audit trail, audit evidence, version control, and archiving
- Incident management, including (CAPA) tools for root cause analysis and corrective action
- Ongoing monitoring of business processes
- Policy management
- Reporting tools
- Risk management and mitigation
- Third party/supplier risk management
- Training record manager
GRC tools may be business-wide or system-specific in their scope of compliance capabilities and governance. Some products offer an all-in-one, cross-business GRC platform for controlling data and facilitating regulatory compliance. Others such as data integration processes or Office 365 systems focus on specific processes or environments. Consider which particular processes or areas demand GRC support, and the tailored scope that will meet their needs.
GRC tools may be compliance focused, process-focused, or both. The two business goals of ensuring regulatory compliance and preventing losses of resources or data are not mutually exclusive, and most GRC tools can achieve both goals. However, many GRC tools may be more specialized in a particular area. For example, expect an emphasis on audit support and reporting from compliance-focused tools, and more of a prioritization of policy management or data loss prevention from resource control-focused GRC platforms.
GRC tools are intended to make governance and compliance easier for InfoSec professionals, so their overall usability greatly affects that benefit. For example, how effectively the platform streamlines compliance reporting, policy management, and other workflows is essential to usability.
What are Enterprise Governance, Risk and Compliance Platforms?
GRC platforms enable large enterprises to monitor risk to minimize legal, financial, and other liabilities. Features in these platforms collect, evaluate, and organize risk information, and track incidents company-wide. They also offer a variety of tools for measuring risk, and for modifying operations to comply with regulations and policies.
GRC platforms are typically used by analysts, compliance officers, and managers. These platforms often reveal how compliance affects the overall business by integrating with general performance management software.
Each of the three components of GRC—governance, risk, and compliance—reveals valuable data about the other and affects the organization as a whole. This ability to deliver these collective benefits is why vendors generally package GRC platforms.
To be fairly called a GRC platform, a product should:
- Assess, catalog, and mitigate risks specific to the business
- Deliver compliance specific learning and training
- Ensure compliance with regulations and company policies
- Assist users develop and implement audit programs
- Offer business continuity management functionality
- Provide risk communication tools
- Perform due diligence and third-party risk assessments including GRC security audits
Support multiple risk management methodologies.
Integrated Risk Management, Enterprise Risk Management, and GRC
Integrated risk management (IRM), enterprise risk management (ERM), and GRC all refer to integrated, enterprise-wide risk management. In other words, each includes audit, compliance, cybersecurity, finance, human resources, natural disasters, privacy, and all other aspects of risk management.
However, ERM involves the strategic, high-level risk management that involves executives and the board. According to Gartner, IRM involves the technical controls critical to effective cybersecurity such as network monitoring, security monitoring, and perimeter protection—the hands-on functionality that enables ERM.
System management resides somewhere in the middle. Risk management policies and procedures lean more toward enterprise-wide risk management, while the compliance aspect of certifications and accreditations falls under both ERM (such as ISO 31000 and COSO), and, in some technically-oriented areas, IRM (such as PCI DSS and NIST).
Because ERM and IRM are integrated, the places where they diverge are less important. Both offer a holistic, integrated model of operation and IT risk management. GRC comes into play at the level of implementation. GRC is a holistic, practical form of risk assurance or risk management.
Does Shujinko Offer GRC Tools?
Shujinko’s AuditX product is designed to be a complement to any GRC tools you are already using. Alongside broader GRC tools that often have many other functions, customers use AuditX to automate evidence collection, audit preparation, and readiness.
AuditX enables your cloud-first enterprise to automate, simplify, and modernize audit preparation for cloud compliance, and get ahead of upcoming compliance initiatives and audit deadlines. This automated solution allows enterprises to leave unclear evidence requests, chains of back and forth emails, and shared spreadsheets behind. Learn more with our FAQs page or our Cloud Compliance Case Study Examples today.
Automate Audit Preparation
Get ahead of your upcoming audit deadlines and compliance initiatives. Ditch the shared spreadsheets, back and forth email, and unclear evidence requests. Start working with Shujinko’s AuditX tool to simplify, automate, and modernize audit preparation for your cloud-first enterprise.