Startups in various industries face significant risks when they don’t have a well-defined approach to governance, risk and compliance (GRC).
By DEVIN PARTIDA
In a 2017 Small Business Regulations Survey, 14% of small-business owners reported spending over 20 hours each month on federal regulation. However, many wonder whether their current approaches to GRC are working.
Startups need a robust GRC program to manage compliance with the ever-changing regulatory environment. It can also improve their information security practices and streamline audits. However, as regulations continue to soar, there are many new guidelines and policies to follow to mitigate risk.
As a result, small organizations must get strategic to ensure corrective actions and controls are in order.
What Is Governance, Risk and Compliance?
GRC is a set of procedures and processes helping businesses achieve their objectives, instill good business practices and address uncertainty. The concept is not new, but it has significantly grown as risks increase in number, complexity and damage.
GRC spans multiple business disciplines such as third-party risk management, compliance and internal audits. Essentially, it is a technology-based approach aligning with the company’s objectives and managing risks effectively to comply with regulatory requirements.
In theory, GRC contains three components.
Your organization must incorporate a hierarchy to establish those responsible for decision-making within the business. Defining responsibilities gives the committee guidance on communicating strategies, enabling your journey to risk maturity.
Risk management involves activities that identify and analyze risks in business — and others that could affect the structural foundations of your small enterprise.
Compliance focuses on following all laws and regulations applicable to your business. For instance, it ensures your IT systems and data are secure and utilized per regulatory requirements. Taking corrective actions and ensuring controls are in place can help you avoid repeating the same mistakes.
Challenges Small Businesses Face With GRC
GRC is structured to consolidate various issues and map out all the necessary processes, but you might face one major problem. Small businesses don’t have distinct departments for compliance, risks and governance. However, you can still find difficulty with information exchange and accountability.
Traditional functioning roles within GRC often work in silos. Therefore, your business’s processes can result in inefficiencies and inaccuracies with risk management, internal audit, compliance and more.
The main challenge comes down to the overlap between governance, risk and compliance. Each of the three components stacks valuable information within the other two — meanwhile, all three impact technologies, people, information and processes in the same way.
When managed separately, tasks often duplicate where multiple teams might spend hours collecting the same data. The lack of transparency becomes damaging in the process, leaving your startup blind to insights and the interrelationship between risks.
Therefore, it’s more critical than ever for you to develop a strong GRC model. The reason is that your business is less likely to survive the noncompliance consequences than a capitalized corporation. The average cost of noncompliance for small businesses is $30,651 — which could damage your reputation and business growth.
Successful Strategies for Navigating GRC
Follow these tips to ensure you manage an effective companywide GRC journey.
You may spend a tremendous amount of time managing risks, but you could also lack focus on monitoring critical controls carefully. Ensure you adopt a proactive approach to monitoring. That way, you can adequately prepare to address new risks.
Prepare Your Startup
You must assess and monitor your small business’s current risks when purchasing a GRC software solution. Evaluate your controls to see how they’re working and whether you need to add or modify anything. Next, you can create your GRC framework and focus on the people and processes involved.
Implement the Right Integrations
Implementing integrations can increase the efficiency of your GRC programs. Therefore, you’re managing risk more proactively and centralizing data, silo tools and stakeholders into one location.
Many of your colleagues might not understand your framework and the objectives of GRC. It’s essential to communicate the concept of GRC to educate your associates. That way, you ensure a smooth workflow within your business.
Leveraging GRC to Attain the Best Results
Think of GRC as an integrated form of people, processes, strategy, technology and time. You can create a structured workflow after considering all these elements. In turn, you make decisions at the right time and plan the best action to achieve the final goal.