Which is the best solution for your organization?
In this blog we will look at two major approaches, or methodologies, in the field of risk management: ERM and GRC. But do you know the difference? In this article we will help you understand how they differ, so you can find the best possible solution for your organization.
Let us start with what the acronyms stand for. GRC refers to Governance, Risk & Compliance. ERM, in turn, stands for Enterprise Risk Management.
Both terms refer to the management and handling of risk within an organization; in other words, they pursue the company’s strategic objectives by seeking to minimize potential risks or, failing that, to mitigate their value as effectively as possible. However, that shared objective is pursued through a completely different strategy in each case, as we will see below.
ERM
The main objective is risk management, and that is the exclusive focus of this methodology: identifying and assessing enterprise risks on the basis of the activity and findings of each area or activity.
This process must run across all departments or areas of the organization, gathering detailed information from each of them in order to define existing risks and make decisions in line with their operational objectives. To put it another way, it is an empirical analysis of risk carried out individually, before the necessary controls are applied.
In short, it is a risk-centered process based on collecting operational data and objectives from each area, but with a cross-cutting view that supports decision-making.
GRC
The acronym itself signals the shift in focus compared with the previous methodology: the main objective is to interconnect areas under those three pillars — Governance, Risk and Compliance. This creates operational synergies that optimize processes and avoid duplication.
The value of GRC is underpinned by senior management, which makes it a top-down process within the organizational chart. As a result, the company’s risks must be aligned with regulatory compliance, adopting generic strategies that can be applied to any area or department.
This solution is a philosophy of risk analysis built around governance and compliance objectives, applicable across the entire organization in a standardized way.
Which should you choose: ERM or GRC?
Neither methodology is better than the other. Each approach is valid depending on the solution you want to implement, with one key difference: the conceptual idea of risk. In one, risk is more quantifiable in each process and its results, as in ERM; in the other, it is treated more conceptually, through compliance based on general operating practices, as in GRC.
If you are looking for a specific solution to achieve business objectives with a focus on the risks of each area or department, with detailed information on each one and operational decisions taken on that basis, the ERM approach will most likely be the best fit for you.
On the other hand, if there is a high involvement of senior management, engaged in the Governance of the organization, with a vision of risk and compliance that is generic and applicable to any area, that is, with a definition of certified controls applicable to the entire company, a GRC solution will be the most efficient approach in your case. In addition, because it is a broader concept of operational risk that connects every department in the company, it offers a more complete view to the “C level”, or executive level, helping to optimize the organization’s governance.
At our organization we have GlobalSuite®, software that makes it easier to implement a corporate risk management system and provides automation and traceability throughout the entire risk analysis and management process.
We also have a consulting practice that will advise you and help you implement the system, so you can see how well your organization is protected against the potential risks affecting your business processes, based on either ERM or GRC.
