Risk management is a complicated endeavor for both small and large organizations. There are usually multiple types of risk to consider including financial risks, environmental risks, cybersecurity risks, and risks to worker safety.
Issues such as lack of visibility into critical risks (often caused by data silos resulting from lack of communication between different departments) and slow action to mitigate risks have cost organizations millions (even billions) of dollars.
These problems can be solved using an integrated risk management framework.
But what is integrated risk management (IRM) and how does it differ from the more well-known governance, risk, and compliance (GRC)? Why use this framework? And how does one implement it? This article answers all these questions and more.
What Is Integrated Risk Management?
Integrated risk management or IRM is an approach to mitigating risk that involves an integrated view of risk as a fundamental part of the business strategy. To implement IRM, the business must already have a foundation in the form of a risk-aware culture. A critical part of this integrated risk management framework is seeking input from all teams within the organization, which eliminates data silos and improves decision-making related to your organization’s unique set of risks.
IRM consolidates three different areas of risk management — cyber risk, operational risk, and strategic/enterprise risk management (ERM). An IRM program is usually collaborative and involves leaders from both the IT and business side of the organization.
Gartner defines six attributes of an integrated risk management program:
IRM involves a comprehensive strategy to approach risk management, including risk assessment and robust GRC measures.
Risk assessment is an important part of IRM, involving the identification, evaluation, and prioritization of organization-wide risks.
IRM needs response systems (or mechanisms) for the mitigation of risks and remediation of vulnerabilities as soon as possible once they’re identified.
4. Communication and Reporting
As IRM involves stakeholders within and outside the organization and requires consistent support from senior management, it is vital to implement robust processes to document and report identified risks and communicate risk response strategies to the relevant stakeholders.
To make the IRM framework effective, there also needs to be a way to track new risks/vulnerabilities, governance objectives, changing compliance requirements, and the effectiveness of risk mitigation strategies already in place.
A complex framework like integrated risk management with such vast communication and tracking requirements is nearly impossible to implement without specialized software. IRM solutions (IRMS) are usually SaaS platforms such as Pulpstream that can combine all the IRM attributes into user-friendly dashboards and metrics.
How Does IRM Differ from Governance, Risk, and Compliance (GRC)?
GRC, which includes governance of the organization, risks involved in running the business, and compliance with industry and government regulations, is the standard, traditional approach to risk management and compliance.
It has some similarities with integrated risk management but focuses on compliance with regulations. In contrast, the integrated risk management approach is broader in scope and more forward-thinking. It takes a comprehensive view of risk and aligns it closely with business strategy, focusing on organization-wide communication where GRC is limited to the business’s compliance team.
The IRM framework, which aims to integrate risk awareness into every aspect of the business, not only provides more visibility into organization-wide risks than the legacy GRC approach but also has a greater chance of capturing unique risks that apply to your organization (as opposed to the entire industry).
All this does not mean that IRM can replace GRC in your organization. Instead, governance, risk, and compliance form three fundamental aspects that would be included in your integrated risk management strategy.
Why Is Integrated Risk Management Important?
The risk landscape today is complex even in small businesses, with multiple risk types (like financial, information security, worker safety, etc.) competing for attention. This results in poor risk visibility and consequently, poor risk management decision-making.
Integrating risk management activities across the organization would overcome these issues and may provide additional value to the business. In fact, according to former Gartner IRM analyst John Wheeler, IRM helps businesses achieve four important objectives — better performance, stronger resilience, greater risk assurance, and more cost-effective compliance management.
There are many benefits to using an integrated risk management approach, ranging from improvement in everyday business operations to larger-scale benefits related to organization-wide decision-making and planning:
1. Accurate Company Data
As regular compliance risk assessments, accurate reporting, and effective communication channels are integral parts of IRM, the data gathered using this approach is always reliable, verifiable, and current. What’s more, this data is available to business leads and third-party stakeholders alike. This helps streamline high-level decision-making and facilitates reliable compliance efforts.
2. Better Disaster Preparedness
The IRM framework prepares you for moderate and low-risk situations as well as extremes, allowing you to bounce back from even a major disaster. So extreme weather or an organization-wide disaster resulting in work stoppage wouldn’t halt your business as IRM would have set it up to maintain business-critical functions.
3. Cost Savings
IRM maps controls related to multiple risk factors, providing insight into your risks as well as controls put in place. By integrating risk management into your business strategy, it could also identify efficiency-improving strategies during the risk identification and analysis exercise. This way, IRM helps cut costs in multiple ways.
4. Great Risk Visibility
IRM is essentially a single monitoring and management system to handle every risk your organization might face. This gives business leaders a full view of all risks, helping them see an overall risk profile, understand interactions between different risk types, and realize the impact of these risks on business objectives and strategies.
5. Improved Stakeholder Trust
Alongside the smooth running of the business and robust internal communication, trust with outside parties including clients, vendors, and potential buyers is also vital. A robust IRM process communicated well with all internal and external stakeholders goes a long way in improving this trust.
Challenges Associated With the IRM Approach
While the benefits of implementing an integrated risk management process are immense, it’s not without its challenges. Chief among them is that it’s not the easiest framework to put in place. Some of the other challenges include:
- IRM needs consistent and unwavering support from business leaders as it has organization-wide effects.
- As IRM is a multi-team effort, arriving at overall costs is very difficult, leading to issues with creating an accurate budget to implement the IRM framework.
- Regulatory compliance requirements are constantly changing, made even worse by globalization. You may end up facing conflicting regulations and restrictions on data access, storage, and transfer. This adds to the complexity of defining and understanding the entire organization’s risk profile.
- Risk data often depends on internal as well as external sources, and this data may be inconsistent or even outdated. The lack of real-time data affects the accuracy of the integrated risk management solution.
But remember, navigating these complexities and challenges is worth it, as IRM has benefits that not only better tackle risk, but also result in cost savings and better business processes.
How to Implement an Effective Integrated Risk Management Framework
From the challenges outlined above, it’s clear that implementing IRM is not a simple thing. And it can be intimidating if you’re just getting started. To help you out, we’re breaking it down and outlining the most important things to keep in mind:
Link IRM to Business Goals
While it’s not easy to find connections between separate risk types and combine seemingly unrelated mitigation tasks, it is the first step towards having a robust IRM framework.
One way to streamline this process is to gain support from upper management and then cascade the processes to the lower levels of management. This can be achieved by identifying IRM as a strategic initiative by demonstrating a direct link between risk management and better business outcomes and financial success.
Create a Risk-Aware Culture
The backbone of an enterprise-wide risk management process is a culture of risk awareness and safety consciousness. Everyone from upper management to ground-level workers should take responsibility for outcomes.
Employees should be encouraged and incentivized to approach their managers with ideas for proactive risk management solutions, and teams should be willing to consistently work together to understand the outcomes of the IRM process.
Create Risk Identification and Prioritization Procedures
Regular risk assessments are an integral part of an effective IRM framework. You need a specified process to streamline the identification of risks.
These risks then need to be quantified and rated based on likelihood, severity, and frequency of occurrence, with high ratings corresponding to high severity, etc. The risks with the highest scores will therefore be of high priority and need to be dealt with first. This process should be agreed upon by all stakeholders and implemented in the same way across the organization.
Report Effectively and Communicate With Stakeholders
Without good reporting, you won’t be able to implement integrated risk management at all. Every metric of your IRM process, every risk identified, and every control implemented needs to be reported clearly and accurately.
These reports then need to be communicated with everyone involved, as IRM is a cross-functional effort. All stakeholders need to know exactly what’s happening and be able to track and monitor actions and controls. This is key to making your integrated risk management program a success.
Invest in Automation to Streamline Your IRM
Enterprise-wide risk management can be complex and time-consuming, especially if you attempt to do it all manually. Automation, in this situation, can save you lots of time and effort and also lead to a better, more efficient system. Using integrated risk management software such as Pulpstream will make everything easier.
Pulpstream’s intuitive dashboards will help you keep track of all risk management actions and controls. Advanced analytics and visualization capabilities will make detecting connections and risk patterns much easier. And you can set up the platform to automate communication and updates to all stakeholders. Finally, you can control access to the dashboard so that relevant people can track and monitor all your IRM efforts.
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