By Sanjana Sachdeva, Product Marketing Manager
Whether a matter of compliance, finance, supply chain breakdowns or cybersecurity threats, risks are an unavoidable aspect of doing business. While risk is guaranteed, the fallout is not. An integrated risk management approach helps businesses to anticipate threats and proactively mitigate them before they impact the business or individuals.
Understanding integrated risk management will help your organization to build a robust risk strategy you can use to make intelligent business decisions.
What Is Integrated Risk Management?
IRM takes a holistic approach to managing risks, so departments work together on common risk management strategies and goals. It helps keep your company from becoming a statistic in the "what could we have prevented" category.
In IRM, an organization strategically identifies and addresses internal and external risks (such as vendor risk). When done well, IRM involves a set of practices that improve risk visibility and support effective decision-making. Armed with the information an IRM plan provides, businesses can mitigate, prevent, and monitor their risks.
Organizations that want to develop a comprehensive IRM strategy should understand its components and how they connect.
Gartner defines IRM by six key components:
- Strategy: The manner in which an organization uses their risk management framework to practice governance and risk ownership throughout their business units and levels
- Risk assessment: How an organization finds risks and decides which are the most important to respond to
- Risk response: The series of actions an organization takes to mitigate risks
- Communication and reporting: The way an organization informs key stakeholders of identified risks and action taken on those risks
- Monitoring: Strategies used to identify risks in real-time and track the effectiveness of risk mitigation strategies, metrics, and controls
- Technology: Key software and dashboards — including an IRM solution — that streamline all the above components, introduce automation, and give an integrated view of your risk profile
Why IRM Matters
The modern risk landscape is unparalleled, and you need a comprehensive methodology to stay ahead of the curve. A piecemeal approach isn’t enough — an organization needs a methodical and thorough risk management strategy to remain protected.
Businesses can no longer afford to rely on singular departments or stakeholders working in silos to be responsible for their risks. The way one department handles its risks affects the whole organization. Thankfully, an IRM strategy involves cross-departmental collaboration, top-down buy-in, and enterprise-wide oversight. This helps ensure your strategy is part of daily workflow practices and aligns with business outcomes.
IRM vs. GRC
IRM is often confused with governance, risk and compliance (GRC). While there are similarities between IRM and GRC initiatives, the terms aren’t interchangeable.
According to OCEG, the first to use the term, GRC is an integrated set of capabilities designed to support organizations in addressing compliance and risk with integrity.
GRC is a compliance-oriented approach in which each department handles its risks independently. Even though compliance requirements and regulatory violations can create organizational threats, GRC has a narrow, specific view of risk. It mostly relies on finance and legal departments.
IRM, on the other hand, is a risk-oriented, cross-departmental, enterprise risk management strategy. It involves internal and external stakeholders. IRM includes compliance risks, cybersecurity risks, and third-party risks.
IRM and Risk-Aware Culture
Again, integrated risk management programs require interdepartmental cooperation — assigning a list of tasks to different departments will only get you so far. Creating and supporting a risk-aware culture will help your organization better identify and respond to threats on an ongoing basis.
A risk-aware culture keeps risks top of mind during day-to-day operations and considers potential threats when making business decisions, designing processes, onboarding third parties, and more. The organization understands the unique set of risks that threaten your business continuity and supports an effective risk management approach.
How to Implement an IRM Program
When it’s time to develop an IRM program and define your risk management processes, your team needs to know the best practices to follow. However, you’ll need collaboration across your enterprise to be truly effective.
Consider these organizational best practices:
Understand the Types of Risk You Face
Before you perform a risk analysis, you need to understand the types of risk your organization is exposed to. Common risks include:
- Cyber risk
- IT risk
- Strategic risk
- Legal or regulatory compliance risk
- Supply chain risk
- Financial risk
- Reputational risk
- Privacy risk
Even if a risk largely applies to just one department (such as financial risk relating to billing and payroll), the whole organization needs to adopt the same approaches to assessing, mitigating, and monitoring risks. Enterprise-wide collaboration is key.
Align Your IRM Strategy with Business Outcomes
Even if you build a strong case for IRM, you’ll struggle to find top-down buy-in and strategy adherence. This is why it’s key to discuss IRM’s relationship to business outcomes. Prioritize risk mitigation strategies that relate to the most relevant and crucial outcomes for your organization.
Not only will you find it easier to gain support — individuals will be more likely to follow risk management processes if they see how it affects their goals and responsibilities.
Foster Risk-Aware Culture and Build IRM into Business Strategy Discussions
As mentioned above, a risk-aware culture is foundational for implementing an effective IRM strategy. Openly discuss risk management activities across all levels of the organization. Both employees and management should always have risk in mind.
Risk should inform business strategy, and the same can be said in reverse: Business strategy and objectives determine the definition of risk levels and the actions to mitigate them.
Report, Analyze, and Automate
An integrated risk management strategy should help, not hinder, your business continuity. By introducing a streamlined workflow and automating elements such as reporting, monitoring, and alerts, you’ll lower risk without placing too much burden on team members.
Start at Onboarding
There are two forms of onboarding to keep in mind as part of your IRM strategies:
- First, you should discuss risk while onboarding a team member.
- Second, your onboarding process for third parties should take your risk management strategy into consideration.
Working with third-party entities exposes an organization to a considerable amount of risk. Information security, compliance management, reputational, and privacy risks increase when data is shared with outside parties. Ensure that your onboarding and intake process for third parties includes a risk assessment and mitigation strategy.
Use Integrated Risk Management Solutions
Implementing and maintaining an IRM framework can feel overwhelming. Thankfully, risks in the technological age come with balanced solutions. IRM solutions, like Certa's third-party risk management platform, are here to save you a lot of headaches. Include an enterprise-grade software solution into your implementation plan, and see how easy it is to identify, mitigate and respond to risks.
Using disparate systems and processes for your IRM strategy is a risk in and of itself, as elements are not as cohesive as they could be. Certa’s IRM approach brings workflows into a single place, enabling inter-departmental collaboration and information transparency. Automated, ongoing monitoring, reports, and comprehensive alerts enable your business to talk about risk without becoming the only conversation topic. An IRM solution is your best ally for managing, mitigating and responding to risk company-wide.