Technology is changing faster today than ever before. Businesses and organizations need to keep up, especially in terms of digital technology and cybersecurity.
In many organizations, the CEO and executive board, rather than regulatory bodies, are now in control of risk management. Having regulatory bodies push these executives to adopt best practices worked well in the past; using siloed teams was acceptable for managing risk programs when new technology options were few. Having separate security and risk management teams worked to achieve the goals of the organization.
With new risks and new regulatory requirements continuously evolving, these strategies no longer work. Modern organizations require new governance and risk management solutions - solutions that allow for complete oversight, rather than siloed teams with limited understanding of how they connect. This is integrated risk management.
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What Is Integrated Risk Management?
Integrated risk management (IRM) is a holistic practice observed by risk-aware organizations that put a premium on corporate governance and cybersecurity. IRM enables company-wide visibility into governance processes through automation and technology integration. IRM is not synonymous with GRC, however: GRC vs IRM.
According to Gartner, IRM has the following characteristics:
Strategy: Enabling and implementing an integrated risk management framework
Assessment: Identifying, evaluating and prioritizing risks
Response: Identifying and implementing risk mitigation mechanisms and methods
Communication and reporting: Implementing the means to inform stakeholders of an organization's risk response
Monitoring: Identifying and implementing processes that track the effectiveness of governance objectives, risk ownership and accountability, regulatory compliance,
Technology: Implementing an IRM solution or solutions
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Implementing an Integrated Risk Management Approach for Your Organization
The next step is determining how best to implement integrated risk management in your own organization. If you are currently using a siloed risk management approach in your organization, switching to an integrated approach can result in three outcomes:
Risk-aware culture: Your organization will recognize that risks previously only associated with one group will affect the enterprise as a whole.
Increased visibility: This is perhaps the most significant change you will see in your organization when you switch. An integrated approach will lead to a fully integrated risk management organization, which will increase performance and communication company-wide.
Fully integrated platforms and solutions: Having fully integrated risk platforms will lead to an improvement in productivity. The holistic view of risk given by utilizing an IRM approach also enables better and faster risk mitigation when compared to previous methods.
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The Relationship Between IRM and ESG
Many organizations question whether IRM is the same as environmental, social and governance (ESG) initiatives. ESG is a way to track and measure the societal and environmental impacts of an organization. It is generally accepted that establishing and adhering to ESG goals can contribute to better organizational performance.
Naturally, ESG and IRM intersect in a variety of ways. According to Ezekiel Ward, founder of North Star Compliance Ltd. and a thought leader in the GRC space:
A trend like ESG is actually the same thing as integrated risk management, so we see [organizations] joining up the dots between different functions like internal audit, compliance, health and safety, HR and other functions. You have that kind of risk management or gatekeeper role, and you really start to see boards being conscious of [this] and talking more openly about the need to connect those dots. So, I certainly think that ESG, as I refer to integrated risk management in corporates, is one thing that I see carrying on in 2021.
