Integrated risk management (IRM) is an approach to managing risk with a focus on centralizing all of a business’ risk activities to drive better and more efficient management of risks across the entire organization. With IRM, the risk management team works together with all business segment leaders to share and visualize data around risk, determine the organization’s true risk appetite, ensure compliance, and communicate the risk management strategy and risk mitigation tactics to the C-Suite.
An integrated risk management program emphasizes collaboration over silos, and looks to balance all types of risks. This strategy accepts risk as a part of doing business, and pulls it into a company’s culture so the organization manages risk as a part of both daily operations and long-term vision.
The result is a company-wide understanding of risk and risk mitigation that positions them to be better prepared for handling risk and builds up proactive defenses through advanced scenario planning. This guide outlines the essential elements of IRM and why it’s important, key approaches to be mindful of, and what to look for when determining which integrated risk management software solution is right for your organization.
What Is Integrated Risk Management (IRM)?
Integrated risk management is an organization-wide approach to addressing risk that involves input from all teams and centers risk as a fundamental part of business strategy. Effectively, IRM ties together three risk management program areas — technology/cyber risk, operational risk, and enterprise/strategic risk. By fostering a risk-aware culture and incorporating a wide, integrated view of the organization’s risks, a set of practices and processes emerge that supplement decision-making and the company’s overall performance — that’s integrated risk management. Any business activity carries inherent risk, so IRM frameworks fold risk assessments and mitigation strategies into all aspects of the company.
An integrated risk management framework involves stakeholders within and outside the organization, requires vocal and consistent support from senior management, and relies on good communication between teams in order to be successful. The result is a comprehensive view of an organization’s risk positions and risk profile — from strategy to execution. IRM also encourages a “risk-first” mindset, which creates a more agile, forward-thinking, risk-aware culture — outpacing the outdated compliance-driven approach to risk management.
Why Is Integrated Risk Management (IRM) Important?
“No matter the size, industry, or location, every business looks to achieve four IRM objectives — better performance, stronger resilience, greater assurance, and cost-effective compliance.” – John Wheeler, Sr Advisor, Risk & Technology, AuditBoard”
While at Gartner, Wheeler effectively coined the term “integrated risk management,” and led the research to define the new approach and the IRM technology market. He has identified four ways IRM enables organizations to work towards those goals: Improving performance, increasing resilience, locking in company-wide risk assurances regarding the overall appetite for risk and mitigation strategies, and meeting compliance requirements as a by-product without outsized costs, resources, and friction for the business. Bottom line: IRM helps companies achieve business objectives, mitigate risks effectively, and guide risk management activities.
“No matter the size, industry, or location, every business looks to achieve four IRM objectives — better performance, stronger resilience, greater assurance, and cost-effective compliance.” – John Wheeler, Sr Advisor, Risk & Technology, AuditBoard
There are many benefits to using an integrated risk management framework in the approach to everyday business activities in the short term and as a part of long-term planning. The benefits to an organization range from day-to-day operational improvements to larger-scale results — and companies are far less likely to be surprised by unforeseen risks due to the thorough advance planning and scenario building in the risk assessment and mitigation processes. IRM benefits include better data, disaster preparedness and resilience, cost savings, efficiencies, risk appetite awareness, project prioritization, holistic views of risk, and third-party trust.
1: Better Data
Compliance risk assessments and fulfillment are an integral part of IRM, so company data about risk is always reliable, current, and available to business leads who need the latest details on the organization’s regulatory compliance positions. IRM calls for a unified view of organizational risks, driving the need for better data aggregated in dashboards that can support management systems and decision-making. The end result is updated, high-quality data, presented clearly.
2: Disaster Preparedness and Resilience
The integrated risk management approach prepares organizations for edge-case extremes and allows organizations to bounce back quickly in the event of a major disaster. IRM programs anticipate risk events, allowing organizations to come up with contingency plans that keep the business running even in extreme scenarios. While not all risks associated with disasters can be fully mitigated, taking an IRM approach ensures that potential risks, at every level of the business, have been considered.
3: Cost Savings
IRM provides insight into a company’s risks and operational controls, mapping individual controls to multiple risk factors. Understanding business risks that affect different areas and their mitigation controls can reduce costs as redundancies are identified and eliminated. Monitoring and revisiting controls and business processes to improve upon them is another aspect of integrated risk management that can result in cost savings.
4: Finding Efficiencies
The IRM process helps identify opportunities for savings and often finds efficiencies during the risk identification, risk analysis, and risk assessment exercises. This extends to teams, and groups may gain flexibility and cut costs through new organizational structures and cross-team relationships.
5: Risk Appetite Awareness
IRM assessments allow senior management to determine the best possible options to mitigate the identified risk issues, and in doing so clarify an organization’s strategy and their overall appetite and comfort level with their business risks. With an integrated risk management program, risk appetites are documented (and centralized) for alignment with the business, preventing miscommunication and limiting misunderstandings.
6: Project Prioritization
The IRM process works to ensure high-priority projects are properly resourced and positioned first by the business and guides decisions so significant risks are well-managed.
7: Comprehensive and Holistic Views of Risk
Leaders gain a full view of how their organization’s risks have an impact on objectives, strategies, and business operations. Successful IRM programs take into account events that might take place outside of the identified risks, and in doing so contributes to a healthy analysis of the landscape and management’s position in all areas of their industry. In addition to integrating operational, enterprise, and cybersecurity risk management functions, a mature IRM program could also integrate ESG risk management and reporting into the umbrella, getting ahead of pending regulatory requirements.
8: Third-Party Trust
It’s more important than ever for companies to create and maintain a high level of trust with outside third parties, be they clients, vendors, partners, or potential buyers. Solid integrated risk management processes as they relate to third parties bolster trust not only with them, but with all key stakeholders. Demonstrating an integrated approach to operational and technological risks signals the organization’s willingness to maintain security and a high level of quality.
Taking a comprehensive approach to risk reaps financial rewards — from finding redundancies in controls or personnel to identifying unexplored areas to work in and generating newfound investor interest. Remember to align IRM efforts to the business’ objectives, and the benefits of IRM will outweigh the costs of allocating time and resources to establish the program.
What Are the Six Key Activities in Integrated Risk Management (IRM)?
In order to comprehend the full scope of their risk profile, and begin implementing IRM solutions, organizations need a full picture from all business units, senior management, and compliance functions, plus any third-party suppliers or partners. They must also consider the six key activities in an integrated risk management program: strategy, assessment, response, communication and reporting, monitoring, and technology.
The first component of the IRM approach is to develop a risk management strategy for the organization. This might consist of implementing a risk management framework or creating a bespoke framework that better fits your company. The strategy for the IRM program should incorporate feedback from stakeholders, leadership, and process owners, establish the company’s risk appetite, and align IRM activities with business objectives.
This stage of the IRM process involves conducting a full risk assessment that includes the identification, evaluation, and prioritization of all risks across all business segments. The results of risk assessments should be documented in a risk register that gets regularly reviewed and updated.
Once risks have been identified, analyzed, documented, and completely assessed, planning a response to the risk comes next. Due to the criticality of risks, some risk mitigation initiatives may be prioritized over others. Nonetheless, each risk should be accompanied by a treatment or action plan, and the organization should determine its response to vulnerabilities according to risk criticality.
4: Communication and Reporting
This part of IRM involves establishing a proper communication and escalation plan to inform the appropriate stakeholders of risk response initiatives and progress tracking. A successful IRM program will also take into account how communication and reporting efforts can foster a risk-aware culture, whether that’s through training, newsletters, or talks by risk practitioners.
Risk management programs should incorporate some kind of performance monitoring and progress tracking. Without accountability, it’s unlikely that things will get done. A key part of risk management is monitoring risks, mitigation progress, controls, business processes, and the overall effectiveness of the company’s risk management activities and strategy. Monitoring can involve analyzing key risk indicator metrics, regular status reports on mitigation initiatives, and even periodic audits or assessments.
Technology plays a significant role in driving an IRM approach. Since IRM takes a collaborative stance and seeks to provide a comprehensive view of an organization’s risks, using technology and software to manage, operate, oversee, and consolidate risk management activities goes a long way in enabling an IRM strategy. Through technology solutions, companies can better coordinate their IRM efforts and track relevant metrics.
After these six phases, make sure your groups are iterating and continuously improving on risk mitigation efforts. IRM is a cyclical process; it is always evolving and adapting to changes in the marketplace, with regard to vendor technologies, to any new legislation and resultant compliance requirements, and in response to overall business goals.
Four Key Approaches to Integrated Risk Management (IRM)
There are some essential steps that must be taken when shifting to an IRM methodology. The four key approaches are: aligning strategies with goals, making sure risk management is a team effort, communicating plans to all stakeholders, and working “smarter.”
1: Match Strategies with Goals
In order to secure executive support and business unit alignment, you must create a culture of risk awareness. Demonstrate a link between improved risk management and better business outcomes, showing team leads that IRM strategy matches the company’s goals. When IRM is linked with financial goals, and provides results, it’s easier to get complete buy-in from all team members.
2: Risk Management as a Team Effort
After securing cross-team and leadership support for the IRM efforts, there should be a cultural shift. To maintain enterprise-wide accountability, there needs to be ongoing promotion of IRM efforts and shared responsibility for outcomes. Risk assessments must be cross-functional efforts. IT compliance teams and business leads need to work together to understand what the business is trying to accomplish and how teams can best support those goals and manage risks. Compliance groups should be alerted to stakeholder decisions and informed any time new systems or solutions are implemented. New or changed processes and policies need to be documented and circulated throughout the organization. Without cross-functional collaboration, a company’s IRM program will fail before it starts.
3: Communicate Risk Management Plans
Sharing risk management plans creates consensus across all teams to support and align with IRM strategies. It provides people with clarity on what their role is, and how they should operate in a risk-aware environment. A complete rundown of internal controls must be properly documented and shared for reference. Compliance teams need to continually review processes, document any adjustments, and communicate those updates to stakeholders. Remember: continuous dialogue and over-communication in the world of integrated risk management is a good thing.
4: Work “Smarter”
Leaders often say, “Work smarter, not harder.” To facilitate a successful IRM implementation, dial down a team’s repetitive, administrative efforts and turn up innovation in the workplace. If teams spend a lot of time battling the tactical work of risk management — like tracking controls and permissions — they don’t have time to think strategically about the business or potential risks. Automate as much as you can to free up team time.
Don’t wait to review controls until just before the next audit round. Instead, use automated reporting to gauge performance and make improvements before scheduled review periods. Give teams the time and room needed to be strategic, and then shift as required — remembering to document and communicate all changes to the appropriate parties.
What Is the Difference Between Integrated Risk Management (IRM) and Enterprise Risk Management (ERM)?
Currently, there’s no clear consensus on how IRM and ERM approaches differ. In some ways, integrated risk management programs encompass and include enterprise risk management. In other cases, enterprise risk management programs include integrated risk management philosophies and practices. Both approaches seek to unify risk management and avoid silos, providing organizations with holistic views of their risk profile and alignment with business objectives.
Selecting the Right Integrated Risk Management Software for Your IRM Program
When choosing the right IRM software for your business, make sure it helps you collaborate across the organization and connects with the company’s strategic planning process and all business units. Here are additional factors to consider:
Is the tool easy to add to the existing system? How adaptable is it? Can it integrate risk-related data from external sources? What does the implementation timeline look like?
Can team members easily learn how to use the tool? Does the service provide training, tutorials, and technical support?
Does the software evaluate risk scenarios and recommend solutions for mitigation? If so, are those recommendations relevant to your industry and actionable?
4: Auditing Tools
Does the software provide proper direction regarding procedures and resourcing, and does it meet both financial and control-based audit requirements?
Are the tools easy to customize? Customizable tools enable your team to pull reports on the analytics most important to them. Will your organization’s key performance indicators and other metrics be captured?
Does the software enable learning about the most relevant risks and compliance requirements? Can it inform teams about learning progress and deficiencies? How frequently does it push out useful information?
Does the overall cost of the tool make sense for your organization, given all of the capabilities offered and the business needs you are trying to meet?
Once you’ve answered all of these questions you should be prepared to select the right software solution for your organization. Keep in mind your needs may change as your business expands, contracts, or pivots to a new space, and as the software themselves update and evolve. It’s a good idea to regularly assess if the software you have in place is still the best choice for your company.
Get Started With Integrated Risk Management Today
The right technology can help you build an effective IRM program. AuditBoard’s integrated risk management software is ready to help you and your organization take steps toward building a powerful, forward-thinking business plan that effectively manages risk. Embrace IRM to future-proof your business and set up your organization for success!
Frequently Asked Questions About Integrated Risk Management
What is Integrated Risk Management (IRM?)
Integrated risk management is an organization-wide approach to addressing risk that involves input from all teams and centers risk as a fundamental part of business strategy.
Why is Integrated Risk Management important?
IRM helps companies achieve business objectives, mitigate risks effectively, and guide risk management activities.
What are the six key activities of Integrated Risk Management?
They must also consider the six key activities in an integrated risk management program: strategy, assessment, response, communication and reporting, monitoring, and technology.
Vice Vicente started their career at EY and has spent the past 10 years in the IT compliance, risk management, and cybersecurity space. Vice has served, audited, or consulted for over 120 clients, implementing security and compliance programs and technologies, performing engagements around SOX 404, SOC 1, SOC 2, PCI DSS, and HIPAA, and guiding companies through security and compliance readiness. Connect with Vice on LinkedIn.