The importance of risk management to businesses and organizations cannot be ignored. Unlike before, there is a significant increase in reliance on third parties in the current business environment. Advancing technologies have also brought forth new risks, specifically digital technology risks and cybersecurity. This has made it necessary for businesses to improve their risk management strategies, primarily by adopting an integrated risk management approach.
What is Integrated Risk Management?
Integrated risk management describes a holistic approach where organizations create a unified view of their internal controls, internal audit, compliance, and risk management practices. According to Gartner, integrated risk management refers to processes and practices supported by risk awareness and relevant technologies.
An integrated risk management approach should have the following key characteristics:
- A strategy – key pointers that enable implementation of the risk management framework.
- Assessment – identification, analysis, and prioritizing organization risks.
- Response – involves implementing risk management measures and mechanisms
- Communicating and reporting – informing stakeholders and relevant partners about the organizations’ response to risks.
- Monitoring – involves tracking the effectiveness of risk management efforts and regulatory compliance measures.
- Technology – the adoption of effective IRM solutions
If your business relies on a siloed risk management strategy, you should switch to an integrated approach for various reasons. However, you should determine the best way of implementing the integrated program to suit your organization.
Why Do Businesses Need Integrated Risk Management?
Businesses should adopt an integrated risk management strategy for the following benefits:
- Offers a Unified and Holistic View of Business Risks
An integrated risk management solution combines multiple business risks for unified management and monitoring. Having multiple risks in one interface makes it easy for businesses to manage them. Businesses can collect all information, reducing the risks of data siloing. An IRM solution avails all business data in one click.
- Better Decision Making
Converging your business’ risk issues and status brings unmatched convenience. A streamlined risk management system integrates all risk dimensions of the organization, making it easy for managers to understand how different factors interact and impact each other. Managers and relevant authorities can make better-informed decisions and create effective risk management measures that address multiple potential risks in the organization.
- Improves Security and Compliance
Increasing rates of data breaches mean businesses should prioritize their security strategies. Besides introducing stringent privacy and data security guidelines, organizations should also introduce heavy fines and penalties for non-compliance. Storing data in different locations or leaving it with third parties makes it challenging for IT teams to ascertain if crucial business data is secure, up-to-date, and accurate. An IRM solution eliminates such uncertainties by providing a compliant and consolidated platform.
Other benefits of an integrated risk management solution include the following:
- Allows organizations to have consistent and accurate information about their risk status
- Enables organizations to remain compliant with the applicable requirements
- Helps businesses recover from unexpected disasters
- Helps organizations identify new opportunities in risk identification and analysis processes
Elements of an Integrated Risk Management System
An effective integrated risk management system should have the following elements:
Your IRM strategy should have a structure that details the entire risk management lifecycle. The structure should highlight the important processes in risk management, such as risk identification, risk analysis, response planning, risk mitigation, and monitoring. Your structure should also recognize that risk management isn’t a one-off event. It should be an adaptive process that evolves over time with changing threats.
- Identify Risks
Businesses should work through highly probable and most threatening risks first. This should be done imperatively as risks emerge. Risk assessment should also be done frequently, and the business risk profile should be updated.
You should develop a tactful approach that tackles crucial business risks. Unlike before, technology is vital and determines how businesses handle risk management. Automating risk management processes saves time and simplifies the most demanding areas.
- Goals and Objectives
Your integrated risk management system should have clearly established goals and objectives. Everybody on the risk management team should be made aware of these goals to foster team effort. Similarly, the correct processes should be used to determine appropriate solutions for pending risks and achieve the set goals.
- Clear Documentation
Tasks and processes assigned to different teams should be clearly identified and communicated to members. Everybody on the team should be aware of their role. Risk management policies should also be clear. Clarity in the entire process is very crucial.
While an effective risk management strategy should mitigate risks, you should prepare for all possible outcomes. The strength and weaknesses of your risk management strategies should be evaluated continuously. Preparing for negative or positive outcomes prevents surprises.
The Bottom Line
Businesses of all types are exposed to risks that can significantly reduce revenue, damage their reputation, or cause business failure. An integrated risk management process should include risk management methods that mitigate current and future business risks. It should also outline specific processes, and functional activities businesses should implement to stay risk-free. You can create an effective strategy based on the above information about integrated risk management.