Integrated risk management (IRM) refers to practices and processes done via a risk-aware culture and enabling technology. It improves business decision-making and performance by giving users the whole picture of how well their organization manages risks.
Think of it as a way to monitor and manage risks (e.g., security threats, compliance requirements, etc.) using a single platform. You only need to look at one monitor, for instance, and already see if problems can potentially spring up from identified issues.
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What Does Integrated Risk Management Entail?
To make IRM work, organizations need to consider the following attributes.
Users need to design and implement a framework that can help them improve their business performance through effective governance and risk ownership. They must know which team or department should be responsible for and be contacted when a particular issue arises in one system or application.
Companies must identify, evaluate, and prioritize risks, which IRM can help with. Since they can see all problems simultaneously, they can more easily handle the ones that pose the most significant risk and resolve them before they can do damage.
IRM can also ease the process of responding to risks. If organizations have well-built frameworks, they can quickly map the appropriate mitigation steps to the risks they identified.
Communication and Reporting
An IRM platform can serve as the best means to track and inform all stakeholders about risks and the responses taken to address them. Since everyone in the company can access the console anytime, they would know about problems as soon as they are detected. They would also know at once if they need to respond in any way. Those responsible for public information dissemination can also know what to say and what not to.
IRM software also identifies and implements processes that track governance objectives, risk ownership and accountability, policy and decision compliance, risks, and mitigation measures and controls. As such, it allows users to spot issues that can cause financial damage.
IRM won’t be possible without technology, specifically an appropriately designed and configured architecture.
Why Should Organizations Employ Integrated Risk Management?
Companies need IRM to answer questions, such as:
- How can decisions be coordinated to address risks?
- What consequences does not managing risks lead to?
- How can risks be mitigated to avoid losses and maximize success?
What Are the Benefits of Integrated Risk Management?
IRM provides organizations several advantages, including:
- Accurate, verifiable, and consistent information for users, applications, and systems
- Ability to adhere to regulations using reliable data
- Ability to mitigate risks associated with data issues
- Flexibility to implement and manage new structures and relationships that result from mergers and acquisitions (M&As)
- Manage the definition, implementation, and measurement of data quality strategies and metrics to avoid potential delays in delivering products or services to customers
- Ability to recover quickly from work stoppage, major disasters, and the like by keeping business-critical functions up and running
There are many others, of course, but you can get by with those mentioned above for now. It’s not all rainbows and sunshine, however, as IRM usage can also suffer from challenges.
What Are the Challenges of Integrated Risk Management?
Business and technical challenges can arise from employing IRM.
- Requires constant executive-level sponsorship
- Actual costs can be hard to pin down due to unrealistic assumptions and inaccurate outputs, which could cause budgetary challenges
- Determining data owners can be tricky since everyone has access to the platform except if roles are explicitly defined in the framework
- Implementing new regulations can be problematic since they require redefining relationships
- Data consistency (formatting and compatibility) may pose processing and reporting difficulties
- Solution chosen should be reliable, scalable, flexible, and easy to manage
As more and more businesses go digital, they’re bound to face an increasing number of threats that can pose risks not only financially but also legally. Failure to protect their customer data can, for instance, not only cause them to pay chargeback fees but also land them in legal trouble for failing to comply with privacy laws like the General Data Protection Regulation (GDPR). That and other reasons could be the rationale behind employing IRM.