Integrated risk management (IRM) is a comprehensive approach to risk management strategies that involves all internal and external factors that might impact a business, its employees, and its customers. Integrated risk management is not only concerned with identifying and mitigating risks, but also with using them to the company’s best advantage.
In an IRM plan, all risks are mapped and connected to the company’s business functions, including:
- Customer relationships
- IT infrastructure
- Employees and hiring processes
- Physical premises
- Assets (company devices, vehicles, other hardware, furniture, event gear)
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Integrated risk management and implementation teams
To create an IRM strategy, businesses need a dedicated team of people who own risk management. IRM strategies must be deliberately designed and carefully managed to be effective. Stakeholders and team members with roles connected to risk management include:
- A designated risk officer
- Data controllers or compliance officers
- Project managers
- Vendor or supplier managers
- Executive leadership
Components of integrated risk management
An integrated risk management plan involves knowing all risks and finding ways to prioritize, handle, and capitalize on them. Risks a company may face include:
- Human resources risks, such as turnover and problems with benefits plans
- People risks (aside from HR)
- Financial risks like low sales, market fluctuations, or fines
- Data risks, including regulatory failures and data breaches
- Technical risks, like network outages and computer problems
- Asset risks, such as damaged or stolen property
- Supply chain risks, such as stalled vehicles or warehouse issues
- Third-party risks, such as vendors that fail to comply or don’t turn products around on time
- Weather and natural disasters
IRM attempts to prepare for both known and unknown risks by revealing possible gaps within the business, projecting how the risks may impact operations, and gathering a team to rank and manage those risks.
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Some risks are beneficial to companies—for example, acquiring a new business unit. Though the risk requires effort and does carry potential sub-risks, it’s not by nature negative—it can add substantial value and benefit to the company. Integrated risk management includes deciding what risks are valuable and positive.
Ranking and analyzing risks reveals whether a risk is healthy and worth pursuing (such as a new marketing strategy) or whether it’s dangerous and should be avoided (like removing a layer of on-premises security). Some risks help companies grow, while others are almost certain to have negative consequences; ranking and prioritizing risks allow businesses to focus on those that most impact company progress and financial well-being.
IRM strategies must also account for regulatory compliance. Data protection regulations strictly monitor how companies handle personal data. Compliance is its own risk category, too. Comprehensive IRM plans manage the methods that businesses use to store, handle, and share data.
Automation is an important component of IRM. Enterprises can’t manage all risks manually; they need to be alerted automatically when something goes wrong or a risk level changes. Automatic risk mitigation features are essential to successful IRM, keeping employees from spending too much time handling risks.
IRM strategies include reporting capabilities. The ability to create reports with clearly represented statistics and charts not only makes risk management easier to understand, but it also makes presentations to executives much easier.
Difference between risk management and integrated risk management
Risk management and integrated risk management are very similar. The main difference is the comprehensive nature of IRM: it takes into consideration all business risks, even ones that don’t fall under finance, technology, security, or data risks. IRM connects all risks and business sectors so that departments and possible threats don’t become siloed. This isn’t to say that risk management plans can’t be comprehensive or tackle all business risks. But in general, IRM is more deeply embedded within an organization, because it involves more people within the company and more regular planning.
First steps to implement IRM
To implement an IRM strategy:
- Create a dedicated team, making sure that company’s executives are on board. Top-level decision makers need to be involved in or at least committed to IRM plans for them to be effective because executive teams have final say in major company choices and priorities.
- Identify all risks from each business department and sector to establish a baseline of the company’s risk profile. Proactively identify and address additional risks as they emerge.
- Assess all risks and each risk’s level, including how far it reaches (does this risk affect one sector of business or the entire company)?
- Select an IRM tool. IRM software includes ServiceNow GRC, LogicManager, and MetricStream Enterprise GRC.