Written by Cassie
1/25/2023
Various business setups and different-sized companies often resolve to implement integrated risk management to secure their vital functions. But what exactly does IRM mean in simple terms?
IRM meaning
Integrated risk management is a group of essential processes by special departments or service providers to curb existing risks and prevent others from surfacing and potentially harming the organization. It is an approach to protect the workings of a business and ensure its smooth running.
IRM encompasses all business functions, including those not typically associated with risk management, such as human resources and public relations. However, as businesses have become heavily reliant on IT in recent years, IRM is primarily concerned with hands-on risk management, including implementing and monitoring systems and technological controls.
The term IRM is a relatively recent one. It was introduced in 2017 to address a more complex risk environment caused by increased digital processes, globalization, and a greater reliance on third parties.
Hence, integrated risk management focuses on providing tight cyber security, maintaining the organization's and its employees' privacy, assisting HR departments, and solving and preventing compliance and regulatory issues.
Are IRM and GRC the same?
Integrated risk management and governance, risk, and compliance have several factors in common, and these two terms may be mistaken for each other. Both these fields are different. GRC provides the foundation of an IRM strategy, and both have distinct core functions within a business. IRM acts as the umbrella risk management strategy, and GRC functions are more specific that aim to improve the risk profile. GRC's approach focuses on technical or operational downsides, while IRM provides a broader focus and includes a comprehensive overview of tactics and strategy, including uptrend opportunities and potential strategic risks.
What does “at risk” mean?
Every organization faces multiple risks in the form of unanticipated, compromising, and damaging events, which can cause serious money loss, leak of significant classified info, or even force it to shut down. Financial non-transparencies, legal liabilities, tech issues, strategic management errors, logistic problems, accidents, and natural disasters are all sources of risk.
Being at risk means facing a negative impact or having to deal with a threat. The more vulnerable an asset is, the more “at risk” it is. However, all assets could face threats from within or outside the company.
Risk Categories
Risk can be grouped into these four different categories, according to the Committee of Sponsoring Organizations of the Treadway Commission (COSO):
- strategic risk (e.g., reputation, customer relations, technical innovations);
- financial and reporting risk (e.g., market, tax, credit);
- compliance and governance risk (e.g., ethics, regulatory, international trade, privacy);
- operational risk (e.g., IT security and privacy, supply chain, labor issues, natural disasters).
A business may also classify its risks into these four main corporate risks: people risks, facility risks, process risks, and technology risks.
IRM benefits
Adopting an integrated risk management strategy instead of a limited-scope approach can provide several advantages. Some of these benefits are listed below:
Better Risk Management
IRM helps to create a more realistic picture of risk analysis, which helps organizational leaders make better decisions. Risks can be identified and effectively communicated between business and IT teams.
A Broader Range of Options
Integrated risk management strategies target all possibilities related to each business strategy facet rather than just minimizing the drawbacks. Opportunities to capitalize on potential upsides may emerge due to a more thorough evaluation of each business outcome. A thorough evaluation of every business process results in better opportunities and potential future projects.
Increased Awareness
Risk awareness becomes part of the corporate culture. Implementing IRM strategies will cause the employees of an organization to perceive risk as a natural element of business operations. They will develop a clear sense of risk management over time, eventually leading to a healthier corporate environment.
What do IRM service providers do?
A business may decide to depend on an in-house risk department or may consider outsourcing IRM tasks to experienced service providers. Companies are actually opting for the second option, as it is more convenient for them to hire experts rather than train their employees.
Skilled IRM firms develop technologies and offer services that cover areas such as risk maturity evaluation, data breach, compliance, and regulatory issues, secure software development lifecycle, security testing, human resources and background checks, and IT cloud strategy and implementation. Since they are in the risk business, they are well informed of the latest risk that threatens companies; hence they provide guaranteed risk management.
What are the key steps of an IRM program?
An effective integrated risk management program consists of four main parts. These are listed below in the correct sequence:
Objectives
Setting measurable primary and secondary objectives is the first step in implementing an integrated risk management strategy. These objectives should be comprehensive with clear descriptions.
Identification
Assets, opportunities, and risks should be identified and monitored. All relevant data should be saved for systematic analysis and assessment.
Analysis
Risk factors should be identified and studied both separately and as a whole group. They must be evaluated because of the following points: why they exist, their impact, how to prioritize them, and their effect on the company’s risk appetite.
Actions
Now we come to the mitigation part, which consists of risk management activities. A detailed plan of action is designed to curb potential risks.
Specialized IRM tools and service providers aid in running this framework smoothly while generating an overview of relevant insights.
What would happen if IRM strategies were not implemented?
Companies require strong integrated risk management programs as existing risks become more complex, and new risks emerge. A lack of understanding of risks and their potential consequences can impede decision-making and harm an organization's business performance.
A business could collapse if it does not properly assess, mitigate, and prevent business risks. They might lose market share if they fail to foresee the risks of shifting circumstances. On the contrary, if they pay attention to the risks associated with growth, they could gain a significant amount of investment money or at least save the current budget.
Moreover, failure to match compliance and regulatory standards may cause an organization to face serious lawsuits. Weak or no IRM may also result in a lack of transparency within and outside, leading to serious threats, such as corruption, cyber-attacks, and other sabotaging activities.
Being constantly at risk and dealing with compromised operations is not a favorite status for any organization. Thus, choosing the perfect integrated risk management program and implementing it signifies corporate farsightedness and flawless driving strategies, eventually leading to numerous inspirational success stories.
See more: Windows 10 Autorotation Fixed, and Why Windows 10 Breaks