What are the Benefits of Integrated Risk ManagementPublished March 6, 2020 • 2 min read
Risk management enables companies to identify potential threats and define their strategies for eliminating or minimizing the effect of these risks, and also offers the methods to effectively monitor and evaluate these strategies.
Integrated risk management enables a company’s business leaders to understand the risks that may prevent them from achieving their overall strategic and operational goals.
Consequently, companies that integrate risk management activities generate better information for decision-making, helping them to meet their business objectives more effectively.
Implementing integrated risk management effectively can offer organizations a number of benefits, including:
- Driving agility in risk-based decision-making by offering one view of top risks
- Bridging the strategy/execution gap to ensure project delivery is tied to the organizational needs and vision of the business.
- Identifying risks at the strategic level as this could have a major effect on the entire company.
- Enabling companies to proactively manage these risks.
- Understanding risks across the business creates opportunities—for cost-savings, competitive advantages, and alignment.
- Enabling organizations to manage those opportunities proactively, rather than just reacting to those opportunities.
- Minimizing cybersecurity threats and maximizing opportunities, thereby boosting the chances of achieving their strategic and operational objectives.
- Providing management with useful information to help in the decision-making process.
- Helping companies create risk-mature cultures, so that they understand that risk exists in all levels of the enterprise, but that they can and should manage that risk proactively to reap the most benefits.
- Improving operational efficiency by reducing the costs and cycle times of risk assessments.
An integrated risk management framework is the formal policy that establishes a structured approach to governing risk. Applying an integrated risk management process will allow organizations to evaluate their risks by providing a link between the objectives, the functional departments of the organization, and the components of a risk assessment, i.e., the extent of the potential loss and the probability that the loss will occur.
The industry standards that help establish best practices for cybersecurity control often refer to IRM frameworks.
For example, one of the most popular cybersecurity frameworks is the National Institute of Standards and Technology (NIST) Framework for Improving Critical Infrastructure Cybersecurity. The NIST Cybersecurity Framework offers five core functions to help organizations through the process of integrating technology risk throughout the business.
However, integrated risk management is different than enterprise risk management.
Enterprise risk management is centered around the process of planning, organizing, leading, and controlling a company’s risk activities. Enterprise risk management works as an organizational review, i.e., an organization looks at its strategic business objectives and then reviews the information technology risks associated with them.
IRM focuses specifically on analyzing the risks inherent in an organization’s technologies. Integrated risk management incorporates many elements of enterprise risk management; however, it’s typically more comprehensive. For most companies, building an IRM program means replacing risk areas that have traditionally existed in silos with a single, holistic view of enterprise risk.
Today, as existing risks become more complex and new risks continue to emerge, companies need to implement strong integrated risk management programs. Not having a clear understanding of these risks and their potential effects can impede an organization’s decision-making, and negatively affect its business performance. Organizations that implement an integrated approach to managing risk will also achieve consistent risk assessment outcomes.
Many companies are adopting an integrated approach to risk management. With this integrated approach, stakeholders can effectively coordinate and unify risk management activities across all business functions. Integrated risk management gives organizations a better understanding of their risks and helps support informed risk-based decision-making.