Modern, forward-looking businesses need integrated risk management (IRM). IRM is a set of business practices that enables organizations to think proactively and comprehensively about how to manage all risks to the organization, both long and short term. When you invest in strong IRM, you’re bringing together both the IT and business side of the house to collaboratively manage everything from cybersecurity to strategic planning to compliance and audits. Let’s explore the four essential elements that you should be building into your IRM solution:\
In a typical organization, most departments and business units fail to see risk management as their problem. They make decisions and actions without considering how they impact the organization. To unify the entire organization around your risk management goals, it’s essential that you build a strong IRM strategy.
Your IRM strategy should link risk to overarching business goals so everyone can see how risk management is tied intrinsically to their personal work activities. A solid IRM strategy should contain both short- and long-term goals for managing risks more effectively and comprehensively in your organization. You want to articulate specifically how you will be proactive, thorough, and deliberate about assessing and responding to a full suite of risks your organization faces, while at the same time understanding and weighing the costs involved with remediation. Ultimately, your IRM strategy must answer the big-picture, existential question every business faces: How will I manage risks today so my organization will still exist in five to 10 years?
Assessment and Response
Once you’ve developed a strategy for how you’ll approach IRM, you need to identify, evaluate and prioritize all of the risks your organization faces. Modern organizations face a wide variety of risks, from changing regulatory compliance obligations to cybersecurity breaches, from economic downturns to lawsuits and product recalls.
The first step is to break down these major areas into a full list of smaller components. Then, you want to prioritize among these components. For each component, you should be asking certain questions:
How does this component of risk affect the organization?
How does this component of risk interact with other components to potentially create risks that are greater than the sum of their parts?
Where does this component intersect with the organization’s overall appetite for risk?
Finally, you will want to develop a plan for tackling your top priorities. As you incrementally address your risk management components, you will systematically boost your responsiveness and adeptness at managing risks.
Monitoring and Communication/Reporting
KRIs (key risk indicators) are essential in every aspect of an organization. Whereas KPIs (Key Performance Indicators) look backwards to show how well you’ve been performing in the past until now, KRIs look forward to identify the possibility of future adverse events. In other words, they tell you if the organization’s stability and sustainability are in jeopardy. Thus, you should be using these metrics to closely monitor whether risk trends within your organization are moving in the right—or wrong—direction.
You want to design KRIs that can help you methodically and comprehensively track your IRM governance objectives, including monitoring compliance with these objectives. In addition, strong KRIs should feel relevant to stakeholders across your organization so every stakeholder is motivated by these metrics to take actions where appropriate to reduce and mitigate risks. Finally, with clear, relevant KRI metrics, you’re poised to communicate continuously to the entire organization about risk across the organization. Your ultimate goal is to keep risk management on everyone’s radar—because it truly is everyone’s collective responsibility.
In simpler times, risk management could be handled with static spreadsheets, email, and a team that could essentially juggle all the important elements in their head. With the exponential increase in technology, this legacy approach is no longer judicious or practical. A robust IRM solution today must be supported by a modern IRM technology platform. This technology that underlies IRM absolutely needs to provide real-time insights, integrate seamlessly with all areas of the organization, be streamlined and automated, and not be vulnerable to human error.
IRM is no longer a matter of want; it’s a matter of need. As advancements in technology present ever-increasing risks to an organization, businesses need IRM to manage those risks appropriately and comprehensively. Developing and implementing IRM starts with the four essential elements of IRM: strategy, assessment and response, monitoring and communication/reporting, and technology. Once you’ve laid this foundation, you’re well on your way.
Ready to learn more about IRM? In the next blog post, we will examine what sets modern IRM apart from the areas of governance, risk, and compliance (GRC), from which IRM has evolved.
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