What is integrated risk management (IRM)?
Integrated risk management (IRM) is a set of proactive, business-wide practices that contribute to an organization's security, risk tolerance profile and strategic decisions. As opposed to compliance-based risk management approaches, IRM focuses on evaluating risks in the wider context of business strategy. An IRM program should be collaborative and involve both IT and business-side leaders alike.
The term "integrated risk management" was first coined by Gartner in 2017, in response to a more complex risk landscape brought about by increased digital processes, globalization and heavier reliance on third parties. As described by Gartner, an effective integrated risk management framework should include a clear strategy, detailed risk assessment, a plan for risk response, communication and reporting, risk monitoring and implementation of a software-based IRM solution (IRMS).
By 2021, Gartner projects that 50% of enterprise risk management strategies within large organizations will involve an IRM solution, and that the market will reach $8 billion annually (factoring in consulting and implementation costs).
What are the benefits of integrated risk management?
An integrated risk management strategy bridges the functional aspects between organizations, culture and strategic business objectives. Several benefits can come from adopting an integrated risk management strategy, as opposed to a limited-scope approach:
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What is risk management and why is it important?
- Which also includes:
- governance, risk management and compliance (GRC)
- risk avoidance
- risk map (risk heat map)
- Wider range of opportunities. Integrated risk management strategies aim to consider the full range of possibilities associated with each business strategy aspect, as opposed to focusing on simply mitigating the downsides. Opportunities to capitalize on potential upsides may arise from the more comprehensive evaluation of each business outcome.
- Improvement of risk identification and management. IRM contributes to a more realistic picture of risk analysis -- from which organization leaders can improve decision making. Risks can be identified and communicated between business and IT teams in a productive manner. With appropriate responses planned and resources in place, organizations with IRM-based strategies will be more equipped to deal with adverse outcomes, and likely suffer less financial loss.
- Risk-mature organizational culture. By taking a wider, interdepartmental approach to risk awareness and management, the result is a more proactive culture. Organizations will start to view risk as an inherent part of business strategy.
What to include in an integrated risk management program
According to Deloitte, an effective integrated risk management framework should contain a few key sections:
- Objective setting. Organizations should collaboratively set primary and secondary objectives. All objectives should be measurable and described within the context of the circumstances.
- Risk identification. Risks and opportunities should be identified and integrated into the framework with a plan for monitoring. Visuals and matrices can be useful tools for organizing and presenting information.
- Risk consideration. Risks should be considered individually, bilaterally and all together. Organizations should answer:
- What material risks exist? How impactful and probable are they?
- How should the organization prioritize each risk?
- How do the risks affect the organization individually?
- How do the risks affect the organization all together?
- How do the risks compare to the organization's risk appetite?
- Mitigation options. These are also called risk management activities. Risk analysis output should yield detailed plans of acceptable outcomes and retained risks, and unacceptable outcomes with the full list of concrete mitigation options.
- Quantitative evaluation of metrics should be defined clearly, with set plans of action. Vigilance is crucial, and implementation of IRMS software can help provide comprehensive views of relevant insights.
How to implement an integrated risk management strategy
Broadly speaking, there are four key pillars to implementing an integrated risk management (IRM) strategy:
- Align cybersecurity strategy with business strategy outcomes. Communication should take place between IT cybersecurity teams and business-side leaders to discuss the relationship between business and cybersecurity strategies. Contextualizing information security risks with business strategy can help non-technical business leaders understand how their decisions factor into the larger cybersecurity ecosystem.
- Build an engaged, risk-aware culture. Changing a company's organizational culture is a daunting task that should be approached gradually, and with patience. A focal point of this step is to build critical allies from influential leaders within the organization, who can help shepherd others into an informed, risk-aware mindset.
- Integrate risk into business strategy discussions. It is critical for leaders in all departments of the organization to understand the natural relationship between business strategy and risk. Making new strategic decisions will alter the organization's risk profile.
- Report effectively. Setting goal-based metrics to evaluate performance of risk management is critical, so that organizations can understand what approaches are and aren't working. A number of vendors offer software-based IRM solutions to streamline the reporting process and compile risk-based insights and analytics into user-friendly dashboards.
Integrated risk management vs. governance, risk and compliance
An integrated risk management strategy focuses on creating a proactive, risk-aware culture, using contextualized risks to create outcome-based frameworks. A governance, risk and compliance (GRC) strategy focuses on checking off boxes that are less specific to the risk profile of an individual business.
Though the two terms contain overlap, they differ in scope, and GRC functions form the base of an integrated risk management strategy. While IRM forms the overarching business strategy in relation to risk, GRC functions are the concrete, more specific functions that enhance the risk profile. GRC's risk management approach generally has a narrow focus on technical or operational downsides; IRM widens the focus to include a more holistic picture of both tactics and strategy, which includes upside opportunities and strategic risks.
Integrated risk management products
IRMS software can help simplify, automate and integrate risk management processes across organizations. IRMS software focuses on providing comprehensive, integrated views into risk-related functions and measures, while building platforms that facilitate the collaborative nature of IRM strategies. IRMS can help organizations with:
- Risk control documentation and assessment.
- Incident management.
- Risk mitigation action planning.
- Risk monitoring and communication.
- Risk quantification and analytics.
Gartner's Magic Quadrant, which details market-specific competitive landscapes, evaluates the following IRM vendors:
- CURA Software
- Dell Technologies (RSA)
- Galvanize (ACL/Rsam)
- SAI Global