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?
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.
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.
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 can be grouped into these four different categories, according to the Committee of Sponsoring Organizations of the Treadway Commission (COSO):
A business may also classify its risks into these four main corporate risks: people risks, facility risks, process risks, and technology risks.
Adopting an integrated risk management strategy instead of a limited-scope approach can provide several advantages. Some of these benefits are listed below:
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.
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.
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.
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