What is Integrated Risk Management?
Integrated risk management (IRM) is a comprehensive approach to managing all the risks an organization faces. It brings together all risk management procedures used by one organization into a single, integrated system.
The importance of risk management of third parties and the supply chain within IRM cannot be overstated. In today’s business environment, organizations are increasingly reliant on third parties for goods and services. These third-party relationships create new risks that need to be managed to protect the organization’s reputation and bottom line.
In fact, according to a 2019 Symantec report, supply chain attacks rose by 78%.
IRM is a vital tool for managing these risks effectively. It provides a comprehensive view of all risks an organization faces, allowing for more informed decision-making and better risk mitigation.
This article will cover the basics of integrated risk management, including its benefits and how it can be implemented within an organization.
Why Organizations Use Integrated Risk Management
Organizations use integrated risk management (IRM) to manage risk across the enterprise. By taking a holistic integrated risk management approach to risk, organizations can more effectively protect themselves and their business performance. Additionally, IRM can help organizations improve communication and collaboration around integrated risk management activities.
There are many benefits of using IRM, including:
- Improved risk identification and assessment
- Better communication and collaboration around risk management activities and stakeholders
- A more effective response to risks and threats (e.g., cyber, sanctions, and reputation).
- Enhanced organizational resilience and business outcomes
- Better decision-making around risk
- Provide cost savings through an improved risk profile
- Risk control strategies that limit risks and look to identify risks before they turn into issues
How to Execute and Implement Integrated Risk Management
As the business landscape becomes more complex, an integrated approach to risk management becomes more vital in a company’s operations.
Unfortunately, many companies are ill-prepared against a range of risks. For example, cyber-attacks. Almost 80% of organizations do not have a cybersecurity incident and risk response plan, even though over 50% of companies have experienced one or more attacks over the last year.
A solid IRM strategy is a necessity for any organization. Here are a few tips on executing and implementing one:
1. Create a Strategy that Aligns with Business Goals and Business Type
When developing an IRM strategy, it is crucial to consider the business type and risk exposures.
Companies have varying risk environment based on the type of business. For example, a manufacturing company will have different risks than a retail company.
Different types of businesses also have varying risk levels—whether it’s regulatory compliance, supply chain disruptions, or something else entirely.
When creating the IRM strategy, you need to identify the risks that could potentially impact the organization—financial, operational, compliance, or reputational—then prioritize them based on potential impact and likelihood.
The next step is to develop risk mitigation and control strategies. These strategies should be designed to reduce or eliminate the identified risks and align with the organization’s business goals and objectives.
There are many different types of risk control strategies, but some common ones include:
- Risk avoidance or avoiding activities that could create risks. For example, an organization might avoid investing in a new product because it is too risky.
- Risk mitigation involves taking actions to reduce the impact of risks. For instance, an organization might select three different vendors for a key component to mitigate the financial impact of one of the vendors failing
- Risk transfer or transferring the risk to another party. An organization might contract with a transportation company to ship and provide insurance coverage on its products, thereby transferring the risk of product damage to the transportation company.
Implementing an IRM strategy can be a challenge, but the benefits can be significant. By considering the specific goals and objectives of the organization and by aligning the IRM business strategy with these goals, organizations can improve their overall performance and resilience.
2. Train Employees on Risk Management
Employees must understand how to identify and manage risk in the workplace. By providing training on risk management, you can create a risk-aware culture in your organization—helping reduce the likelihood of your business leaders and the team being impacted by risk events, for example, a cyber attack.
Here are some tips on conducting risk management training:
- Define what risk management is and why it’s essential. Employees should understand what risk management is and how it can help protect the company and themselves.
- Identify potential risks. Employees should be aware of potential hazards in their work environment and also the relevant wider enterprise risks such as vendor failure.
- Explain policies and procedures to mitigate risks. Employees should know the policies and set of practices to reduce the likelihood of risks or mitigate them if they should occur.
- Encourage employees to report any potential risks. Employees should feel comfortable reporting any potential risk-related items.
- Provide resources on risk management. Employees should have access to information on risk management, such as safety manuals and cyber risk resources.
All employees must appropriately understand the risk management strategy and know-how to identify and report potential risks. Remember, risk management training can be outsourced and/or supported by external expertise.
Exiger’s experienced compliance professionals provide complete coverage, from design and implementation to ongoing training and development. In creating a culture of compliance, our professionals will arm your team with the tools to recognize and report red flags before they become a compliance issue.
Contact a member of the Exiger team today to learn more.
3. Invest in Integrated Risk Management Software
Integrated risk management solutions can help automate the process and highlight risks before they cause issues. By automating the risk management process, your company can avoid potential problems while saving time and money.
When choosing an IRM solution, selecting a comprehensive/easily integratable and user-friendly one is crucial. Selecting a software package that is too simple may not provide enough protection, while one that is too complex can be challenging to use and may increase the risk of problems.
An effective risk management software package will include features such as identifying, tracking and managing risks, creating reports, and generating alerts. It should also be easy to install and configure with other key enterprise solutions.
With the right risk management software, your company can avoid potential problems and save time and money. Investing in such a package is integral to any comprehensive risk management strategy.
Exiger’s DDIQ identifies, validates, and analyses risk indicators globally at high speed and scale. It enables financial institutions, multi-national corporations, and governments to vet clients and third parties efficiently and effectively, reduce false positives and noise, and obtain insights into supply chain networks.
It can analyze both structured and unstructured data across dozens of languages and is currently being deployed in many use cases—adverse media monitoring, watchlist screening, third-party due diligence, supply chain discovery, and customer risk assessment.
4. Monitor Integrated Risk Management Reports
Integrated risk management reports provide a comprehensive view of risks and are used to track the progress of risk mitigation efforts. By regularly running and analyzing risk management reports and metrics, you can identify potential risks and take appropriate steps to mitigate them.
An IRM solution can provide risk analysis, dashboards, and IRM reports with an integrated view of financial risks (i.e., credit risk, market risk, and liquidity risk) and non-financial risks (i.e., operational risk, strategic risk, IT risk, and reputational risk). It can also inform your decision on risk appetite and prioritization of which threats to mitigate first.
5. Regular Review of Risk Strategy
The risk picture faced by any organization is constantly changing, so it’s essential to regularly review the organization’s risk strategy. By doing so, you can make sure that the integrated risk management program (IRM program) remains effective and address any new risks.
When reviewing the risk strategy, consider the following factors:
- The current and future risk landscape
- The organization’s business objectives and goals
- The effectiveness of the current risk strategy
- Any changes that have been made to the organization or its operations
- Appropriateness of the organization’s risk tolerance and appetite levels
After considering these factors, you can adjust the risk strategy as needed. By regularly reviewing and updating the risk strategy, you can help ensure that the organization is prepared to deal with any risks that come its way.
Implement Integrated Risk Management with Exiger
Integrated risk management is critical for organizations of all sizes and industries. By taking the time to understand and implement an integrated risk management plan, you can protect your organization from potential harm while also maximizing opportunities.
Exiger is a leading provider of risk management solutions and can help you get started with this critical business process. We have the experience and resources to ensure your company is protected from any potential risks.
Contact us today to learn more about our services and how we can help you execute and implement integrated risk management for your business.