Failure of risk management processes across organizations has caused some of the worst economic and financial crises in the world. It is hard to be responsible for a domain as vast and complex as risk management, but lack of visibility into critical risks, coupled with tardiness in action to avoid potential losses has brought down organizations worth hundreds of billions of dollars just in a matter of a few weeks.
Integrated Risk Management (IRM) includes all risk management procedures followed by an organization to improve its risk visibility and decision-making process in ways that help it not just survive, but thrive on risk.
Each organization has its programs for risk management and has separate risk teams assigned to take care of each major risk category.
Today, the sheer complexity and volume of the risk landscape has made it difficult for organizations to see the connection between various risks, to make the right risk management decisions. And as a result, organizations fail to meet the set objectives and milestones for success. Risk management activities can be futile and expensive as efforts are primarily directed towards risk mitigation without adding any value to the organization.
Therefore, it’s critical to integrate risk management activities throughout the organizational structure. An Integrated Risk Management framework provides an optimal risk control strategy to create a coordinated approach for the evaluation, control, and monitoring of risks in an organization.
The Integrated Risk Management approach helps to address questions such as
The traditional approach to risk management includes identifying different risks and delegating those risks to different risk experts who resolve them using different tools. However, this approach fails in adding value to organizations as the risk management process operates in silos, resulting in a narrowed vision of risk mitigation.
Implementing a comprehensive approach to risk management - Integrated Risk Management or IRM - helps align risk management across different functions and maximizes the value of this approach by considering all risks and methods deployed.
By integrating different risk management functions into an operating risk framework, organizations can now shift the focus of risk management from considering each risk in isolation to assessing the organizations’ collective exposure to risks.
An integrated approach to risk management is therefore essential to identify how the risks interact with each other. This way, expert teams can develop processes for risk mitigation after assessing how the organizational structure will be affected by these risks and associated changes, as a whole.
Integrating the risk management processes will open up new markets for growth and increase the opportunities of success. An Integrated Risk Management program is also necessary for an organization to perform well in a global marketplace.
There are many advantages when organizations establish a robust IRM process.
A few of the business values offered by a well-coordinated IRM program are listed below.
Organizations face constant challenges in moving towards implementing an Integrated Risk Management process. These can broadly be classified into business and technical challenges.
IRM requires the ability to move from a siloed approach to a systemic approach. It allows for the effective integration and coordination of the organizational risk management processes while meeting the performance expectations of the stakeholders.
Listed below are a few guidelines to improve the Integrated Risk Management process in an organization.
An organization that follows a robust Integrated Risk Management process can:
A few points are to be considered before selecting the right platform and tools to implement an effective Integrated Risk Management solution.
Organizations continue to grow in size, revenues, and geographic coverage. Creating and maintaining an effective risk management culture in a growing organization can be quite challenging.
Knowledge about risks, how they are managed and experiences from individual business units should be captured and shared across the organization. With regulatory requirements changing over time, it is essential to accurately collect metrics on time to ensure the success of the risk management process. Training programs can be conducted to effectively integrate the risk management processes into the existing business processes.
Communication protocols should be established for frequent and consistent communications with the management regarding the objective, success, and cost of the risk management process. This will facilitate maintaining management support and encourage continued participation of managers and invested stakeholders in the ongoing risk management process.
Adequate software tools and methods should be developed and deployed to enhance the effectiveness of the risk management process. The tools identified should facilitate the sharing of risk data across other programs to increase their utility across a range of business management processes.
The IRM solution of choice should help you effectively collaborate across the organization and directly connect to the strategic planning process, business objectives, business units, and various functions within these units.
Integrated Risk Management framework includes the strategic combination of risk management techniques to manage current and future risks faced by an organization. It defines the specific set of functional activities and processes used to manage risks and describes the accountability and reporting methods that will support the risk management process.
A successful IRM implementation broadly covers the following steps:
In order to successfully implement an Integrated Risk Management program and achieve organizational success, one must conduct thorough research, identify pain points, put together control activities to mitigate risks, work together as a team, receive oversight and support from the management, and communicate appropriately.
The top-listed risk management certifications are: