What are the Elements of an Integrated Risk Management System?

Integrated risk management (IRM) is “a set of practices and processes, supported by a risk-aware culture and enabling technologies, that improve decision-making and performance through an integrated view of how well an organization manages its unique set of risks,” as defined by research firm Gartner.

Put simply, integrated risk management is an approach to risk management that integrates risk activities across every level of your company to drive better decision-making by your decision-makers.

Integrated Risk Management Systems vs. Enterprise Risk Management Systems

It’s important to understand that integrated risk management is not the same as enterprise risk management (ERM). Enterprise risk management focuses on planning, organizing, leading, and controlling your risk activities. Enterprise risk management allows you to review your strategic business objectives as well as the information technology risks associated with those objectives. 

Integrated risk management is more about analyzing the risks inherent in your company’s technologies. Although integrated risk management includes many elements of enterprise risk management, it’s typically more comprehensive. 

For most companies, building an integrated risk management system means replacing risk areas that have traditionally existed in silos with a single, holistic view of enterprise risk.

This integrated risk management strategy requires that all the key functions in your company — personnel, financial services and accounting, manufacturing, procurement, information technology, legal, internal audit, strategic development, marketing, and so forth — take part in the risk management process.

An integrated risk management framework establishes a structured approach to governing risk. Applying an integrated risk management strategy lets you evaluate potential risks by providing a link between your business objectives, the functional departments of your company, and the components of a risk assessment (that is, the extent of the potential loss and the probability that the loss will occur).

Elements of an Integrated Risk Management System:

Every integrated risk management system will have these common components, which are discussed in detail below: 

• Risk Identification
• Risk Assessment
• Risk Response
• Risk Communication
• Risk Monitoring

Risk Identification

During risk identification, your organization identifies and develops a solid understanding of its risks. You should include any types of risks that could keep employees from achieving your business objectives at various levels of the company.

You should also provide your staff members with clear direction regarding your expectations about identifying risks, and provide the necessary tools to help them do this. There are a number of risk management tools and methods you can use to identify risks, including workshops and checklists. Enterprise risk management software is also available, and can be hugely beneficial in identifying areas of operational risk. 

You can identify risks using a structured integrated risk management plan as part of a formal risk assessment, or on an ongoing basis as part of regular meetings. When defining risk identification activities within the risk management process, you can offer direction regarding:

• Who should be involved in identifying risks;
• How much rigor is needed for particular risk identification activities;
• The type of data you have to collect and the level of detail that you need;
• How you should document the risks you identify for risk assessment purposes.

Risk Assessment

During the risk assessment, you have to analyze and prioritize your identified risks. Typically, analyzing risks during this phase involves assessing how likely it is that a particular risk will occur, and how much it will affect your business if it does occur.

Risk assessment generally focuses on “residual risk” — that is, the level of risk after you account for existing controls and any existing risk responses. Risk assessment can, however, also include assessing inherent risk: the level of risk before you consider existing controls and any existing risk responses.

Risk analysis helps you to prioritize which risks should be addressed first. This usually involves ranking risks that need responses promptly, so you can focus on the right risks. During this prioritization process, be sure to consider your risk tolerance. 

You should perform a risk assessment at the organizational level (“which risks could disrupt our whole enterprise?”) as well as at activity level (“which risks could prevent us from doing this specific thing, like protecting customer data?”). It should also include identifying and analyzing risks that may affect your company’s ability to achieve business objectives. In general, risk assessment involves determining how important the risk is, assessing the probability that the risk will occur, and figuring out how to handle it.

When you define your risk assessment activities within the risk management process, you may want to indicate:

• Who should be involved in the risk assessment;
• How much rigor is needed for a specific risk assessment activity;
• What type of information you need to collect and what level of detail is required;
• How you should document assessed risks for risk response purposes.

Risk Response

Risk response is the process of selecting and implementing strategies to respond to a specific risk. Usually, you select a general response strategy. For example, you might decide to accept, monitor, transfer, avoid, or reduce the likelihood or impact of a risk. Your tolerance for a specific risk should determine your risk response.

If you decide that you’ll take some action (say, not to accept the risk), you have to put a plan in place outlining the specific actions, responsibilities, and timelines of the action. Your risk response strategy should include all of the activities to accompany the risk response, such as communications and outreach. 

When you define your risk response activities within the risk management process, you might want to offer direction in terms of:

• Considering the wider context of the risk, including the business objectives you’ve defined and the outcomes that you expect;
• How stakeholders inside and outside your company will tolerate the risks;
• Your priorities in terms of allocating resources. 

Risk Communication

Risk communication, a key part of the decision-making process, refers to how you communicate and report information about risks to the appropriate levels of your organization at the right times, to support your decision-makers in their decision-making. 

This includes communicating risk information internally to your employees across different operational areas, as well as externally to clients and stakeholders. An important aspect of effective risk management communication is giving your decision-makers enough information so they can contribute to the decision-making process in an informed way.

Risk communication also lets you reuse risk information for other processes, which means you won’t have to conduct multiple risk assessments in the same area for different purposes (say, for auditing, planning, and resource allocation).

As with risk identification and risk assessment, you can use a number of tools and techniques to communicate risk information. You should, however, consider implementing a standardized method to communicate risks.

In defining risk communication activities within the risk management process, you should consider offering information about: 

• What type of metrics you need to communicate at various stages;  that is, what type of information do stakeholders need and want;
• Who the audience is for this information:, your employees, your management, external stakeholders;
• How you will communicate the information to the right people.

Risk Monitoring

Monitoring your risks is critical to ensure that the information you have about them continues to be relevant. Risk monitoring involves reviewing and monitoring whether your risk profile changes after you implement internal controls. 

That means you have to review your risk information regularly so that you can account for the effect that changing circumstances have on your existing risk controls. It also means that you must review your risk responses to assure that you’ve implemented your risk responses effectively and that you are achieving your business objectives. Monitoring risks also enables you to identify improvements that you could make to the risk management process.

In defining risk monitoring activities within the risk management process, you might want to offer information about:

• Who should be involved in monitoring new risks;
• How you should monitor the changes and the level of risks and how you should monitor each risk’s continuing relevance through its life cycle; 
• How you should monitor the progress on implementing risk responses;
• How you should monitor the effectiveness of risk responses as it pertains to moving risks toward levels your company can tolerate;
• How often you should review risk factors;
• Who is responsible for making changes or taking any corrective actions.

Implementing Your Integrated Risk Management System

Every company is different, and it’s important to design risk management practices that meet your organization’s specific needs. While creating your system, be sure to:

• Consult with internal and external stakeholders;
• Communicate senior management’s commitment to and vision of risk management throughout your company;
• Communicate the components of your risk management approach and any modifications to that risk management approach in a timely manner;
• Report the effectiveness and outcomes of your risk management solutions.

Once you’ve established these foundational elements, you can integrate them so they become an inherent part of your company:

• Risk management strategy. Establish and activate a risk-aware culture, executive sponsorship of the risk management program, plans, and roadmaps, including development of an integrated risk management framework.
• People. Empower all your employees and give them the resources they need to do their jobs. Communication and reporting are critical. You have to take the steps necessary to implement the best methods to track and inform all your stakeholders about your company’s risk response.
• Processes. Establish risk management processes that deliver risk and compliance outcomes, and make certain everyone can follow them. 
• Technology. Implement technologies that accelerate your risk management strategy. Establish processes, enable collaboration, drive engagement, support your integrated risk management strategies, and keep stakeholders informed and involved. 

Developing communications and reporting methods allows you to keep stakeholders informed about organizational risk management processes, practices, and risk responses. At any time, you should be able to provide stakeholders with a snapshot of your company’s key risks and what you’re doing to manage them. 

ZenGRC Has a Solution for Integrated Risk Management

Transparency is crucial for a successful integrated risk management program, and it’s imperative that your team is up-to-date on all of your risk reduction efforts. ZenGRC provides your company with an integrated central location for your risk and compliance management which streamlines your workflows and makes it easy to keep everyone on the same page. 

Our platform allows you to track security threats in real-time and give your customers the security they need. Schedule a demo today to learn more about how ZenGRC can simplify your risk mitigation plans.