In 2024, organizations are focused on annual budget planning and reflecting on areas of improvement.
In the current economic environment, risk leaders are being asked to find additional savings, create efficiencies, or stay “budget neutral,” limiting their ability to make significant investments in the very technologies that could enable long-term incremental savings. The wish lists of “must haves” and “nice to haves” are likely being pruned to include only “must haves” at this point.
For risk leaders, this challenging budgeting and planning dynamic is compounded by:
- Increased auditor and regulatory scrutiny.
- New regulatory requirements and SEC rules.
- Evolving risk and market conditions.
- Increased third-party risk.
- High employee turnover.
- Poor organizational data management practices.
Amid these obstacles emerges a resolution for change in 2024. The time for integrated risk management has come.
What Is Integrated Risk Management?
Integrated risk management (IRM) is a comprehensive approach to managing all risks within an organization. This approach ties together the high-level risk pillars of the organization – enterprise-wide risk, technology risk, financial and compliance risk, and operational and strategic risk – enabling the creation of a common set of practices and processes that drive standard business operations and procedures cross-functionally.
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How to Implement Integrated Risk Management
IRM allows leaders to prioritize where time and resources should be invested. This prioritization will be unique to the demands, strategies, and goals of each organization.
While there are numerous ways organizations can commit to and execute IRM, the below mechanisms are generally productive, agnostic starting points:
- Creating a risk-aware culture: The crucial first step to effective IRM is to ensure the tone at the top of the company is set and a risk-aware culture is being implemented across the organization. This involves training employees to understand and manage risks within their roles and promoting a mindset that prioritizes risk identification and mitigation. Employees should understand not only why they are performing controls but how to identify whether controls are operating as intended.
- Enhancing cross-functional collaboration: IRM requires collaboration across different departments within an organization like finance, IT, compliance, legal, and operations to help identify, assess, and mitigate risks. Many organizations are adopting IRM technologies or tools that consolidate various risk-related processes into a single platform. This allows for a holistic view and better management of risks. It also avoids duplication of efforts and creates better accountability.
- Leveraging data analytics, automation, and AI: Risk management is an ongoing process. With data and predictive analytics tools, organizations can analyze large volumes of data to identify potential risks and trends and surface risks before they escalate. Automation and artificial intelligence (AI) platforms can simultaneously streamline and expedite highly manual processes and controls, improving the reliability and accuracy of data and decision-making.
- Performing dynamic risk assessments and scenario planning: Unlike traditional risk assessments, which are typically conducted annually, dynamic risk assessments acknowledge that risks change and new hazards arise. They emphasize the importance of adaptability and flexibility in addressing risks effectively. Conducting dynamic risk assessments and scenario planning exercises on an ongoing basis empowers organizations to formulate appropriate responses to variable risk scenarios. This proactive approach to risk management helps to mitigate the impact of potential risks that would otherwise likely be more severe or entirely unexpected.
- Keeping pace with evolving regulatory compliance: Staying abreast of changing regulations and ensuring compliance is a key aspect of IRM. With changes such as SEC Cybersecurity Disclosure Requirements or SEC Climate Risk Disclosure Organizations, organizations must stay ahead of what’s coming so they’re prepared to comply when regulations are released. Companies should invest in tools and processes to monitor regulatory changes and ensure adherence across the organization.
- Increasing Board and leadership involvement and education: Boards and senior leadership play a critical role in IRM. They set the tone for risk management strategies, oversee the implementation of IRM frameworks, and ensure that risk management is integrated into the organization’s overall strategy. It’s critical to ensure that all members of the Board and senior leadership are educated in critical areas of risk, such as cybersecurity. It’s also critical that the Board and senior leadership are provided with accurate data to ensure they’re making informed decisions.
- Focusing on resilience planning: One huge lesson that many organizations learned during COVID was the importance of focusing on business continuity and resilience. Building organizational resilience to bounce back from unforeseen events involves not only identifying risks but also preparing strategies to recover swiftly from potential disruptions.
By incorporating these strategies, organizations can create a more robust and proactive approach to managing risks across all facets of operations. To implement IRM strategically, contact CrossCountry Consulting.