Why Successful Integrated Risk Management Needs a Strong Enterprise Strategy

Aarthi Natarajan

Modern organizations face an ever-changing landscape of risk around many different areas of focus, which might include economic, compliance, security and fraud, financial, reputational, operational and competition risk. Not only do they need to be aware of all the different risk scenarios they might face and how indicators are shifting as risk levels rise and fall — but they also need to balance their risk appetite and risk reduction protocols against their various business needs.

Risk management is no longer simply a job for the compliance and audit functions — it’s an enterprise-wide initiative that requires buy-in from the board, executive stakeholders, and individual business units, alongside your risk management team. And that means it’s essential to create a comprehensive enterprise strategy that centers around integrated risk management (IRM).

Understanding IRM

Integrated risk management (IRM) is more than your risk management technology stack — more broadly, it’s a set of practices, processes and tools that enable you to assess and monitor your organizational risk in a comprehensive fashion. It allows your organization to inventory and define disparate risks; assign an owner to each risk; and develop key risk indicators (KRIs) and mitigation plans for when risk levels are elevated. With IRM, you should get an accurate, real-time look at your organizational risk, drilling down into key data for deep analytic insights that will empower your decision-making throughout the organization.

IRM enables you to build a risk-aware culture, in which the risks of every decision are apparent when your stakeholders are making their strategic plans, evaluating potential scenarios, or deciding how to respond to an existing situation. With IRM, every opportunity will be weighed within the framework of your organization’s risk appetite, enabling you to make better strategic decisions with a strong understanding of all potential outcomes.

What is Your Enterprise Strategy?

Enterprise strategy refers to the process for aligning all of your stakeholder and societal expectations, values, norms and standards within your strategy development processes. Your strategy can include goals and objectives that you wish to meet as an organization on behalf of your investors, customers and broader community. These objectives might be outlined within an ESG policy. It should encompass elements such as corporate governance, sustainability and good corporate citizenship, and may also be addressed through legislation such as the Sarbanes-Oxley Act (SOX).

Your enterprise strategy helps you build a long-term plan to map the future of your company, understanding your core competencies and the key differentiators that will set you apart from your competitors. It will also involve outlining your financial structure, so that you can forecast how you will fund all of your business ventures and what level of risk is involved in taking on various forms of business debt, participating in mergers & acquisitions, raising capital or other opportunities.

IRM Within Your Enterprise Strategy

A successful IRM practice falls within the framework of a comprehensive and clear enterprise strategy. By identifying key goals and objectives, and developing a plan for reaching those goals, you can then map out all of the risks inherent on the path to meeting those goals.

While risk identification will come from the bottom-up with an IRM approach, your overall strategic objectives must come from the top. They, in turn, will dictate the kinds of risk that each level of the business will encounter.

IRM gives you the insights to inform your business strategy by helping you see how each potential choice fits your organization’s risk appetite. It enables you to analyze the upside/downside of every scenario so that you can take on more risk when the potential outcome is warranted.

IRM within the context of a robust enterprise strategy enables your entire organization to maintain a clear focus on meeting business goals by making decisions within your risk appetite. It equips you with insights to make strategic business decisions that will help you achieve superior outcomes and drive a competitive edge.

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