In the last 12 months, 41% of organizations have experienced three or more critical risk events. Enterprise risk management (ERM) and integrated risk management (IRM) are both keys to keeping these risks at bay.
When it comes to IRM vs. ERM, think of IRM as the tree’s roots and ERM as the leafy canopy. While ERM is a top-down strategy that helps manage risk strategically across an organization, IRM is a bottom-up approach to governing organization-wide risk within a single source of truth, rather than centering on a specific team or set of objectives.
Because ERM is strategic in scope, it may seem like the more important risk management tactic. Yet as risks evolve in scale and complexity, IRM vs. ERM isn’t as much about how the two approaches compete but how they can support each other to create a more secure infrastructure for your organization.
What is the difference between IRM and ERM?
IRM and ERM are two sides of the same risk management coin. They both have their parts to play in identifying and mitigating risks, but the primary difference comes down to why and when the organization is managing its risk.
ERM points to risks that threaten strategic decisions from the board level, whereas IRM — typically a function of governance, risk and compliance (GRC) teams — aims to centralize the organization’s risk profile into a single view.
An example of integrated risk management vs. enterprise risk management
Enterprise risk management is primarily concerned with a business’s strategic risks, which are primarily financial, reputational, technological or competitive risks that can result in traffic business failure. If a healthcare provider wants to start processing payments online, it must identify and mitigate all the risks associated with its new online ecosystem. An effective framework for this organization should assess vendors, new technologies and more.
Integrated risk management, on the other hand, is an approach that creates a single view of risk on a unified platform. With IRM, that same healthcare provider would have one platform that would allow for cross-functional visibility across the risk, audit and compliance teams. They would have visibility into whether the new technology itself is secure and how that technology may interact with technology the healthcare provider already uses — data they could turn into actionable insights that reduce their risk exposure and can be shared with the C-suite and Board.
|ERM vs. IRM: Key differences
|Enterprise risk management
|Integrated risk management
|Starts from the top (board of directors)
|Starts from the bottom (GRC/operational teams)
|Integrated view of all risks
|Provides management and board with an understanding of the top organizational risks and threats, how well they are controlled and what actions to take if they are not
|Provides increased potential for collaboration and communication regarding potential risks as they emerge in an organization across all levels
How do IRM and ERM work together?
Integrated risk management and enterprise risk management are different. But IRM and ERM are more integrated than ever in today’s business landscape.
Most, if not all, big business decisions involve technology — 95% of businesses used software to provide services in 2022, and another 78% expect to increase their use of software tools. That’s billions of dollars companies spend on technology annually, all contributing to the inherent relationship between IRM and ERM.
In thinking about integrated risk management versus enterprise risk management, think about how they can both help address risk at all levels. ERM stems risk from high-level business decisions, while IRM mitigates threats that can arise during the day-to-day use and integration of key technologies. When implemented together, organizations protect themselves from top to bottom.
Evaluating IRM vs. ERM: Which comes first?
IRM and ERM are both important. But it can be challenging for organizations to implement both, especially if their risk management approach isn’t yet mature. Whether you start with IRM or ERM depends on your company’s size and maturity.
ERM can be costly, time-intensive and complex. This isn’t an issue for mature organizations that can afford both the workforce and the technology that an effective ERM strategy requires. Small to mid-size companies, however, may struggle to implement ERM. For these organizations, IRM may be the better fit because an IRM bottom-up approach can effectively mitigate risks while still being more affordable and easier to implement for organizations that don’t yet have a deeply embedded way of working.
As the organization grows, its approach to risk can, too, which typically includes introducing ERM into the cybersecurity framework.
Is your organization ready for enterprise risk management?
ERM is important. But implementing it before you’re ready can swamp your cybersecurity team with complex tasks that might overshadow your existing IRM and other cybersecurity efforts. Organizations with adequate time, budget and staff should consider enhancing their security through ERM, starting with enterprise risk management software.
ERM software can drive performance by developing an ERM system specific to your organization’s unique needs. Make the most of your resources, proactively identify risks and communicate a holistic view of risk to reveal opportunities in all your business decisions.
Learn more about Enterprise Risk Management from Diligent. Talk to an expert today!