In the past 12 months, 41% of organisations faced three or more critical risk events, emphasising the vital roles of Enterprise Risk Management (ERM) and Integrated Risk Management (IRM). The dynamic relationship between IRM vs. ERM is crucial for safeguarding against risks and ensuring organisational resilience
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 organisation, IRM is a bottom-up approach to governing organisation-wide risk within a single source of truth, rather than centring 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 organisation.
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 organisation 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 centralise the organisation’s risk profile into a single view.
An example of integrated risk management vs. enterprise risk management
ERM focuses on strategic risks—financial, reputational, technological, or competitive—that may lead to business failure. A healthcare provider processing payments online must identify and mitigate risks in its new online ecosystem. An effective framework for this organisation should assess vendors, new technologies and more.
Integrated risk management creates a unified platform for a single view of risk. With IRM, a healthcare provider achieves cross-functional visibility in risk, audit, and compliance. They gain insights into technology security and interactions, reducing risk exposure, shareable with the C-suite and Board.
|ERM vs. IRM: Key differences|
|Enterprise risk management||Integrated risk management|
|Top-down approach||Bottom-up approach|
|Starts from the top (board of directors)||Starts from the bottom (GRC/operational teams)|
|Strategic risks||Integrated view of all risks|
|Provides management and board with an understanding of the top organisational 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 organisation across all levels|
How do IRM and ERM work together?
Integrated risk management and enterprise risk management are different. But IRM vs. 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 vs. 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, organisations 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 organisations 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 organisations with the resources for an effective ERM strategy. Small to mid-size companies, however, may struggle to implement ERM. For these organisations, 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 organisations that don’t yet have a deeply embedded way of working.
As the organisation grows, its approach to risk can, too, which typically includes introducing ERM into the cybersecurity framework.
Is your organisation 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. Organisations 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 organisation’s unique needs. Optimise resources, identify risks proactively, and communicate a holistic risk view to unveil opportunities in all business decisions.
Learn more about Enterprise Risk Management from Diligent. Talk to an expert today!