Financial institutions are learning to appreciate the business advantages of a proactive and integrated risk management approach. Here’s what that means, and how to orient your financial enterprise toward enhanced risk management value.
Integrated risk management (IRM) deploys a highly disciplined approach to identifying and mitigating the risks inherent in managing a complex organization. This strategy prioritizes a deep understanding of existing risk, has built-in capabilities to identify emerging risk vectors, and the agility to manage risk response processes across all organizational functions.
Nowhere is the necessity for a top-down, highly intentional approach more evident than in financial services, where the consequences of a risk management failure can be catastrophic.
Managing Diverse Risks Types and Unexpected Interactions
Abundant product offerings and diverse operating divisions mean that banking organizations tend to be highly matrixed but also siloed, e.g. your bank’s wealth management division compared to its lending division has very different customers, regulations, operations, networks, etc. That means each of your divisions also faces very different risks.
An IRM approach allows your banking organization (and similarly diverse enterprises) to manage disparate risks types across the organization, top to bottom. Just as importantly, IRM empowers you to effectively manage the interplay between those risks, so that a risk decision that effectively manages risk within one silo doesn’t simultaneously threaten another silo.
Management’s Role Within an IRM Approach
Management atop each silo, as well as across your organization, plays a critical role in evaluating and communicating risk. This remains true whether in day-to-day discussion and updates, or periodic audit committee-style meetings.
The IRM approach integrates vital risk communication functions in the role of the Chief Information Security Officer (CISO). Where other approaches may consider cybersecurity or business continuity activities to be irregular or reactive, an IRM-empowered CISO has a firmly established place at the executive table and reach sufficient to continuously penetrate across siloed divisions.
IRM Documentation & Auditing Recommendations
Supporting your IRM program requires documenting its performance and effectiveness, including spotlighting and sharing evidentiary data. Whether it’s via reports submitted to management, or sharing meeting minutes containing discussion of and direction given to emerging risks, it’s important to highlight the clarity and depth of the information provided within the IRM framework.
In internal audit or external regulatory examinations, it’s essential to explain to stakeholders the risk methodology in unambiguous terms. Within an IRM approach, a little education can go a long way toward evidencing a fully integrated and effective risk discipline.
Learning More About How IRM Can Bring Your Risk Management Goals Within Reach
IRM is the latest evolution toward implementing a fully integrated risk management function throughout your organization. The improved performance and value it can deliver requires a deeper level of risk understanding and practical expertise, rather than simply relying on a standard dashboard and reporting system.
If you’d like to learn more about IRM and how it can help your enterprise reach its risk management program goals, connect with the ComplyScore experts for a courtesy consultation.