Navigating Business Risks: The IRM Journey
Like navigating a ship through a stormy sea, managing business risk involves charting a set course, choosing the right people, and planning carefully – but it also involves reacting nimbly to avoid dangerous conditions or obstacles.
And whether risks are stumbled upon, like a data breach, or seen from afar, like a regulatory change, organizations must be able to quickly identify and manage risks to be successful in the long term.
Integrated risk management (IRM) is a more comprehensive approach to managing risk. Like a map guiding a ship, a solid IRM strategy should provide a holistic view of the risk landscape and coordinate the management of those risks across the organization, including financial, operational, strategic, and reputational risks.
IRM technology must adapt to requirements across industries, countries and areas of particular risk to meet the diverse needs of customers across different industries. For example, the complexity of managing the risk of cyberattacks on a multinational medical research entity would require a different management approach to a small to medium-sized enterprise (SME) upscaling data protection on a tight budget.
Priorities in IRM technologies
These diverse priorities, and the growing complexity of regulatory updates around managing data, have prompted IRM vendors to expand their products to support a broader range of use cases in risk and compliance. Three key growth areas in IRM technology continue to gather momentum.
One of these areas is cyber risk, which poses a significant threat to businesses of all sizes. Failing to notice or prevent a cyber breach can result in massive financial losses, reputational damage and loss of customer trust. However, IRM technology helps organizations interconnect cybersecurity risk with other processes across the business – including useful preventions like embedded threat and vulnerability assessments, incident response plans, compliance management around data protection, and overall cybersecurity monitoring and reporting.
Ethics and compliance is another area of growing importance to IRM strategies. Many organizations are looking for solutions to help them manage their compliance obligations and demonstrate a commitment to ethical, responsible business practices. IRM helps businesses manage risk around unethical behavior and non-compliance with regulations, including training and processes around prevention and steps for properly handling cases of noncompliance or ethical dilemmas. Ethics and compliance must be integrated with risk management to maintain a positive reputation, build employee and stakeholder trust, avoid legal consequences, improve financial stability, and improve employee engagement.
Finally, environmental, social, and corporate governance (ESG) is another area organizations should prioritize. ESG factors refer to the non-financial aspects of an organization’s operations – environmental impact, social responsibility and governance practices, all of which draw much attention if an organization fails to meet expectations. Sustainability will be something for organizations to move towards proactively; in response, IRM vendors are developing solutions to help organizations better manage, report and improve their ESG initiatives and performance.
Understanding IRM solution models
As with all technologies in the digital age, IRM is changing rapidly. A broad vendor landscape has emerged that, according to Gartner®, a company that delivers actionable, objective insight to its executives and their teams, generally covers three main categories.
Multivendor, Point Solution (silo)
This refers to a collection of risk management solutions from different vendors designed to address specific risk management needs. This might be due to an organization’s different business areas or units having different risk priorities, each requiring a different approach.
An advantage of this type of solution is being able to choose specialist solutions from multiple vendors to address specific needs. However, while this allows the tailoring of solutions to specialized requirements, limited integration capabilities between the solutions mean risk profiling can lack detail and sophistication. Best suited to organizations still working out their roadmap for risk maturity or only needing to pinpoint one specialized area of risk management, this type of solution can also be tricky to scale up – especially as sharing data between disparate systems can involve additional manual effort.
Single-Vendor Suite (integrated)
This refers to a comprehensive risk management solution offered by a single vendor, which integrates multiple risk management tools and functions into a unified suite or platform. This solution model works well for organizations looking to find a single provider for their IRM approach, to simplify architectural requirements for implementation or to get a system up and running faster.
Multivendor, Multi-Suite Solution (connected)
This refers to a combination of risk management solutions from single or multiple vendors. These are designed to work together in a connected environment, either as part of the same suite or with integration capabilities across other solutions or platforms. This solution offers the most advanced risk analysis and profiling, often with API connections to streamline data sharing between different modules or systems.
These integrated solutions work well for larger organizations needing additional functionality not covered by a single vendor or if they need open architecture to build more complex, customized integrations in the future.
What makes a vendor the right choice?
The demand for smarter, faster ways to manage business risk across all the nebulous aspects of risk management continues over time. Gartner forecasts the IRM software market to grow at an 11.4% compound annual growth rate (CAGR) to $8.4 billion from 2020 through 2025.
Even so, the value IRM providers can offer their customers will depend on how they can tailor a strategy and deliver software to cover all bases, which involves three considerations:
- Risk management maturity – How well the vendor can understand the organization’s current level of risk management maturity to tailor offerings to meet their specific needs and current capabilities
- Use cases – Understanding the customer’s specific use case (e.g., regulatory compliance, operational risk management) to focus on how their product can solve the customer’s most pressing pain points
- Primary IRM objectives – Understanding a customer’s primary objectives (performance, resilience, assurance and compliance) to show how a product addresses long-term goals and provides value to the customer
An essential factor to have in mind is the importance of a budget. IRM providers must be able to provide tailored solutions appropriate to the business in terms of pricing and capabilities. There are a few options for adaptability around this need; a vendor might offer a more affordable out-of-the-box IRM solution for organizations at the start of their IRM journey, with a more advanced solution or upgrade selection for organizations with more mature risk management practices.
There’s no question that IRM is the approach modern businesses need to take to be successful and maintain that success. With the growing importance of areas like cybersecurity, ethics and compliance, and ESG, IRM providers must offer tailored solutions spanning affordable to fully customizable. Crucially, the technologies that prove to be the best investments for any organization will be those that can scale as the customer’s organization grows.
With such a wide range of IRM technologies and providers available, it is important to know the market’s options, pros and cons.
To learn more about the different types of IRM technologies in the field, and their areas of focus, check out the full Gartner report, “Competitive Landscape: Integrated Risk Management,” below.
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Gartner, Competitive Landscape: Integrated Risk Management, Elizabeth Kim, 6 December 2021