ERM vs. IRM: What You Need To Know in 2022 & Beyond
Nov 29, 2021
Despite what some business leaders may believe, enterprise risk management (ERM) and integrated risk management (IRM) are two unique sets of practices and processes for identifying and mitigating risks.
ERM vs. IRM: What's the Difference?
While the two risk management approaches may sound interchangeable, there are key differences in how they’re implemented and the governance required. Understanding the differences between ERM and IRM is critical in finding the right technology fit for you and your business.
What is Enterprise Risk Management?
ERM is an approach to risk management that’s used to identify, analyze, and manage areas of exposure in an organization. Rather than delegating risk management to each business unit, an ERM framework considers the entire organization. An ERM team assesses strategic business objectives and, as part of its mission, identifies any risks technology poses to the organization.
For example, if you’re a professional services company that caters its services to financial institutions, you may realize your product also works for manufacturers. But these two industries have very different cybersecurity and logistic requirements. So to scale your organization with ERM, you would look at risks associated with each component of the business (e.g., strategic, operational, financial, and IT risks).
Keep in mind that IT risk evaluation is part of a significantly more extensive undertaking inherent to ERM solutions. Typically employed by large enterprises, ERM can increase visibility into an organization’s risk landscape by continuously monitoring internal and external threats.
What is Integrated Risk Management?
IRM is a comprehensive approach to governing risk that identifies, assesses, responds to, and reports the underlying risks in an organization’s systems and technologies. Unlike ERM, this approach to managing risk focuses on inherent security vulnerabilities in an organization to improve risk visibility and decision-making.
Typically used by small- to mid-sized businesses, an IRM approach prioritizes a risk-aware culture that results in regulatory compliance and cross-functional visibility. This approach acknowledges that every organization has a unique risk tolerance, which enables a risk management strategy that’s more closely tailored to your business.
Choose an IRM for Agility, Cost-Efficiency, and Scale
ERM and IRM both provide competitive advantages. But how do you determine which approach is right for you? First, think about the size of your organization.
Enterprise risk management technology can be costly and time-intensive to implement, which isn’t a problem for large organizations like Walmart and Amazon. These companies have the required budget and infrastructure for an ERM implementation.
But what if you’re a small or medium-sized organization? You may not have the resources to implement ERM technology or maybe it doesn’t work with your business model. An IRM framework and its key risk technology support small and medium-sized businesses due to its easy implementation and cost-efficacy.
The technology that supports IRM — a risk management platform — is an agile alternative to more complex solutions. A risk management platform enables organizations to report incidents in real-time, leverage analytics features, and take advantage of opportunities for more seamless collaboration between departments.
Focus On What Your Organization Does Best
With a risk-aware culture and supporting technologies, an IRM approach enables organizations of any size and risk appetite to keep pace with the evolving risk and compliance landscape. Creating a risk-aware culture with an IRM approach helps you reduce inefficiencies and focus on what your business does best.
Learn more about how to promote a risk-aware culture with Aclaimant’s insight-driven workflow solutions.