As traditional businesses transition to becoming digital first, cyber attacks are becoming more common, often causing irreversible damage. As a result, the cybersecurity industry has introduced new ways to combat the risks associated with a cyber attack. The three approaches to cyber security risk management are Governance, Risk Management and Compliance (GRC), Integrated Risk Management (IRM) and Enterprise Risk Management (ERM).
What’s the Difference? GRC vs. IRM vs. ERM
While all three terms refer to system wide risk management programs, GRC, IRM and ERM each refer to a specific approach within the broader scope of a cyber security risk assessment.
What is GRC?
Governance, Risk and Compliance (GRC) is a way to coordinate corporate and technical goals while managing risk and meeting government regulations. While many businesses regularly practice these three components separately, GRC places them under one umbrella, ensuring that tasks are completed seamlessly and efficiently.
Governance deals with the systems that dictate management, hiring, and training protocols that a business might utilize in order to meet its goals. It outlines the key responsibilities of players within the system, such as stakeholders, board members and management teams. When done right, corporate governance is instrumental in supporting teams as the company grows.
- Establishment of company wide direction
- Monitoring of system performance
- Transparent sharing of information
- Policies to resolve conflict
Risk refers to the vulnerabilities that exist as a result of a company’s operations. While many companies are able to identify loose ends, the real challenge is developing and implementing a plan to respond to risks the team identifies. The best risk management systems aim to locate existing loopholes, seal up any cracks and, ultimately, reduce losses.
Compliance is the ability to abide by certain rules, including laws and regulations. This comes into play whenever a business is dealing with legal policies or regulatory requirements. When it comes to GRC, compliance is an ongoing effort that ensures businesses meet the requirements of any bodies that may govern their operations.
What is Integrated Risk Management?
Integrated Risk Management (IRM) involves all the ways an organization assesses and manages its own risk portfolio, as well as the decision-making frameworks that enable companies to navigate uncertainty with conviction.
Why is Integrated Risk Management Important?
IRM is necessary because the IT, accounting/finance, legal and operational departments of an organization may each have different risks they deem essential. Here are some of the ways organizational departments could be affected by a single ransomware attack:
- IT would have to patch vulnerabilities in the system.
- Accounting and finance would be required to manage heavy financial damages.
- Legal would need to respond to the lasting ramifications of data held hostage.
- Operations would need to rectify the organization’s reputation and client relationships
What Does an Integrated Risk Management Solution Look Like?
Under normal circumstances, these assignments might be dealt with separately, or even on a one-off basis. By contrast, an integrated risk management solution would take all action items into account systematically and put policies in place to prevent vulnerabilities before a catastrophic event occurs. With IRM, all risks are viewed through a unified lens, making it possible to develop a comprehensive solution to security by addressing every concern in a standardized manner.
What is Enterprise Risk Management?
Enterprise Risk Management (ERM) is an approach that assesses risk from the perspective of a business or organization. It is a top-down methodology that serves to identify risk, analyze threats and arrange for potential losses and downtime that may negatively impact a business and its operations.
ERM enables decision makers to configure their firm’s appetite for risk by directing certain business units to either focus on, or stray away from certain initiatives.
IRM vs. ERM
While IRM and ERM both assess risk, they differ in their areas of focus. While IRM concentrates specifically on vulnerabilities within an organization’s internal systems, ERM takes a broader view, looking at risks that occur due to change in the external environment.
Why is Risk Management Necessary?
Modern businesses face a variety of risks and possible hazards. If left neglected, these risks can turn into major sore spots, resulting in a series of escalating consequences. Enterprise Risk Management seeks to identify these risks before they become a problem, saving organizations time and money.
Before the internet, businesses approached risk at the department level. Due to the fact that each team in an organization may have had their own set of rules, it was generally accepted that risk would be managed in a silo. Today, organizations are much more interconnected.
More recently, ERM puts businesses in a position in which risk is observed from a higher level. While individual risk profiles are just as important as ever, managers are now able to identify risks that affect not just a single department, but the organization as a whole.
How to Create a Risk Management Framework
The ways in which an organization manages uncertainty will depend on its business objectives, the size of its industry and its appetite for risk. Below are some of the best ways companies can establish risk management systems.
- Set boundaries. While every organization benefits from a strong risk management plan, not all stakeholders agree on the prioritization of certain risks. Team leaders can start off on the right track by speaking with their colleagues in order to create strategies that take into consideration a company’s risk portfolio.
- Create a plan. While setting boundaries is a good first measure, the next step is to put in place a plan that makes it possible to mitigate any risk identified beforehand. By forming a list of action items, an organization can describe the steps necessary to protect its current assets as well as the health of its future growth.
- Take action. After the company decides on a plan, it is time to move forward by carrying out all actionable steps. One way to streamline this process is by assigning tasks to employees across the organization. This way, the action plan can come to fruition quickly and more efficiently. As an added benefit, employees are responsible for their own piece of the risk management process, giving everybody at the firm a sense of awareness and understanding when it comes to the importance of risk management.
- Get feedback. Once a risk management framework is established, it is important to stay on top of the health of the system. One thing to consider is that certain frameworks may perform better than others. For this reason, it is essential that managers have conversations with their colleagues to determine which initiatives are effective, as well as to identify areas worth improving.
- Embrace change. As technology evolves, so will the set of risks that affect organizations around the world. In creating a risk management framework, leaders should aim to design a system that can grow with the needs of the company. The threats that are present in today’s world will soon evolve in size, source and complexity. The key to a strong risk management program is to prepare for future threats without prohibiting the company from meeting its goals.
What is NIST?
NIST is the National Institute of Standards and Technology within the U.S. Department of Commerce. NIST offers a wide range of guidance documentation to those who wish to tailor the ways they approach cybersecurity.
What Does NIST Do?
NIST provides suggestions that enable federal agencies to effectively manage and protect sensitive data. In particular, NIST is responsible for the creation of the Federal Information Processing Standard (FIPS). The Secretary of Commerce approves FIPS, after which all federal agencies must comply by law. As a result, NIST commands a strong presence in the world of federal cyber security strategy.
What Doesn’t NIST Do?
NIST does not write regulations for organizations, nor does it offer commentary on individual practices. Despite this, the NIST Cybersecurity Framework (CSF) is followed by many organizations across the world. This is due to the fact that NIST guidelines are considered the gold standard for cybersecurity risk management at the organizational level.
- Risk management frameworks are a great way to assess threats and reduce losses.
- Industry sector and business goals play significant roles in determining individual risk profiles.
- Appetite for risk matters. Before implementing any risk management frameworks, take time to consider the different threats at play and how they might affect your organization, both within teams and across departments.
- Acknowledging risk is not the same as managing it. Be sure to define a list of steps your organization can take if and when a cyber threat is recognized.
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