When Compliance Isnt Enough: A Case for Integrated Risk Management

Why governance, risk, and compliance solutions lull companies into a false sense of security, and how to form a more effective approach.

The governance, risk, and compliance (GRC) approach to risk management is proving insufficient as companies grapple with myriad tools amid a false sense of security. Instead they now are turning to integrated risk management (IRM) and risk quantification to inform strategies.
What we are seeing, and have seen over the last five years, is a pivot away from more of a compliance-focused approach around IT and security risk that youd typically find in a GRC program, or even in utilizing GRC technology, says John Wheeler, global research leader for Gartners Risk Management Technology division. His focus is on IRM, which involves different ways to address risk and potentially transfer risk vehicles; for example, cyber insurance.
GRC, now around for nearly two decades, stemmed from a growing need to address the broad landscape of compliance mandates security pros face year after year, Wheeler says. While helpful in meeting said mandates, companies that invested more in GRC-specific tools found themselves in a potpourri of products either purpose-built to address a specific compliance requirement or limited in its ability to understand risks unique and specific to the organization.
For many organizations, they may have a false sense of security, he adds. If they think they are compliant with regulations, risks are addressed … [this] couldnt be further from the truth.
It is imperative companies understand their individual risk profile, Wheeler continues; out of that will come a greater ability to meet compliance mandates that are relevant to the business. Rather than focus on GRC, many are turning to IRM so they can comprehend how IT risk, and cybersecurity requirements and posture, fits into and aligns with broader operational risk.
[IRM is] taking it beyond technology into the realm of people and process risk, and ultimately all the way up to overall strategic risk of an organization, such that they can understand their security and IT risk aligned with where the organization is headed strategically, he explains.
IRM is a forward-looking risk posture in that it considers the most strategic initiatives a business is taking on, and where its headed, as opposed to reporting on historical security incidents. While past events are important and can inform an enterprise approach to security, they make up only a small piece of the picture – and one senior executives and board members cant fully appreciate as it has little relevance to what theyre hoping to achieve in the future.
Context is Key: Why IRM is Different
The core of IRM is the ability to perform risk assessment at an asset-based level, which aligns with the IT or cybersecurity world, says Wheeler, who spoke about the approach at
this weeks
FAIR Conference, held in Washington, D.C. Most IT and security pros assess the risk of their hardware, software, and data assets to determine which of these are most critical.
That is important, but what they lack is context of how those assets are also tied into the broader business, he says. They need to take the risk assessment of a given process, and the people involved, and tie those into asset-based risk assessment to realize how they intersect.
For example, you may have a server on the network deemed critical, but in reality, it doesnt support any critical business processes, so it doesnt need to be highly ranked. At the same time, you may have an asset labeled non-critical, located outside the core network and tied into a highly critical business process. For that reason, it will need to be treated differently. These risk assessments can help IT better understand how different systems relate to one another; in doing this, they can better prioritize their work efforts and resource allocation, he adds.
IRM is helpful in informing the development of new products and services, says Wheeler, as it provides a vertical view of risk through the company. This is essential in helping businesses address digital
risk management
as it relates to the creation and delivery of new digital products and services, an issue of great importance to CEOs who want to use these to grow.
To do that effectively, they need to have that vertical view of risk down through the organization to give them better understanding and visibility into the risk they face with digital products and services, Wheeler says. Not only for developing a business case, but then as it progresses from business case to design and delivery, understanding how risk profile changes.
Navigating Shifts and Challenges
Wheeler acknowledges adopting IRM comes with its obstacles: while security pros can use tools and methodologies to better quantify risk, he says, it will never be precise in its calculation.
Its unlike, say, financial risk, when you get into credit risk or market risk, where you can be very precise in the amount of risk that needs to be mitigated or transferred, he explains. The goal of this exercise should be directionally correct, as he puts it, instead of entirely exact. With that expectation, organizations can focus on creating and maintaining a dialogue around IT and cybersecurity risk, and make decisions based on the directionally correct data they have.
He also points to a shift occurring within many organizations, which are seeing more and more risk borne by people within the business as opposed to technology experts and leaders. As this is happening, tech is moving into a frontline activity as it supports products and services. This accountability will drive a desire within the business to be engaged and understand the risk.
With that engagement, an understanding must be made. IT and security pros can provide risk data, but everyone must keep in mind the focus of the risk itself as opposed to the process of calculating the risk amount. In his personal experience, Wheeler says much of the conversation between business and technology devolves into a discussion of how a risk amount was calculated – which avoids the goal of addressing risk in a way that drives the business forward.
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When Compliance Isnt Enough: A Case for Integrated Risk Management