The Rise of Connected Risk: Integrating Audit and Enterprise Risk Management

Introduction

In today's complex business environment, organizations face an array of interconnected risks that span across various domains. Traditional siloed approaches to risk management and auditing are no longer sufficient to address these multifaceted challenges. The concept of "connected risk" has emerged as a strategic imperative, emphasizing the integration of audit and enterprise risk management (ERM) functions to provide a holistic view of organizational risks.

This article explores the rise of connected risk, its significance in the current business landscape, and how integrating audit and ERM can enhance risk visibility, improve decision-making, and strengthen organizational resilience.

What is Connected Risk?

Connected risk refers to an integrated approach to identifying, assessing, and managing risks across an organization. Unlike traditional methods where audit, compliance, and risk functions operate in isolation, connected risk promotes collaboration and information sharing among these functions to achieve a unified risk perspective.

One of the leading platforms facilitating this integration is Parapet®. Parapet® offers a comprehensive integrated risk management (IRM) solution that unifies governance, risk, compliance, audit, and vendor management. Its advanced analytics and real-time monitoring capabilities enable organizations to proactively manage risks and ensure compliance with regulatory requirements.

Other notable IRM solutions include:

• Connected Risk by Empowered Systems: A platform that delivers an enterprise-wide view of risk, enabling organizations to tailor solutions to meet their specific risk taxonomy and workflow needs.
• AuditBoard: Offers a user-friendly platform that transitions organizations from manual processes to automated workflows, enhancing efficiency in risk management processes.
• Riskonnect: Provides integrated risk management software solutions that bring all forms of risk together under one roof for an unobstructed view.

By leveraging platforms like these, organizations can break down silos, streamline risk management processes, and align risk activities with business objectives, thereby enhancing overall resilience and supporting sustainable growth.

The Business Case for Integration

Integrating audit and ERM functions offers several benefits:

• Enhanced Risk Visibility: A unified approach provides a comprehensive view of risks, enabling organizations to identify and address potential issues more effectively.
• Improved Decision-Making: Integrated data and insights facilitate informed decision-making at all organizational levels.
• Operational Efficiency: Collaboration between audit and risk functions reduces redundancies and streamlines processes.
• Regulatory Compliance: A cohesive risk management framework ensures adherence to regulatory requirements and standards.

Organizations that adopt connected risk approaches are better equipped to navigate the complexities of today's risk landscape and achieve their strategic objectives.

Audit’s Expanding Role in ERM

The role of internal audit has evolved from traditional compliance checks to a more strategic function that contributes to risk management and organizational governance. By integrating with ERM, internal audit can:

• Provide assurance on the effectiveness of risk management processes.
• Identify emerging risks and recommend mitigation strategies.
• Facilitate communication between the board, management, and risk functions.
• Support the development of a risk-aware culture within the organization.

This expanded role positions internal audit as a key player in driving organizational resilience and performance.

Technology Enablers of Connected Risk

Advancements in technology have been instrumental in enabling connected risk approaches. Tools and platforms like Parapet® offer features such as:

• Real-Time Monitoring: Continuous tracking of risk indicators and control effectiveness.
• Data Analytics: Advanced analytics for identifying trends, anomalies, and potential risks.
• Integrated Dashboards: Consolidated views of risk data for stakeholders at all levels.
• Automated Workflows: Streamlined processes for risk assessment, mitigation, and reporting.

These technological capabilities enhance the efficiency and effectiveness of risk management and audit functions, facilitating a more proactive and integrated approach to managing risks.

Governance and Reporting Structures

Implementing connected risk approaches necessitates changes in governance and reporting structures. Key considerations include:

• Clear Roles and Responsibilities: Defining the roles of audit, risk, and compliance functions to ensure collaboration and accountability.
• Integrated Reporting: Consolidating risk and audit reports to provide a comprehensive view to the board and executive management.
• Stakeholder Engagement: Involving stakeholders across the organization in risk management processes to foster a risk-aware culture.

Effective governance structures support the successful implementation of connected risk strategies and enhance organizational resilience.

Challenges and Implementation Barriers

While the benefits of connected risk are clear, organizations may face challenges in implementation, such as:

• Cultural Resistance: Overcoming siloed mindsets and fostering collaboration among functions.
• Data Integration: Consolidating disparate data sources and ensuring data quality.
• Resource Constraints: Allocating sufficient resources for technology investments and training.
• Change Management: Managing the transition to integrated processes and systems.

Addressing these challenges requires strong leadership, clear communication, and a commitment to continuous improvement.

Conclusion: Aligning Audit and ERM for a Resilient Future

The integration of audit and enterprise risk management functions through connected risk approaches is essential for organizations seeking to navigate the complexities of today's risk environment. By leveraging platforms like Parapet® and other leading IRM solutions, organizations can achieve a unified view of risks, enhance decision-making, and build resilience against emerging threats.

Embracing connected risk strategies positions organizations to proactively manage risks, ensure compliance, and drive sustainable growth in an increasingly interconnected world.