Integrated Risk Management in the Digital Enterprise

12 min
IRM 700 x 301

In today’s fast-paced digital landscape, Integrated Risk Management (IRM) is a crucial concept that covers methodology and governance model. Its primary objective is to provide organizations with the tools necessary to effectively monitor and report on their risk and compliance posture across various operational domains. 

When it comes to managing IRM practices efficiently, the Three Lines of Defense Operating Model is the best practice Governance framework. 

1st line of defense

The 1st line of defense consists of people ‘in the business’ who are assigned certain responsibilities (‘ownership’) of a particular organizational domain. For example, department, process, or IT system owners. In line with the defined company ‘Policies’, these people are responsible for ensuring that the Policy ‘measures’ and ‘procedures’ are effectively implemented for the domain that they are responsible for. In short: The 1st line of defense is considered the ‘Control Owners’. In a high-maturity IRM use case, these people often perform well-documented ‘Control self-assessments’, to record that they are complying with the Policy ‘Control objectives’. 

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2nd line of defense

The second line of defense consists of individuals in oversight roles within the organization, for example, risk managers and compliance officers. They are primarily responsible for:

  • Monitoring and controlling risks stemming from business activities in the first line of defense. 
  • Addressing issues of non-compliance from the first line of defense, mainly related to Controls that are not ‘implemented’ effectively. 

Additionally, individuals in the second line of defense often engage in various activities to fulfill their duties: 

  • Risk Managers: Risk Managers initiate and conduct risk assessments, frequently through interviews with various stakeholders in the business. Depending on the ‘scope’ of the risk assessment, they engage with other stakeholders in the business. For example, control owners for operational risks or executive teams for enterprise risks. They also document outcomes and track risk levels using reporting instruments, such as ‘Risk Heatmaps’ to visualize the Risk Matrix ‘Likelihood x Impact factors’ 

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  • Compliance officers:They perform ‘Control Reviews’ through collaborating with the 1st line of defense and assess the effective implementation of ‘Controls’. The level of formality (e.g. interview based, word, excel, tooling) in this engagement varies based on the maturity of the governance model.  

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3rd line of defense

The 3rd line of defense, known as Internal Audit, operates as an ‘independent’ entity within the organization. It reports directly to the Executive team and has two primary objectives:

  • Providing insight to the executive management about the monitored Risk levels across the organization. And ensuring that they align with the ‘Risk Appetite’ defined by the leadership team. 
  • Assuring the executive team that the defined policies are ‘operating effectively’ throughout a given period (retrospectively). 

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Internal Audit Cycles

Internal audit teams follow Annual Audit Cycles depending on the regulatory, legislative, and internal company policies. During these Audit cycles, they engage with both the 2nd and 1st lines of defense, conducting sample-based tests of Controls and assessing Risk Response follow-up. This process involves a high administrative workload for all stakeholders across the three lines of defense due to the volume of information exchange.  

The extent of information exchange and administrative workload varies based on the IRM maturity in different use cases. Companies relying on manual-driven processes, such as Excel or spreadsheets, encounter several business challenges, including:

  1. A ‘redundant’ administrative workload which increases the ‘total cost of compliance’ 
  2. Less value to the business due to the ‘scatteredness’ of information and the ‘error-prone’ nature of this way of working.  
  3. Limitations in effectively reporting on Risk and Compliance posture (KRI’s) across the organization. 
  4. Challenges in measuring the performance (KPIs) of the 3 lines of defense operating model itself. 
  5. A slowdown in organizational activities, as it will take more time to assign, perform, and monitor them.  

Benefits of a Digital IRM Capability

Implementing a digital integrated risk management capability brings several key advantages to the organization, including:  

Streamlined information exchange
A digital integrated risk management streamlines information exchange along the 3 lines of defense, minimizing the total cost of compliance and reducing risk posture. This approach provides valuable and reportable insights into enterprise-wide risk and compliance posture (KRIs). Whilst tracking the performance of stakeholders and teams as part of the 3 lines of defense operating model (KPIs). 


Enhanced Efficiency
The IRM function fundamentally serves as a reporting and control instrument. In a manual-driven organization, the IRM operating model can significantly increase the administrative workload due to top-down information ‘requests’ (3 lines of defense). To address this, a business imperative is needed to maximize automation and data capturing. This minimizes the additional workload generated because of risk and compliance practices. 

The Digital Transformation Roadmap

The digital transformation roadmap should therefore be oriented towards the ultimate vision: achieving a total digital enterprise capability. This will lead to 4 major benefits for the organization: 


  1. People: Establishing a clear, concise, and accurate governance model across the enterprise with defined ownership, roles, and responsibilities. This unified digital governance framework enhances decision-making speed and adaptability.


  1. Process: Implementing a fully standardized and end-to-end collaborative platform to streamline process workflows across reporting lines. This balance between speed and process controls prevents human errors common in manual-driven processes, ensuring operational excellence.


  1. Technology: Maximizing automation of administrative and repetitive tasks to reduce manual work, overhead, and cost drivers across all business lines and domains. Such an enterprise workflow solution captures all data points within end-to-end processes automatically.


  1. Data: Establishing a single source of truth for enterprise data using a uniform data model. This enables highly mature reporting capabilities, providing a comprehensive, accurate, and consistent view of performance (KPI) within enterprise domains and aggregated business risks (KRI).

Leveraging total digital capability

A total digital capability serves as an executive instrument to make informed decisions and steer the organization. It prioritizes and balances investments toward:

– Underperforming business domains 

– Organizational domains at risk  

– External market factors that may have a negative impact of the competitive advantage of the enterprise

In conclusion, the integration of Risk, Compliance, and Audit workflows in the digital enterprise is crucial for achieving efficiency, collaboration, and informed decision-making. Embracing digital solutions and automation enhances the organization’s ability to manage risk and compliance effectively while minimizing administrative burdens and costs. 

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Carel Jansen

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Carel Jansen
GRC Platform Consultant
+31 (0)30 76 02 670

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