The Benefits of Integrating Enterprise Risk Management (ERM) and Internal Audit Management for Credit Unions

An enterprise risk management strategy or ERM offers a host of benefits to companies in all industries and business sectors. But the advantages increase exponentially when you integrate enterprise risk management practices with internal audit management activities within your credit union or other financial institution. 

What is Enterprise Risk Management? And What Are the Benefits of ERM? 

To fully appreciate the benefits of integrating ERM and internal audit management, you need to have a solid understanding of how enterprise risk management benefits your credit union. Banks and other financial institutions such as credit unions use a business model with a high degree of in-built risk. Risk is essentially unavoidable for these businesses; it’s not something that can ever be fully mitigated. Credit unions can only minimize risk and reduce vulnerabilities.

An enterprise risk management framework offers a holistic, structured, and centralized process that can be deployed across the entire credit union. ERM is used to identify, monitor and manage the risk factors and vulnerabilities that the organization is confronting at any given time. Enterprise risk management is also favored for its ability to provide business leaders with a transparent and broad “eagle’s eye view” of a credit union’s risk management landscape. 

ERM has rapidly gained favor in many business communities thanks to the way in which it goes beyond traditional risk management to account for strategic business objectives. With insights into a financial institution’s risks and vulnerabilities, business leaders are well-positioned to leverage this knowledge as they consider future business goals and allocate resources in a strategic manner. 

Enterprise risk management also promotes transparency, which means that business leaders at all levels will have an increased sense of risk awareness. This makes it easier for managers and business leaders throughout the organization to recognize vulnerabilities and risk factors; it also empowers them to seize upon new opportunities like never before. 

Other benefits of an enterprise risk management program include the following. 

• Recognizing and addressing risk becomes a normal part of a credit union’s operations. Staff throughout the organization will become involved in risk management and mitigation thanks to the greater levels of transparency. Risk mitigation becomes a system-wide effort. 
• ERM allows for continual, company-wide monitoring. This includes monitoring for risk factors and vulnerabilities, but also for new opportunities. Continuous risk monitoring also allows your credit union to act promptly when an issue is identified. This effectively limits the damage and negative consequences that may result from an incident.  
• Risk mitigation and risk management become part of the company culture. When risk management is an integral component of your credit union’s company culture, it’s never an afterthought; it’s not a single task that can be overlooked or forgotten. It’s a natural part of a company’s operations and as such, it’s integrated into everything you do. 
• Risk management becomes in-built into the credit union’s decision-making processes. This ensures that all of your processes and business decisions take risk mitigation into consideration, so vulnerabilities are avoided/minimized and risk factors are neutralized to the maximum degree possible. 
• Silos are broken down with improved transparency. Information silos exist across virtually every business and this is especially true in financial institutions. These silos can stand in the way of effective risk management and mitigation. But with an effective enterprise risk management program, you can open new channels of communication when risk mitigation becomes a natural and holistic component of the organization’s operations and company culture.

An enterprise risk management program also allows an organization to implement unique, and even creative risk mitigation solutions. But the benefits of ERM programs are amplified when you integrate them with internal audit management for your credit union.

How Do You Integrate Enterprise Risk Management With Internal Audit Management for Credit Unions?

Internal audit management is a critical component of a credit union’s risk management strategy. Internal audits are designed to evaluate the efficacy of an organization’s risk mitigation operations, policies, governance efforts, regulatory compliance, and internal controls. These internal audits serve as a self-evaluation of sorts, ensuring that everything aligns with the credit union’s risk management goals and objectives.

By integrating your internal audit management efforts with your enterprise risk management program, you develop a system of checks and balances. It’s relatively easy to deploy risk mitigation programs but to succeed long-term, you need to evaluate the efficacy of those efforts. Integrate an internal audit management program and you’ll have an in-built mechanism for identifying initiatives that are succeeding and initiatives that are falling short of expectations. 

A credit union’s enterprise risk management program can be integrated with internal audit management that spans several different areas. The four areas of internal audit management include: 

• Regulatory compliance audits –  Internal audits focused on regulatory compliance examine the credit union’s efforts at achieving and maintaining compliance with all applicable rules and regulations. This can be an especially challenging aspect of enterprise risk management due to the ever-changing nature of the regulatory landscape.
• Operational audits – Operational audits involve a review of the risks that are associated with the company’s policies, processes, and operations. Problem areas are identified, serving as an opportunity to make operational changes that will reduce risk and eliminate vulnerabilities. 
• Financial audits – Financial audits can be especially extensive when dealing with a credit union or other financial institution. These audits involve the organization’s financial obligations and its ability to meet those obligations, amongst other things. It also looks at areas of financial liability with the goal of minimizing those liabilities in a strategic manner. 
• IT / Cybersecurity audits – Technology accounts for a great deal of a modern company’s risk management landscape and this is absolutely true for a credit union. These audits examine the financial institution’s cybersecurity measures and general IT-related security measures.

By integrating all four areas of an internal audit management program, your enterprise risk management program will encompass the highest-risk regions within the credit union. This makes for more effective risk mitigation efforts and a more impactful internal audit management program. Integrating these two initiatives makes both more effective and advantageous. 

Technology to Support Your Enterprise Risk Management and Internal Audit Management Programs

Enterprise risk management and internal audit management are both very complex yet essential programs within today’s modern financial institutions. A well-built risk management software program is really essential for success, as it provides a centralized framework for identifying problem areas and planning your response to those issues. Many platforms also include monitoring and alerts that allow an organization to mount a rapid response and limit damage when a problem is identified. 

At iTech, our team specializes in risk management technology. Our goal is to provide clients with the risk mitigation tools they need to succeed by promoting regulatory compliance, increasing the efficacy of their risk mitigation efforts, and improving internal audit management efforts. 

We work with the client to gain a full understanding of their strategic objectives and their challenges. Then, we architect technology that will support those goals, while simultaneously improving their risk management capabilities. We invite you to contact the iTech team today to learn more about how we can help you meet your enterprise risk management goals.