Wheelhouse Advisors' 2025 Predictions: Integrated Risk Management Becomes Non-Negotiable
As we move into 2025, organizations worldwide are grappling with two interconnected challenges redefining risk management: the relentless pace of digital transformation and the escalating urgency of sustainability goals. The rapid adoption of artificial intelligence (AI) and other digital technologies creates new risks and significantly increases energy consumption. This surge in energy demand strains sustainability objectives, forcing organizations to reassess their strategies.
The FERMA Global Risk Manager Survey 2024, conducted with PwC, highlights this emerging dichotomy. Risk managers are now more involved than ever in integrating Enterprise Risk Management (ERM) with other risk domains and the business at large. However, the accelerating demands of AI introduce complexities that cannot be ignored. Integrated Risk Management (IRM) technology emerges as a critical tool, providing greater visibility and understanding of risks to drive actionable change.
The Interconnected Risks of Digital Transformation and Sustainability
The survey reveals that digital threats like cyberattacks and data breaches remain top concerns within the next 12 months. Looking ahead three years, the rapid pace of technological change and regulatory shifts become critical risks. Furthermore, climate change adaptation tops the list of long-term risks over the next 10 years.
This progression underscores a significant tension: while digital transformation is essential for competitive advantage, it contributes to increased energy consumption and carbon emissions. AI technologies, in particular, require substantial computational power, leading to higher energy use. According to industry estimates, training a single AI model can emit as much carbon as five cars over their lifetimes.
IRM Navigator™ framework developed by Wheelhouse Advisors
Organizations Integrate ERM with Business and Other Risk Domains
An encouraging trend from the FERMA survey is the increasing involvement of risk managers in integrating ERM with other risk domains and business strategies:
91% of risk managers are involved in corporate strategy, focusing on aligning risk management with business objectives.
57% are involved in assessing ESG-related risks, up by 22 percentage points since 2022.
Risk managers are playing pivotal roles in ESG activities, significantly contributing to risk analysis, framework definition, and reporting.
This integration is crucial for addressing the dual challenges of digital transformation and sustainability. By embedding ERM into all aspects of the business and integrating it with Operational Risk Management (ORM), Technology Risk Management (TRM), and Governance, Risk, and Compliance (GRC), organizations can better anticipate and manage the complex risk landscape.
The Role of IRM Technology in Navigating Complex Risks
IRM technology is instrumental in providing organizations greater visibility and understanding of risks across all domains. By leveraging advanced analytics, AI, and real-time data processing, IRM solutions enable organizations to:
Break Down Silos: Integrate data from ERM, ORM, TRM, and GRC to provide a comprehensive view of risks.
Enhance Decision-Making: Use predictive analytics to anticipate risks and opportunities, facilitating proactive management.
Drive Actionable Change: Translate risk insights into strategic actions that align with business objectives and sustainability goals.
Wheelhouse Advisors' Bold Predictions for 2025
Based on our analysis of the evolving IRM marketplace, Wheelhouse Advisors makes the following bold predictions for 2025:
Widespread Adoption of Integrated IRM Platforms: By the end of 2025, over 70% of large organizations will adopt integrated IRM technology platforms that unify ERM, ORM, TRM, and GRC. This integration will be crucial for navigating the complex risk landscape, providing real-time insights, and fostering actionable change.
Risk Domains Converge Under Unified Strategies: Organizations will increasingly recognize the interdependencies among risk domains. Over 60% will develop unified risk strategies that integrate digital risks, sustainability challenges, and operational vulnerabilities, leveraging IRM technology to manage these complexities.
Integrated Reporting Becomes Mandatory: Regulatory bodies in at least 50% of major economies will require integrated reporting that encompasses financial, digital, and sustainability risks. Organizations will need to leverage IRM technologies to consolidate data across risk domains, ensuring compliance and enhancing stakeholder transparency.
Strategic Approaches to Integrate Risk Domains Using IRM Technology
To navigate these intertwined risks, organizations should consider the following strategic approaches:
Adopt Comprehensive IRM Frameworks: Implement IRM solutions that integrate ERM, ORM, TRM, and GRC, providing a unified view of risks and enabling cross-domain insights.
Leverage Advanced Technologies: Utilize AI, machine learning, and predictive analytics within IRM platforms to identify emerging risks and trends across all domains.
Enhance Collaboration Across Departments: Break down organizational silos by promoting collaboration between risk management, sustainability, IT, and other vital functions, facilitated by shared IRM technology.
Invest in Real-Time Monitoring and Reporting: Use IRM tools to monitor real-time risks, enabling swift responses and proactive mitigation strategies.
Leveraging Wheelhouse Advisors' IRM Navigator™ Reports
To assist organizations in tackling these challenges, Wheelhouse Advisors offers the IRM Navigator™ report series, covering all four IRM segments:
Enterprise Risk Management (ERM): Strategies for aligning risk management with corporate objectives and integrating with other risk domains.
Operational Risk Management (ORM): Best practices for managing operational risks exacerbated by digital transformation and sustainability pressures.
Technology Risk Management (TRM): Approaches to mitigate risks arising from AI and other digital technologies, emphasizing the role of IRM technology in providing visibility.
Governance, Risk, and Compliance (GRC): Guidance on navigating regulatory requirements and integrating compliance efforts across risk domains.
Embracing IRM Technology for Greater Visibility and Actionable Change
The dual challenge of digital transformation and sustainability requires a balanced and integrated approach. IRM technology plays a pivotal role in this integration, offering tools and insights that enable organizations to:
Gain Comprehensive Risk Visibility: Understand the full spectrum of risks across all domains in a unified platform.
Drive Strategic Action: Translate risk insights into actionable strategies that address complex challenges.
Enhance Organizational Resilience: Build adaptive capabilities to respond to emerging risks proactively.
As we anticipate the evolving risks of 2025 and beyond, adopting comprehensive IRM strategies supported by advanced technology is imperative. This integration enables organizations to navigate the complexities of the modern risk landscape, ensuring long-term success in an increasingly digital and sustainability-focused world.
To understand how IRM technology can enhance your organization's ability to integrate risk domains and drive actionable change, access our comprehensive IRM Navigator™ reports covering ERM, ORM, TRM, and GRC at Wheelhouse Advisors' IRM Navigator™ Reports.
