INTERCONNECTED RISKS WITHOUT A COMMON LANGUAGE

INTERCONNECTED RISKS WITHOUT A COMMON LANGUAGE

| By Karmine Team | Category: Thought Leadership

Background

Mid-sized companies across the globe are grappling with an increasingly complex risk landscape. From cyber threats and supply chain disruptions to regulatory changes and market volatility, operational risks today are more interlinked across business functions than ever before.

Yet, many of these organizations lack a harmonized risk language and accountability, a shared, enterprise-wide way to understand, categorize and monitor risks. Instead, each department often speaks its own dialect of risk, using different taxonomies and sometimes, tools to monitor. The result is that critical issues can go unspoken, miscommunicated across silos, leading to unclear ownership of risks, duplicated compliance efforts, and missed early warning signs of trouble.

What is a “common risk language”? 

In simple terms, it’s a standardized vocabulary and classification of risks that everyone in the organization uses. This involves agreeing on a risk taxonomy, risk ratings and terms across all teams. The purpose of a common risk language is to ensure that a finance manager, an IT analyst, and an operations supervisor all mean the same thing when they discuss “high operational risk” or a “compliance issue”. A a common framework enables people with diverse backgrounds to communicate effectively about risk and identify issues more quickly.

According to one benchmarking survey, teams managing risk in silos reported spending nearly 38% of their time on administrative tasks (assembling reports, updating spreadsheets) and the vast majority said at least one-third of their effort went to repetitive manual work. These inefficiencies directly translate to higher compliance costs and lost productivity.

One common symptom is unclear risk ownership. For example, consider a mid-sized manufacturing firm. The operations team tracks safety incidents and supply disruptions, the IT team handles cybersecurity threats, and CISO monitors regulatory issues. When a critical supplier suffered a cyber breach, operations labeled it a supply chain issue, IT labeled it a vendor cyber risk, and CISO saw a third-party data privacy concern.

Another example ailing many financial institutions pertains to preventing, detecting Money Mules (Money mule risk refers to the threat posed to a financial institution when its accounts, systems, or services are exploited knowingly or unknowingly by individuals, to move illicit funds, thereby exposing the institution to fraud losses, regulatory breaches, and reputational damage.)

Who truly owns this risk? Is the fraud risk team or the AML Compliance team or the cyber team or the first line of defense? Money mules are a classic case of an interconnected risk without a common language. Multiple functions in the same organization perceive the risk differently and hence, are never able to solve the root cause issues are a singular unified view. Without a unified view, early indicators that might have been obvious in say, a consolidated dashboard, remain scattered.

Since there are no common taxonomies linking these perspectives, no single owner is alerted to the full picture. This overlap and ambiguity mean everyone assumes someone else is mitigating the problem. The early warnings are hence, often missed amidst the fragmented reports.

The problems exacerbate in case of un-regulated sectors. 

Why a Common Risk Language Matters:

  • Aligned Risk Appetite and Decision Making:  A common risk language helps align the organization’s risk appetite with operational decisions. Risk appetite, the level and type of risk a company is willing to accept in pursuit of its objectives, is typically set at the top. With a unified taxonomy, management can define risk appetite in concrete terms for each risk category, and everyone from the board to the business units understands it the same way. This means decisions on the ground are made with a clear understanding of how they fit the company’s risk tolerance.
  • Clear Ownership and Accountability: With the unification, every major risk category has an owner and stakeholders who all understand what falls under that risk. There’s less chance of “grey area” risks being unowned. Responsibilities can be assigned without ambiguity ensuring someone is watching each risk and accountable for responding.  
  • Enterprise-Wide Visibility: Using one risk language allows aggregation of risk data across the whole company. Executives can see the full risk profile without blind spots. Early warning indicators become more apparent when all inputs feed into one picture. Patterns (like similar issues cropping up in different regions or departments) can be detected via the common categories. This holistic view is essential for spotting systemic risks that individual silos might overlook.
  • Efficiency and Reduced Duplication: Standardizing risk categories and reporting streamlines processes. The same risk does not need to be assessed in triplicate by different teams; one assessment can serve multiple purposes. Controls and mitigations can be designed to address multiple related risks at once. This cuts down the repetitive administrative burden. In mid-sized firms where resources are limited, this efficiency can be a game-changer, freeing staff to focus on high-value risk mitigation.
  • Improved Communication and Collaboration: A shared vocabulary breaks down communication barriers between functions. In day-to-day operations, this means cross-functional teams can come together quickly around emerging issues, because they have a common reference point. Stakeholders from different domains can contribute insights without talking past each other, leading to more robust risk assessments.

A Contrast: Harmonized Taxonomy in Action

Building a Common Risk Language: Practical Steps for Mid-Sized Companies

Implementing a harmonized taxonomy may sound daunting, but it can be achieved with a series of practical, staged steps. Mid-sized corporates, in particular, should tailor these steps to their scale and culture, focusing on enabling cross-functional collaboration without excessive bureaucracy.

Below is a roadmap to strengthen enterprise-wide risk insight and decision-making through a common language. 

1 – Inventory and Reconcile Existing Risk Terminologies: 

  • Identify overlaps and gaps – Gather the risk lists and terminologies currently in use across departments (e.g. finance risk register, IT risk log, HR compliance checklist, etc.). It’s common to find different names for essentially the same risk. For instance, “data leak” in IT, “confidentiality breach” in legal, and “privacy compliance failure” in compliance might actually refer to overlapping risk events.
  • Draft an initial unified risk taxonomy – Form a small working group with representatives from key functions to review and start mapping equivalences. Leverage industry frameworks as a starting point, for example, ISO 31000 or COSO ERM categories but customize them to fit the company’s context. This collaborative approach brings deep expertise from each area and ensures the taxonomy isn’t imposed top-down but rather agreed upon.
  • Develop a Common Risk Glossary and Definitions – For each risk category and sub-category in the taxonomy, write down a clear definition and examples. This becomes the glossary of the common risk language and a common rating criterion.

2 – Assign Clear Risk Ownership and Governance 

  • Assign Risk Owners – With the taxonomy in place, assign risk owners for each major category or for specific key risks. In a mid-sized company, a single executive or senior manager might own multiple related risks (for instance, the Head of Operations might own Supply Chain and Safety risks, the CFO might own Financial and Compliance risks, etc.). The important part is that it’s documented and communicated.
  • Establish a cross-functional working groups – Set up risk workking group that meets regularly to discuss risks enabled through the common language. Having this governance structure formalizes the common language, it’s where everyone “speaks risk” together. It helps break the historical silo mindset and replace it with a culture of information-sharing.

3 – Implement Enabling Tools and Central Risk Register

  • Establish a single source of truth – This could be as simple as a shared spreadsheet or database in smaller companies, or a module in GRC (Governance, Risk & Compliance) software for those who have it. The key is that all departments log their identified risks, incidents, and mitigation plans in this central repository using the agreed taxonomy and ratings.
  • Provide visibility to the central source of truth – This central risk register gives everyone visibility into risks across the enterprise. It also simplifies reporting; one can generate an enterprise risk dashboard from it for management or board reporting, instead of manually compiling data.

4 – Integrate Risk Discussions into Operational Processes: 

Having a common language and tool is half the battle; the other half is making sure it’s used in decision-making. Mid-sized firms should embed the common risk language into their routines. For example:

  • Department heads can be required to include an update on key risks (using the common categories) in their monthly reports.
  • Project proposals can have a section assessing risks in common language terms.
  • Incident post-mortems should map causes and follow-up actions to the taxonomy categories.
  • Gamify or use simple checklists to guide staff on identifying and reporting risks consistently.
  • The goal is to avoid situations where only risk managers talk about risk. Instead, every team uses the common language in their context.

5 – Link the Common Language to Risk Appetite and Strategy: 

  • Articulate risk appetite – Ensure that the company’s risk appetite is articulated in the same terms as the risk taxonomy.  This practice directly ties operational risk oversight to strategic goals and thresholds. It also helps in aligning mitigation efforts with what the company cares about most.
  • Periodically review enterprise risk profile – Companies should review these appetite statements periodically in their risk committee and adjust as necessary (for instance, if entering a new market or launching a new product, adjust appetite and categories accordingly).

6 – Continuous Education and Refinement: 

  • Implement Ongoing Training – Conduct periodic workshops or scenario drills where cross-functional teams practice responding to a hypothetical risk event using the shared framework. The risk landscape also changes so the common language must evolve too.

By following these steps, mid-sized enterprises can gradually build a common risk language that permeates the organization. This is as much a cultural initiative as a technical one. Leadership should articulate the “why”; explain to all staff that the company is establishing a common risk language so that everyone can work together to safeguard the business. Teams start to see how their concerns connect with others’.

Mid-sized companies may not have the massive risk departments of large corporations, but they can absolutely achieve world-class risk oversight through this exercise. When risks stop being described in incompatible ways and instead are discussed on a shared platform, previously “unspoken” priorities become clear. Early warning signals emerge from noise. Compliance efforts become more about insight than paperwork.

In an environment of ever-interconnected risks, establishing this shared understanding is fast becoming not just a best practice, but a necessary priority for sustainable growth.

As the old proverb goes, “if you want to go fast, go alone; if you want to go far, go together”. A common risk language ensures that a company’s departments go together, equipped with unified insight, as they navigate the risks on the road ahead.

Sources:

  • Boultwood, B. How to Develop an Enterprise Risk Taxonomy. GARP (2021) – Importance of a hierarchical common risk language for ERMgarp.orggarp.org.
  • LogicGate Risk Cloud. The Language of Risk (2021) – Benefits of a shared risk vocabulary; 50% of companies lack consistent risk data/languagelogicgate.comlogicgate.com.
  • Chambers, R. Break Down Silos for Visibility Into Enterprise Risk. MIT Sloan Management Review (Feb 2025) – 86% of risk professionals say silos hinder risk management; need for holistic approachsloanreview.mit.edu.
  • OneTrust Blog. Who Owns Third-Party Risk: Breaking Down Silos (Mar 2022) – Risk silos create duplication of efforts, analysis gaps, lack of knowledge sharingonetrust.com.
  • Hyperproof. 2025 IT Risk & Compliance Benchmark Report (Oct 2024) – Data silos link to higher breach frequency; 46% of siloed-risk firms had breaches vs 30% with integrated approachhyperproof.io. Also, siloed teams spend ~38% time on admin taskshyperproof.io.
  • MetricStream Case Study. Almarai – Enterprise Risk and BCM (2020) – Fragmented approach led to inconsistent risk understanding, limited visibility, duplicate workmetricstream.commetricstream.com; introducing common risk taxonomy improved data accuracy, visibility and cut effort by 50–70%metricstream.commetricstream.com.
  • MetricStream Case Study. Fortune 1000 Insurance Co. GRC Journey (2021) – Lack of common risk language caused inefficiencies, solved by centralized taxonomy and platformmetricstream.com.
  • Chakraborti, A. Challenges of ERM Implementation in India (Jan 2024) – Mid-sized enterprises struggle with resource constraints for risk managementlinkedin.com.
  • DeLoach, J. Using a Risk Model as a Common Language. Corporate Compliance Insights (2014) – Purpose of a common risk language is to ensure completeness in risk identification and effective communicationcorporatecomplianceinsights.com.