Why is it important?
Ensuring effective risk management is vital for your business’s smooth operation and success and for maintaining security and compliance with standards such as ISO, SOC, NIST, and many more. Automated risk management can efficiently handle the complexity of risk management processes, saving time and reducing human errors.
What is compliance risk management?
Compliance risk management refers to identifying, assessing, and controlling the potential risks associated with non-compliance with laws, regulations, standards, and policies applicable to a particular business or industry. While true for multiple operational aspects, managing cybersecurity risks is one of the most challenging and evolving fields of Risk Management. The goal of compliance risk management in this respect is to ensure that an organization operates within boundaries minimizing the potential for negative information security and privacy consequences. A compliance risk management policy should be integrated into an organization’s overall risk management framework to ensure it is aligned with its strategic goals and objectives.
What are the main steps in risk management?
- Risk Identification
The initial step in effective risk management is identifying which risks apply to your business. It involves considering both business and IT assets, threats, and vulnerabilities. In essence, risk
can be defined as the possibility of harm occurring when a threat exploits a vulnerability. Alternatively, risk can be viewed as the point at which assets, threats, and vulnerabilities intersect.
- Risk Analysis/Assessment/Evaluation
Once risks have been identified, the next crucial step in your compliance risk management plan is to conduct a comprehensive analysis, measuring, assessment, or scoring of each of the identified risks. This involves giving meaning to each risk, taking into account factors such as the likelihood and impact of the risk, the expected loss in the event of the risk happening, and the probability of the risk. By analyzing these factors, we can define the characteristics of each risk and produce a risk “bottom line,” such as a score, number, or price. This information serves as crucial input for the risk management expert in making informed decisions and taking appropriate actions in the next step. Different analytical methods can be applied, including qualitative or quantitative risk analysis, which we’ll delve into in the next post, where I’ll explain the differences and guide you on how to perform a thorough cyber risk analysis.
- Risk Treatment
Once the risks have been identified, analyzed, and fully comprehended, it’s time to take action – this is where risk treatment comes into play. Here are the available options for each risk:
- Avoid – This approach involves eliminating the risk and for instance, modifying your plans or implementation to eliminate the likelihood or impact of the risk. This means there will be no risk whatsoever.
- Mitigate (reduce) – This method entails taking action to reduce the likelihood or impact of the risk. One effective method is defining and monitoring security controls. Accept – By choosing to accept you acknowledge that the risk can happen and do nothing to prevent it. You may wonder when this would be advisable. An instance is when mitigating the risk is too expensive compared to the likelihood, impact, and loss expectancy, as deduced from the comprehensive risk analysis you carried out earlier.
- Transfer – In this approach, you transfer the risk to a third party.
- Continuous Risk Monitoring
Effective risk management is an ongoing and dynamic process that demands consistent attention. Once risks have been reduced through the implementation of mitigation strategies and controls, it becomes imperative to monitor them regularly. To achieve this, updating the risk, registering, and testing the effectiveness of processes should be a regular practice.
This article provides an overview of the key steps involved in risk management for businesses. The initial step is to identify risks that are relevant to the business, considering both business and IT assets, threats, and vulnerabilities. Once risks have been identified, a comprehensive analysis should be conducted, measuring factors such as the likelihood and impact of the risk. The next step is risk treatment, where available options include avoiding the risk, reducing the likelihood or impact, accepting the risk, or transferring it to a third party. Finally, ongoing risk monitoring is crucial to ensure that risk management remains effective and dynamic. We emphasize the importance of effective risk management for business success, security, and compliance with industry standards.
If you have any questions or comments about any of the above, please feel free to contact us.