Risk management is the practice of proactively assessing where your business is vulnerable to threats, and then assessing and mitigating those threats.
Risk management includes different policies and processes aimed at identifying, assessing and controlling a wide range of potential risks to a business, including financial uncertainty, legal risks, strategic management errors, accidents, natural disasters and cyberattacks. Ultimately, risk management allows companies to move from an approach of uncertainty and reaction to a proactive and preventive approach.
With the proliferation of sophisticated and stealthy malware, as well as the proliferation of stringent and financially punitive compliance regulations, such as the General Data Protection Regulation (GDPR), risk management tools and strategies have become increasingly difficult and a top business priority. It should therefore come as no surprise that they are increasingly developing comprehensive risk management plans outlining processes for identifying and controlling threats to all of their digital assets, which include confidential, proprietary or sensitive data, intellectual property and personally identifiable customer information.
The following article discusses different types of risk, explains why you need to understand your business risk, and discusses different techniques for responding and reducing overall risk.
Understand the risk
Why is it essential to understand the business risks of your business?
It is imperative that companies understand the business risks they are exposed to in order to have visibility, and therefore more control, over the many factors and variables that can potentially cause serious, costly and lasting damage. Understanding specific risk factors not only allows a business to identify potential threats, losses, and disruptions in advance, it can also help them respond appropriately to threats and allocate resources and infrastructure needed to reduce or prevent serious losses.
What are the different types of risk?
Businesses face a wide range of business risks, but the most common are operational, financial, strategic, compliance, reputational and cybersecurity risks.
Operational risks: These include unexpected failures and disruptions that affect the day-to-day operations of your business such as technical problems, power outages, employee errors, fraud, or failure of procedures and policies.
Financial risk: refers to anything that specifically threatens the movement of money in and out of a business.
Compliance risk: As regulations change regularly, companies are constantly faced with the risk of breaking rules without their knowledge and exposing themselves to heavy fines and other harmful penalties.
Reputational risk: encompasses anything that can cause widespread and lasting damage to a company's brand image or reputation, such as a high-profile lawsuit, product recall, scandal, or other. type of negative publicity, or criticism of its products and services issued by a prominent entity.
Strategic risk: it hinders the company in its efforts to achieve the objectives it has set itself, or reduces the effectiveness of its strategy due to technological changes, the arrival of a new competitor, changes in consumer demand, a rapid increase in incidental or raw material costs, or other major change.
Security risk: This is the likelihood that a company will suffer loss, damage, or destruction of its assets because malware, unauthorized users, or other threats infect its systems, exploit vulnerabilities, or steal or compromise their data.
What is Total Cost of Risk (TCoR)?
The totla cost of risk is a quantifiable and controllable indicator that represents the sum of all aspects of a company's operations associated with the management of risks and incurred losses. This equation includes, among other things, risk factors such as insurance premiums, deductibles, uninsured losses and related adjustment expenses, regulatory fines, internal and external risk control costs, administrative costs, taxes and fees. An important part of understanding risk is calculating the TCoR for your business.
What are the causes of security risks?
Security risks can be associated with people, including disgruntled, inattentive, or misinformed employees or contractors. Risk can also be attributed to faulty or vulnerable devices and applications, such as certain mobile applications that may expose company data to unauthorized users, outdated or outdated equipment or systems, as well as vulnerable public cloud applications or inadequate security policies.
How does a flaw affect risk?
Breaches often have serious long-term consequences, including widening the types of risk, for affected businesses.
At a recent conference, many cybersecurity experts suggested that a breach or a successful cyberattack will necessarily increase a company's financial exposure. A data breach has immediate costs, such as the payment of financial compensation to the victims or the replacement of the sums stolen during the breach. Additionally, affected companies must also pay hefty non-compliance fines to government and regulatory bodies: under the GDPR, for example, penalties can reach the maximum sum of 20 million euros ($22 million) or 4% of turnover. annual business, whichever is greater. In addition, companies that suffer a breach will inevitably see their share price fall and be forced to pay higher insurance premiums to protect themselves in the event of a recurrence.
In addition to these many immediate costs, breaches still have long-term consequences for businesses. Following a breach, the affected company must also deal with the lasting damage inflicted on its reputation: decline in consumer confidence, reduction of its customer base, loss of market share to the benefit of the competition. Additionally, because victims of data breaches are vulnerable to identity theft if personal or financial information is leaked, they also expose themselves to lawsuits and arbitration's.
What are the steps for implementing risk management?
Risk management is generally done in three steps: risk assessment, risk analysis and risk mitigation.
Risk assessment involves identifying vulnerabilities within your IT infrastructure and network that could lead to data loss, revenue loss, disruption, or compliance penalties. The primary goal is to determine which business assets are most likely to be compromised, and how.
Risk analysis is the process of determining how your business may be adversely affected in the event of a computer security incident. This step includes threat research and penetration testing to uncover vulnerabilities while honestly reviewing current safeguards and assessing the impact these threats have on the business.
Risk mitigation is planning and taking action to reduce threats and their impact on security, which may include setting up company-wide policies and procedures, hiring staff or train existing staff, implement new controls or adopt new technologies. It also requires defining your security priorities, describing how to resolve problems, and implementing remediation measures.
How to mitigate security risks?
One of the key steps in mitigating security risks is identifying vulnerabilities and detecting loopholes that leave you vulnerable to attack. Regular cyber threat assessments can lead to early detection and mitigation of risk by exposing application vulnerabilities, detecting malware and botnets, and identifying outdated or at-risk devices. Additionally, these assessments can help you analyze user productivity and inventory applications running on the system, while providing insights into network usage and performance (such as bandwidth consumption) to identify suspicious spikes in traffic before harmful disruptions occur.
Vulnerability detection: While vulnerability indicators are very dependent on the type of attack, there are several general warning signals. Unusual login times, unexpected reboots, increased network latency or unexplained traffic spikes, the use of unknown software or malfunctioning security applications, and the presence of unrecognized IPs are all signs that may indicate a past or ongoing fault.
Identify vulnerabilities: Outdated or outdated devices often contain vulnerabilities that open the door to attacks. Many forms of sophisticated malware can lie dormant indefinitely until triggered (e.g. during a reboot or update, when the system is most vulnerable) and then target any unpatched vulnerabilities to steal data, conduct cyber-espionage operations or disrupt the operation of systems.
How can automation help reduce risk?
Many innovators suggest that automation is a way for companies to address risk holistically because it brings improved power and structure to threat detection and incident resolution. Critical systems like IT operations, threat and vulnerability management, configurations, compliance audits, and identity governance systems can all be automated as part of the enterprise risk management process. Operations and security incidents that occur in these systems can be associated with IT risk repositories, allowing incident response teams to assess the level of risk they pose to the business.
Information about a recently identified vulnerability, for example, can be automatically uploaded to the risk management solution, which can then trigger an investigation and classify the incident's risk level and severity according to a set of predefined criteria. Once the solution classifies the threat, the automated system can trigger the necessary course of action. And if the vulnerability becomes a threat, the solution can also trigger the risk assessment process and use the threat's CVE number to initiate proactive patch management.
How do the different vertical segments approach risk?
Faced with different groups of customers, compliance regulations, goals and assets, industries like healthcare, financial services and government all take a very different approach to risk avoidance, mitigation and associated investment decisions.
For instance:
Healthcare: While healthcare organizations have historically focused on patient safety, risk in this sector has become much more complex to manage. This complexity is driven by the expanding role of health technologies and connected health networks, increasing cybersecurity threats, and rapidly changing health regulations and the legal and political landscape. In the area of risk, the healthcare industry's biggest concerns relate to compliance regulations such as the US Health Insurance Portability and Accountability Act (HIPAA), risks associated with medical errors, and cybersecurity threats. increasingly sophisticated that seek to steal or compromise patient data.
Financial services: in the financial services sector, risk management revolves around the management of exposure to operational risk, credit, market and foreign exchange risk, commercial and legal risk, and risk of reputation and security. Perhaps more so than in other sectors, the financial services industry faces reputational risks, particularly since a series of security breaches and various scandals involving the creation of hundreds of millions of fake customer accounts, money laundering or bank fee scams.
Governments: Threats to the operations of government agencies range from natural and criminal disasters to cyber espionage, technological failures and security incidents. As many government services are essential to the health and safety of the public, risk management strategies should minimize any disruption, whether it is temporary inconvenience or disruption of critical infrastructure service.
What is the Risk Management Framework (RMF)?
To develop consistent, repeatable, and reliable standards for IT infrastructure security, government agencies can rely on the Risk Management Framework (RMF), a set of guidelines that governs the development, oversight, and securing of US government computer systems.
Designed to identify risks that could harm operations, these risk management standards include guidance from the US Department of Defense (DoD), National Institute of Standards and Technology (NIST), and other authorities.
DoD Risk Management Framework: Released by the US Department of Defense in 2014, this framework outlines a six-step process (Category, Select, Implement, Assess, Authorize, and Oversee) to be followed by government agencies and their subcontractors to prevent IT security risks.
NIST Risk Management Framework: NIST, or National Institute of Standards and Technology, is a non-regulatory federal agency within the U.S. Department of Commerce that enables companies to apply risk management principles and best practices. risks in order to improve the security and resilience of critical infrastructures. NIST also released the Voluntary Cybersecurity Framework, which provides standards, guidelines, and best practices for managing cybersecurity risk in all organizations, not just government agencies.
Framework for improving the cybersecurity of critical infrastructures: this framework is a risk-based approach that incorporates various industry standards and best practices to better manage cybersecurity risks. This framework can be used to reinforce an existing risk management program or as a guide to developing one from scratch.
COSO Framework: Created in 1992 by the Committee Of Sponsoring Organizations of the Treadway Commission (COSO), this widely used framework was developed to assess internal controls, with a focus on financial compliance. It consists of five parts: corporate culture, risk assessment, control activities, information and communication, and supervision.
Enterprise Risk Management (ERM): Defined by the Association for Risk Management's ERM Council as the "ability to manage all enterprise risks in pursuit of acceptable returns", ERM will beyond security and addresses the business as a whole. This framework is intended to help companies determine whether to take the risk of adopting new strategic directions.
Risk management is essential to asset protection
With the proliferation of stringent compliance regulations and the proliferation of destructive cybersecurity threats, it is a well-established fact that businesses face increased risks to their data, assets and reputation. Therefore, effective risk management is an essential aspect of business operations today.
For businesses, the benefits of having a comprehensive risk management program in place are many, as they give security managers, administrators and policy makers the ability to:
- adopt a logical and systematic approach to the continuous improvement of IT security;
- identify the risks that could be most damaging to the business and protect both data and assets;
- proactively seek out and mitigate these risks before cyberattacks cause disasters;
- find ways to improve the efficiency of operations and the allocation of resources and talent;
- plan and ensure that the business or organization is equipped to handle security incidents and can recover from them more quickly and easily.
A comprehensive risk management plan helps security professionals and managers fulfill all of these roles. From both a security and operations perspective, it enables CIOs, security analysts, and administrators to continually make business improvements and maintain them. And all of this helps reduce and manage the security and compliance risks that threaten the organization and, ultimately, its revenue.
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