In business, risk is unavoidable.<\/p>\n\n\n\n
Even standing still can be risky, especially in today\u2019s volatile business world. After all, if the world is moving in a new direction, those that stand still are at the greatest risk of being left behind.<\/p>\n\n\n\n
Organizations must take a systematic approach to minimizing any risk, whether that risk comes from action or inaction. <\/p>\n\n\n\n
This is where the discipline of risk management<\/a> comes in. <\/p>\n\n\n\n Among other things, risk management is designed to:<\/p>\n\n\n\n To be effective, risk management leaders must work closely with certain departments, such as compliance, corporate governance, and cybersecurity.<\/p>\n\n\n\n Business risks are potentials for loss that can negatively impact an organization\u2019s health or operations.<\/p>\n\n\n\n These risks are compiled into a single picture, known as a risk profile<\/a>. That profile will differ depending on the organization in question. <\/p>\n\n\n\n Some organizations will face greater risk from a certain direction than others. Government agencies tend to face different types of risks than private companies, while a company in the agriculture space will have a different risk profile than a technology firm.<\/p>\n\n\n\n Categories of risks include:<\/p>\n\n\n\n To effectively manage risks such as these, it is necessary to quantify, measure, and prioritize these risks, which is where risk management frameworks come in.<\/p>\n\n\n\n A risk management framework (RMF) is a step-by-step model designed to perform a set of key activities related to risk assessment, mitigation, and management.<\/p>\n\n\n\n RMFs focus on tasks such as:<\/p>\n\n\n\n Identifying potential risks.<\/strong> In this step, risk management professionals focus on a specific set of factors: threats, vulnerabilities, the impacts of potential risks, the likelihood of specific risks, and predisposing conditions that will affect the impact or likelihood of a particular risk.<\/p>\n\n\n\n Measuring risks.<\/strong> Once the risk has been identified and classified, managers can rank and prioritize risks in order to efficiently address the most pressing ones.<\/p>\n\n\n\n Developing risk mitigation plans.<\/strong> Risk mitigation plans will focus on preventing, eliminating, minimizing, or mitigating risks, beginning with high-priority risks. In some cases, risk is unavoidable and organizations will choose to accept it as part of a larger success.<\/p>\n\n\n\n Monitoring and reporting.<\/strong> Risk tracking and reporting is both a matter of safety and compliance. When attacks and breaches aren\u2019t reported, they can reoccur and threaten the organization again in the future.<\/p>\n\n\n\n Governance.<\/strong> Finally, governance policies are designed to maintain compliance through actions such as policies, procedures, and role assignment.<\/p>\n\n\n\n One framework that is particularly popular was developed by the National Institute of Standards and Technology (NIST)<\/a>, part of the US Chamber of Commerce, which outlines an organization-wide approach to risk management that addresses three levels of risk:<\/p>\n\n\n\n According to NIST, adequate risk management should encompass all of these levels.<\/p>\n\n\n\n Their RMF, which revolves around managing security and privacy risks, includes seven steps:<\/p>\n\n\n\n Preparation.<\/strong> Preparing involves tasks such as assigning roles and creating a risk management strategy for each of the three levels mentioned above.<\/p>\n\n\n\n Categorization.<\/strong> Tasks in this step include describing the characteristics of the information system and its security.<\/p>\n\n\n\n Select.<\/strong> During this stage, security controls are created and allocated.<\/p>\n\n\n\n Implement.<\/strong> Next, security and privacy controls are implemented and changes are documented.<\/p>\n\n\n\n Assess.<\/strong> Controls should then be assessed to ensure that they are operating efficiently and effectively.<\/p>\n\n\n\n Authorize.<\/strong> Senior managers review the system to determine its acceptability and either authorize or deny its use.<\/p>\n\n\n\n NIST\u2019s framework tends to emphasize the importance of cybersecurity, which is unsurprising, given the ongoing digital transformation<\/a> of the global economy. As the world becomes more digital, we can expect to see an even greater focus on cyber risk management.<\/p>\n\n\n\n Risk management in the digital era<\/strong><\/p>\n\n\n\n In addition to the general RMF covered above, NIST also provides several documents that focus more specifically on cybersecurity and cyber risk management.<\/p>\n\n\n\n For instance, their Cybersecurity Framework Version 1.1<\/a> covers a set of steps to follow in order to achieve specific cybersecurity outcomes:<\/p>\n\n\n\n Identify.<\/strong> Understanding the potential cybersecurity risks that can impact the organization, its assets, its capabilities, and its people.<\/p>\n\n\n\n Protect.<\/strong> Create safeguards to maintain business continuity<\/a> and continuous delivery of services.<\/p>\n\n\n\n Detect.<\/strong> Develop detection processes to discover incidents when they occur.<\/p>\n\n\n\n Respond.<\/strong> Create response plans, communication plans, analyses, and other strategies to invoke when incidents occur.<\/p>\n\n\n\n Recover.<\/strong> Implement plans to recover normal operations and reduce the impacts of cybersecurity incidents.<\/p>\n\n\n\n While this framework was designed by a US government agency, its foundation can prove useful to any organization, regardless of size or industry. As we move forward into the digital era and as digital strategy<\/a> takes center stage, it will become increasingly important to mitigate cyber risks through systematic approaches such as those covered above.<\/p>\n\n\n\nTypes of risk<\/strong><\/h2>\n\n\n\n
The core components of a risk management framework (RMF)<\/strong><\/h2>\n\n\n\n
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