How IT Risk Management Impacts Your Organization

No business is without risk — and anyone who believes otherwise is due for a rude awakening. 

In today’s climate, cyber resilience is a must. But in order to be resilient, you must first understand your vulnerabilities, threat landscape, and risk profile. And for that, you need an effective IT risk management program. 

We’ll examine what a risk management program is, how it works, and most importantly — what it takes to implement one within your own organization. 

What Is Risk, Exactly? 

Before we get too deep into our discussion, we should first clear the air. There’s a great deal of confusion about the difference between a risk, a threat, and a vulnerability. Understanding the difference between the three is one of the most important foundations of risk management. 

The ISO defines the three as follows: 

• A threat is an incident or actor with the potential to cause harm to a business. 
• A vulnerability is a weakness in a business asset that may be exploited by threat actors. 
• A risk is the potential that a threat actor will harm a business by exploiting a vulnerability. 

The National Institute of Standards and Technology (NIST) goes into a bit more depth in NIST SP 800-30, NIST FIPS 200, and NIST SP 800-30. We’ll be using the definition from NIST 800-30, as it pertains specifically to IT risk. You can find it below. 

“The net mission impact considering (1) the probability that a particular threat-source will exercise (accidentally trigger or intentionally exploit) a particular information system vulnerability and (2) the resulting impact if this should occur. IT-related risks arise from legal liability or mission loss due to —

1. Unauthorized (malicious or accidental) disclosure, modification, or destruction of information
2. Unintentional errors and omissions
3. IT disruptions due to natural or man-made disasters
4. Failure to exercise due care and diligence in the implementation and operation of the IT system.” — NIST SP 800-30

What Are the Different Categories of Risk? 

Depending on your industry, framework, and even whether or not your business uses IT risk management software, risks can be categorized in a range of different ways. Most commonly, they’re classified by severity, based on the Common Vulnerability Scoring System (CVSS) framework, which we’ll discuss in greater detail momentarily. CVSS assigns its scores based on several different factors, including exploitability, impact, scope, and temporality. 

It may be helpful, however, to also understand the most common causes of cyber risk, which are as follows: 

• The actions, whether unintentional or deliberate, of human agents. 
• Hardware or software system failure. 
• Poor process design, poor process execution, or flawed process controls.
• Uncontrollable external events. 

What is IT Risk Management? 

IT Risk Management (ITRM) is the process of managing your business’s IT risk through various methodologies, processes, tools, and frameworks. The core goal of ITRM is to identify, quantify, and mitigate the multitude of technological risks a business faces. A secondary goal, as noted by Mike Chapplle, Notre Dame University’s Senior Director of IT, is to establish both the business’s tolerance of and appetite for risk: 

• Risk appetite functionally boils down to the quantity and severity of risks a business is willing to accept in the pursuit of its strategic objectives. 
• Risk tolerance is typically applied on a case-by-case basis, and defines whether a particular risk should be considered acceptable. 

Why is Risk Management Important? 

Your security perimeter no longer ends at your firewall. In today’s landscape, even a small or mid-sized business must contend with a veritable kaleidoscope of risk as their ecosystem becomes perpetually more complex. COVID-19 has only exacerbated the situation, throwing distributed work atop supply chain vulnerabilities, ransomware, and malware. 

In short, the volume, scope, and complexity of risks your organization now faces mean you can no longer passively mitigate risk or react to threats. Instead, you must take a proactive, strategic approach. This is what leads to cyber resilience. 

What’s The Difference Between Traditional Risk Management and Enterprise Risk Management?

Traditionally, businesses took a siloed approach to risk management. Each business unit managed its own risks independently, with the direct responsibility for managing risk typically falling on the shoulders of each unit’s leadership. Moreover, each unit often had its own processes, tools, and policies for managing risk. 

Enterprise risk management, on the other hand, acknowledges that if cybersecurity is everyone’s responsibility, so is managing risk. It takes a holistic, collaborative approach to risk management. An enterprise risk management team works directly with each business unit, led by a Chief Risk Officer (CRO). 

Another core difference between the two is that traditional risk management was largely born out of formal processes in regulated organizations such as financial services firms. 

The Benefits of Risk Management

An effective risk management program that’s properly-aligned with strategic objectives can have a significant positive impact on your business. More specifically: 

• Allows you to identify hidden risks that may not have been immediately apparent before. 
• Promotes increased organization-wide awareness of risk.
• Makes regulatory compliance and GRC considerably more efficient and effective, particularly when paired with automation. 
• Streamlines projects and improves operational efficiency through consistent, coordinated application of IT risk management controls, 
• Opens up new business opportunities and partnerships, particularly from risk-averse organizations.
• Improves data governance, orchestration, and integrity. 
• Enhances workplace safety. 
• May act as a competitive differentiator, especially in high-security sectors.  

Overcoming the Roadblocks to Risk Management

While the value of a risk management program may be clear as day to you, demonstrating that value to organizational leadership is another matter altogether. They want concrete numbers — something you may not be able to provide until you can accurately quantify your business’s risks. They may also balk at the costs associated with management and remediation, particularly if it requires replacing any existing infrastructure or investing in a cyber risk management platform. 

Even in the wake of the pandemic, which caused many businesses to begin actively pursuing a risk management program, you may encounter some resistance. Your best bet is to approach the problem incrementally. Don’t try to convince leadership all at once, but instead focus on building influence gradually: 

• Provide as much concrete data as possible. Industry trends, credible research, and the specific ways risk might impact a particular KPI. 
• Tailor your message. A CFO has a different picture of risk than a CIO, and will require a different approach. 
• Find your champions. Seek out those with influence in the organization; if you can help them see the value of ITRM, they will be an immense help in securing further buy-in. 

Governance can be a challenge too, particularly if your organization had terrible data hygiene prior to exploring risk management. This is exacerbated considerably for businesses that must manage one or more industry regulations. Significant capital and resources may be required to ensure compliance.

Once your risk management program is actually up and running, quantification is another concern. How does one determine the severity of each individual risk? Who is responsible for defining the organization’s appetite and tolerance?

Finally, there’s the matter of compliance. Regulations and legislation are constantly changing — keeping up at all can be a significant challenge, let alone applying new controls. 

Risk management automation can help considerably in both cases, particularly if you select a platform where automation drives data orchestration, analytics, and smart remediation capabilities.  

What Are The Recommended ITRM Standards and Frameworks? 

As you might expect, there are many different frameworks for cybersecurity and risk management. Some are industry-specific, while others are more generalized. We’ve compiled a few of the most widely-used here.

Note that you don’t need to exclusively leverage a single framework; you may even find that each framework serves a different need for your business.

COBIT

Control Objectives for Information and Related Technology (COBIT) is a comprehensive framework that establishes guidelines and controls for governance, risk management, security and business strategy. Developed by the Information Systems Audit and Control Association (ISACA), COBIT is predicated on the idea that the most effective risk management programs are created from the alignment of IT and business goals. To implement COBIT, ISACA advises the following: 

• Identify the needs of your stakeholders.
• Identify core business goals and alignment goals.
• Identify governance & management objectives. 
• Select and customize the metrics associated with your goals. 
• Select and customize governance and management components.
• Integrate COBIT with your processes and practices. 
• Ensure you have a means of monitoring performance and remediating risk. 

ISO

The International Organization for Standardization publishes an incredibly broad catalog of frameworks covering everything from quality management to IT security standards. It’s responsible for developing the globally-accepted ISO 27001. Primarily focused on data management, ISO 27001 establishes security controls and provides guidance for the processing of sensitive data such as intellectual property, personally-identifiable information, and financial details. 

ISO 27002 is closely-related, and provides a framework for the establishment of an information security system based on the above guidelines. Finally, ISO 27005 provides in-depth guidance on conducting a risk assessment. 

NIST

Similar to ISO, the National Institute of Standards and Technology publishes far more than security and risk management frameworks. We already mentioned several of their frameworks earlier, when defining risk. The NIST Cybersecurity Framework (CSF) may also prove valuable to your organization, as it provides comprehensive guidance on both cybersecurity and risk management.

Notably, it also draws on one of ISO’s frameworks, ISO 27000. 

What is the IT Risk Management Lifecycle? 

The IT risk management lifecycle consists of the following stages: 

• Identification: Determine the different risks with which your business must contend. To ensure a complete view of your risk landscape, involve stakeholders from every business department. 
• Assessment: For each risk you have identified, determine your risk tolerance. Evaluate the severity of the risk’s impact alongside the likelihood that it will be exploited. 
• Remediation: Determine how to deal with the risk. You have several choices here  — acceptance, avoidance, transference, reduction, or mitigation, which we’ll discuss in further detail below. 
• Monitoring: This should be continuous throughout the risk management process. Monitoring may take the form of regular risk assessments and vulnerability scans, or it may involve a risk management platform that automatically consolidates threat intelligence. 
• Reporting: Regular reports should be issued to senior management explaining both identified risks and remediation methods. 

What Are the 5 Basic Risk Remediation Methods? 

Once a risk has been identified and categorized, you can deal with it in one of five ways: 

• Avoidance means preventing any action which could result in the risk’s occurrence. For instance, your risk assessment of a prospective vendor may reveal that working with them is far beyond your risk appetite. Rather than providing them with remediation advice, you may decide it’s better to simply avoid a business relationship entirely. 
• Reduction occurs only in cases where complete mitigation is impossible, such as when there is not yet a patch available for a particular vulnerability. You take every possible measure to reduce the impact of the risk, often with the intent of fully mitigating it at a later date. 
• Transference means placing responsibility for managing the risk with a third party.  Cyber risk insurance is perhaps the best example of risk transference. As you may have guessed, that means this isn’t strictly a remediation method, but rather an important part of any business’s approach to risk management. 
• Acceptance means you’ve decided that the most cost-effective route is to simply allow the risk to exist. Either the likelihood of someone exploiting the risk is low enough that you feel your attention is best-directed elsewhere, or the impact of the risk isn’t high enough to justify the cost of mitigating it. 
• Mitigation aims to eliminate the risk entirely. This could mean patching a vulnerability, implementing new security controls, or decommissioning a vulnerable system. 

How to Implement an IT Risk Management Strategy

Prior to considering the specifics of implementing your risk management program, it’s advisable to first consider where that program could potentially go wrong: 

• Lack of effective governance: Without effective governance, you cannot have an effective risk management program. 
• Imbalance between resiliency and efficiency:  Prioritizing efficiency over resilience can result in your business slamming face first into catastrophe. On the other hand, being too draconian with your controls can cause significant issues for workflows and growth. 
• Lack of insight: The more threat intelligence you can gather for your risk assessments, the better. But you also need to ensure you have the necessary tools and skills to analyze that intelligence.  
• Failure to consider new risks: As the old saying goes, expect the unexpected. Do not allow your risk management program to lull you into a false sense of security — ensure you have measures in place for novel risks. 

With that established, the implementation of an effective risk management program requires that you start with a comprehensive, holistic understanding of your business. How it operates, its long-term strategic goals, and its technical infrastructure. Your first step, then, involves visibility and orchestration. 

You need a complete map of your critical assets, including where sensitive data is stored, how it is accessed, and who has access to it. 

From there, your next step involves collaboration and communication.  We briefly touched on this earlier, but you’ll need to approach this incrementally, gradually raising awareness and communicating the importance of a risk management strategy to each business leader in their own language. 

Once you have complete buy-in, establishing your risk tolerance and risk appetite is your next step. You’ll want to consider the regulatory climate in which your business operates alongside its culture, objectives, and client-base. 

You then need to determine each step your specific risk management lifecycle. When considering monitoring, for example, it will typically involve the use of one or more tools such as vulnerability scanners and network monitoring software. You may also leverage surveys and questionnaires. 

Traditionally, this requires a great deal of manual work. However, modern risk management platforms can automate the majority of the process, reducing the time commitment by as much as 80%. Some solutions even allow you to automatically apply controls, and leverage artificial intelligence to provide smart remediation advice. 

You must also understand that risk management is an ongoing process. There will never be a point at which your risk management program is complete. It will require constant evaluation, iteration, and consideration.

Finally, remember that, above all, your risk management strategy must create value, and align with your business’s objectives.

Simplify IT Risk Management Within Your Organization

No business is without risk. An effective risk management program is built on that understanding. And in today’s landscape, that’s more important than ever. 

Centraleyes is a next-generation GRC platform that simplifies every aspect of IT risk management by giving your organization the tools it needs to rapidly collect, quantify, measure, and manage risk in real-time. 

Are you interested in seeing how you can leverage Centraleyes to overcome your biggest risk management challenges? Book a demo today and discover what a next-generation GRC solution is capable of.