In an increasingly interconnected world, anticipating and managing risk is more important — and more challenging — than ever before. Ultimately, you need a risk management program that will expand and evolve to meet the emerging and ever-changing threats to your organization.
Maintaining your risk management program is an ongoing process, and one that will require constant revision if you want it to last. Above all, your program needs to be scalable, growing as the rest of your enterprise grows.
In this article we’ll examine risk management programs, what makes them successful, and how they can be built to scale so your business is better prepared to meet the threats of tomorrow, today.
What Is Risk Management?
Risk management is the process of identifying, monitoring, and reducing the potential threats to your business and their negative impacts.
A risk is the potential for loss, damage, or destruction of your assets or data caused by a threat. Examples include data loss, cyberattacks, security breaches, or system failures. Some of the most common cyber threats — malware, phishing attacks, and viruses — can be responsible for some, or all, of these potential risks.
A risk management program better equips you to understand and control the risks to your business, so you can make better decisions and reach your business objectives. A successful risk management program will also help you identify the risks to your business through a process called risk identification.
It’s critical that your organization identifies potential risks to your business before they can do any harm. Doing so will make it easier for you to take the appropriate steps to prevent risks from actually happening. How you choose to respond to a risk is called a risk response plan, and it’s another important element of risk management.
Understanding risk is a critical component of project management as well. With each new project comes new project risk; an effective risk management strategy can help you identify each new project’s strengths, weaknesses, opportunities, and threats.
One of the easiest ways to organize your project risk management program is to use a risk register: a tool to catalog all the information you have about potential risks to your business. Ideally, you would create a project risk register for each new project (and especially for complex projects). This results in a resource you can use to draw knowledge about past, present, and future risks to your projects and your business.
Ultimately, a business that plans for potential risks will be able to respond more quickly to those potential risks should they arise. Project managers should understand that risk management is an important part of project management, because both processes depend on planning, preparation, results, and evaluation for success.
All that said, your risk management program’s long-term success will depend on its scalability. A risk management program that can’t scale won’t last.
As risks to your business continue to change, your risk management program needs to follow suit. Creating a risk management program that has the capacity to scale with your business now will save you from any complications in the future.
Components of a Scalable Risk Management Program
Growth and change are inevitable for any business, regardless of industry. But creating a risk management program that’s built to respond to new risks as they arise isn’t easy.
Here are some of the most important components of a successful scalable risk management program to consider during the development process:
A Team of Experts
Before you begin creating your risk management program, it’s critical that you assign a team of experts to take on the task. This team should come from across your organization, with the single goal of identifying and reviewing potential risks to your enterprise.
Your team will ideally include senior management, your compliance officer, and various department managers. If your organization is developing software, you should also include one project manager from each project team to review project management and respond to project risks.
Once you’ve assembled a team, you can begin working on the other important components for your risk management process.
Clearly Defined Goals and Criteria
As with any enterprise-wide endeavor, the next step after assembling your team should be to establish clear short- and long-term goals. This is also an opportunity for you to establish uniformity in the criteria you will use to measure progress towards these goals.
Clearly defining the goals and criteria for your risk management program requires foresight. While it’s helpful to focus on the past and present when determining the context of your risk management program, the most successful risk management programs anticipate the future.
Ask yourself: what new areas of risk might arise? How will new technologies affect our current risk management process? If our business goals change, can our risk management program change to meet them?
Here, it might be helpful to examine some of the existing risk management methodologies or templates, and select one that’s the best fit for your business and the goals you’ve outlined.
Keep in mind that your risk management program will need to be integrated with departments throughout your enterprise, including your legal, IT, security, and enterprise risk. This level of integration will require some pre-planning, a process which will be augmented by increased collaboration, shared reporting, and shared resources among departments.
Whichever approach you choose, the foundation of your risk management program will ultimately determine its success. Creating a plan that aligns with your business’s existing goals and criteria lets you present a more coherent picture to the stakeholders and decision-makers who will determine how much funding the program should receive.
A Steady and Sufficient Budget
Any successful program needs funding, so it will be important to get the decision-makers in your company on board early. Make sure that their concerns are addressed when you’re creating your risk management plan, and invite them to participate in the process.
It’s likely that your risk management program will be expensive (although not as expensive as a data breach will be without a program in place). It’s important that you’re able to communicate to your C-suite, your board, and your business-line team how critical a thorough risk management program is for longevity.
As threats to your organization continue to evolve, your ability to respond to these threats will also depend on how quickly and flexibly you’re able to employ new technology. Risk management tools, however, can be expensive and hard to rationalize without data to back up your claims.
Make sure that you have clear, thorough data to support your requests for resource allocation. Also make sure that you can communicate that information to your C-suite and board members in a way they will understand.
Robust Procedures and Policies
The procedures and policies your organization uses to prevent and respond to risk should be designed to last. The purpose of your risk management policies should be to provide guidance regarding the management of risk, with the goal of supporting your corporate objectives, protecting staff and business assets, and assuring financial sustainability.
More specifically, your risk management policies should be robust enough to outlast those who create them.
First, you’ll need to develop internal policies that specify reporting and decision-making procedures. Consider your chain of command: who answers to who? Who is responsible for final decision-making? Who will report to senior leadership?
You’ll also need to develop policies that govern acceptable levels of risk. Using the uniform measurement scale you decided upon during the goal-setting stage, you’ll be better equipped to remove any subjectivity from your risk management procedures. These will include risk assessment and analysis, risk evaluation, and risk treatment.
Clearly define how you want these procedures to be carried out so that your team (or any future teams) will be able to do so without you there to guide them. These procedures should be explicitly outlined and strictly followed for the best results. They should be based on roles, rather than the specific people in those roles.
The policies and procedures you define early on in the design phase of your risk management program should also account for scalability. While it’s important that these “rules” are clearly defined, they should also be designed so that they can meet the changing needs of your business as it continues to grow.
Now that we’ve laid the foundation for the components your risk management program should contain, it’s time to put it all together and document the process in your risk management plan.
How to Build a Successful Risk Management Program
A successful risk management program considers all the components we listed above, and then applies them to each stage of the risk management process. Next, we’ll give you a brief overview of the necessary steps to build a successful risk management program.
While clearly defined goals and criteria are something your team should consider before creating your risk management plan, it’s critical that you set specific objectives for risk management.
By beginning with business objectives, your risk management process will better align itself with your current and future goals. These goals may change as your business grows, which is why it’s important that your risk management program is built to scale.
While your objectives may change over time, your risk management program itself should have the ability to flexibly mold itself to meet any new objectives as they arise.
Identify, Monitor, and Manage Risks
Risk identification is the process of reviewing IT assets such as systems, networks, software, devices, vendors, and data. You should catalog these assets and then allow your team members to identify all the risks to them. Keep in mind that a risk, or uncertain event, can be both a positive or a negative condition that has a financial, operational, or reputational impact. Here, it would be useful to create and continually update a risk register with new risks as they are identified.
Risk assessment is the next step, and will require your team to evaluate the potential risks that you’ve previously identified. Be as specific as possible about the risk, without including any unnecessary information. If the risk is described vaguely, it may be harder to know whether an event fits the risk description or not. For instance, describing a risk as “the weather” will not be much help to most employees. On the other hand, “hurricane season in NY could result in shipping delays” will.
Risk analysis determines the likelihood that an event will happen and then estimates the impacts to your organization if it does. Try multiplying a risk’s likelihood by its estimated impact to give insight into the risk’s effect. For example, a risk with low likelihood might lead to a devastating financial impact, while a risk with high likelihood may have no impact at all. Part of your risk analysis will be to develop a risk assessment matrix using qualitative or quantitative measurement scales to assign risk ratings for each risk as either high, medium, or low.
Risk tolerance is where your team decides whether it will accept, transfer, mitigate, or refuse each risk. For accepted risks, your team should create a set of risk mitigation strategies. For any risks that your organization accepts or transfers, you will need to define responses to any issues that might occur. These risk mitigation strategies will act as a contingency plan if the event occurs to help limit the defined impact.
After you execute this process and document each step along the way, it’s time to repeat. Your risk management program will ultimately consist of these steps, repeated over and over again, to make sure your organization can identify, monitor, and manage any new risks to your business as they arise.
Each time you repeat the process, you should aim for improvement. This might mean adjusting your policies and procedures for better outcomes, adding or subtracting team members to introduce new perspectives, or adding additional funding to satisfy needs for new technology or additional team members.
The scalability of your risk management program lies in your ability to repeat the risk management process over and over, fine-tuning it to meet the needs of your organization.
Be warned: your organization continues to grow, this step can also become overwhelming. Keeping track of everything all at once, and all the time, might seem impossible. Fortunately, there are solutions that can help.
Build Scalable Risk Management with Reciprocity ZenRisk
One of the most efficient ways to make risk identification and mitigation easier for your business is to employ tools that are designed to help.
Reciprocity ZenRisk is an integrated cybersecurity risk management solution designed to provide you with actionable insights to gain the visibility you need to stay ahead of threats and clearly communicate the impact of risk on high-priority business initiatives. Turn the unknown into quantifiable and actionable risk insights with built-in expertise that identifies and maps risks, threats and controls for you, so you can spend less time setting up the application and more time using it.
A single, real-time view of risk and business context allows you to communicate to the board and key stakeholders in a way that’s framed around their priorities, keeping your risk posture in sync with the direction your business is moving.
Reciprocity ZenRisk will even notify you automatically of any changes or required actions, so you can be on top of your risk posture like never before. Eliminate time-consuming, manual work and streamline collaboration by automating workflows and integrating with your most critical systems.
Plus, Reciprocity ZenRisk is seamlessly integrated with Reciprocity ZenComply so you can leverage your compliance activities to improve your risk posture with the use of AI. Built on the Reciprocity ROAR Platform, the Reciprocity product suite gives you the ability to see, understand and take action on your IT and cyber risks.
Now, through a more proactive approach, you can give time back to your team with Reciprocity ZenRisk. Talk to an expert today to learn more about how the Reciprocity Product Suite can help your organization mitigate cybersecurity risk and stay ahead of threats.