It’s rare in life that you can get a big reward without any risks, and it’s no different when talking about your business or organization. Your risk appetite is the amount of risk your organization thinks is appropriate for certain business objectives. If your business prides itself on customer service, then you may have a low risk appetite for poor reviews. This would then reflect in your risk management practices as you set a plan in place to avoid customer dissatisfaction.
As you are doing your own reading to understand cyber risk appetite, you may see another term that’s closely related: risk tolerance. It may sound like risk tolerance and risk appetite are interchangeable, but there is a key difference between the two. If risk appetite describes the risks your business takes to meet success metrics, then risk tolerance is how much variance you have within those risks. For example, you may have strict rules in place for cyber risks and email campaigns, so then you would have a low-risk tolerance within that risk appetite.
Why Identifying Your Risk Appetite is Important
The greatest benefit of identifying your risk appetite is that it puts you in a better position to understand the payoff from the risks you take. The parameters and regulatory measures that you put in place in deciding that risk appetite mean your future cyber risk management will be more efficient. As your business grows and your operational risks change, you’ll have a ready understanding of your risk-reward balance to turn to each time.
Additionally, maintaining a living risk appetite statement allows you to adapt to new conditions or to adjust your risk tolerance for improved growth opportunities.
How to Calculate Your Cyber Risk Appetite
Key stakeholders, senior management, the chief information security officer (CISO), and your board of directors should all be involved in calculating your cyber risk appetite. First, prioritize your top business objectives. Then, consider scenarios where your risks don’t pay off—what level of negative impact will your organization tolerate should the risks not produce beneficial results? On the other side of that coin, you’ll need to understand the positive potential impacts your risks could have.
If your team decides they can’t endure the consequences of failure for certain objectives, then you should decide on a low-risk appetite. If your business can continue to function successfully in the day-to-day with some failure, you may have a higher risk appetite.
You should communicate with your board of directors to ensure that high-level decisions are made to accommodate the needed cyber risk appetite you put in place. Drafting a risk appetite statement together will help ensure this process is efficient and enforced.
Creating Your Cyber Risk Appetite Statement
After you’ve calculated your cyber risk appetite for each strategic objective within your business, you should essentially write an executive summary of the decision-making process. You should write down the risks your team agreed to and the appetite for each. You should also include cybersecurity and regulatory measures for risk mitigation while pursuing success metrics.
Finally, treat your cyber risk appetite statement as a living document by returning to it in a few months. Revisit your decisions and update as appropriate to allow for new business objectives, changing potential threats, and improved risk tolerances.
Minimize the Threat of Cyber Risks with ZenGRC
Reciprocity connects your business with the cybersecurity experts needed to guide you through an efficient and secure cyber risk assessment. The ZenGRC platform and dashboard give you all the continual data you need to maintain efficient cybersecurity over time. Regular monitoring and shareable reports help you adapt to potential threats and efficiently update your cyber risk appetite statements.
You can learn more about ZenGRC or request a demo today.
