Risk is inherent to all businesses, regardless of your industry. To prevent those risks from causing harm, you must first know what threats you are facing. So the foundation of any successful risk management program is a thorough risk assessment – which can take many forms depending on what methodology best suits your needs.
Risk assessment is the process of determining what threats confront your organization, the potential severity of each threat, and how to keep potential damage as low as possible. A risk assessment will usually include the following steps:
- Risk and hazard identification
- Determining the likelihood and size of potential losses
- Creation of controls and mitigation measures
- Record, review, and monitor
These basic steps aren’t enough to help a company develop a clear view of its threat landscape; that’s where risk assessment methodologies come in. A methodology is a disciplined approach to working through those basic steps, so your assessment can happen more efficiently and arrive at better results, time and time again.
Keep in mind that you are not limited to one choice of methodology. Some assessments may call for a combination of approaches, or different methods may better suit various departments within your organization.
Risk Assessments vs. Risk Analysis
One step within the assessment process is the risk analysis, in which you weigh the importance and likelihood of each risk before giving the risk a score. We’ll get to risk analysis shortly. For now, just understand that the two terms might seem similar, but each one actually describes different concepts.
Risk Assessment Process
Risk assessment happens in four steps:
- Risk identification. First, find all the risks that might harm your organization. Cybersecurity risks often bubble to the top in a world connected with technology, but you’d be remiss if you only focused on technology-related risks. Survey employees and other stakeholders to identify a broad variety of risks.
- Determining potential damage. After identifying hazards and vulnerabilities, consider how they are harmful and the possible outcomes.
- Risk analysis. After identifying the risks, perform the risk analysis and develop action plans. First, assess the probability and criticality of each risk actually happening. You are not expected to eliminate all risks since this is impossible. You do, however, want to take measures proportionate to the level of risk; analysis helps you understand what that level is.
- Review the risk assessment. Risk assessments should be reviewed periodically to see whether any circumstances have changed. The assessments should always include all potential hazards and new risks.
Risk Analysis Process
As noted above, risk analysis is one step within the risk assessment process. The framework for risk analysis can be developed with the aid of potential impact estimates.
- Quantification of uncertainties. As best you can, pinpoint each risk and measure the likelihood of it happening.
- Estimation of potential impact. Estimate the impact of various risks. For instance, you may be unable to forecast all the damage from an important system going off-line, but you could model how many employees and the personnel costs squandered per hour as they wait for the system to come back online.
- Formulate risk management actions. Consider “what-if” scenarios and the potential results. Do the costs match the potential benefits? If you plan to update business processes to reduce risks, check with stakeholders to assure that your ideas are effective and sustainable.
The Difference Between Risk Assessment and Risk Analysis
The difference between risk assessment and risk analysis is that risk assessment is viewed as the entire process where all potential risks are detected, as we explain in our article on risk assessment versus risk analysis.
Each risk level is defined in the process of risk analysis. (And both risk assessment and risk analysis, by the way, fall within the larger category of risk management.)
Choosing the Right Risk Assessment Methodology for You
While all risk assessment tools seek to achieve similar goals, how they pursue those goals can look very different. The structure and framework of your risk assessment process can be tailored to the unique environment and circumstances that make up your company’s risk landscape.
When choosing a risk assessment methodology, ask yourself what you’re hoping to learn. For example, do you want concrete data, where a quantitative risk assessment would be best? Or do you want a broader, generalized sense of enterprise risks, where a qualitative risk assessment would be better?
Do you want to perform a risk assessment within one specific department or across the entire extended enterprise? Asking such questions can help determine what methodology will suit your needs.
You’ll also want to consider how your industry, location, size, and other factors affect your risk control requirements. Certain compliance and regulatory frameworks may require specific risk assessment techniques, which should factor into your decision-making. Before you conduct risk assessments, make sure you understand the legal requirements that apply to your company.
Types of Risk Assessment Methodologies
Risk assessments can be either of two types: quantitative or qualitative.
Quantitative risk refers to the numerical value of the probability and potential impact of a threat. This type of risk assessment requires data collection and statistical analysis to arrive at those numbers.
Qualitative risk is more subjective, focusing on the characteristics of a threat rather than its numerical value. This type of risk assessment often uses expert opinion to arrive at ratings (usually a low/medium/high scale or something similar) for probability and potential impact.
Here are some typical examples of more specific risk assessments.
HIPAA Security Risk Assessment
A HIPAA security risk assessment evaluates your compliance with the Health Insurance Portability and Accountability Act, which protects personal health information (PHI). A HIPAA risk assessment measures how well your organization protects PHI. The safeguards fall into three categories administrative, physical, and technical.
Assessment of administrative safeguards would include a review of business processes and policies. Physical safeguards would be inspected by verifying building and equipment security. A cyber assessment of technical safeguards confirms system security functionality is up to par and access controls are limited to authorized users.
A HIPAA Security Risk Assessment Tool is available at HealthIT.gov and serves as a helpful template.
Workplace Risk Assessment
A safety professional can conduct risk assessments in your office to investigate potential health and safety risks. These inspectors can survey employees and stakeholders to identify potential hazards, such as ergonomic injuries or air quality concerns. In addition to reducing downtime and sick time, a risk evaluation focusing on human health often raises productivity and morale among workers.
Construction Risk Assessment
An assessment team should do a safety risk assessment and hazard analysis on construction worksites to assure that safety standards set by the Occupational Health & Safety Administration (OSHA) are met. Safety management is a critical component in dangerous environments. A safety professional can help implement corrective measures to reduce the level of risk and ensure compliance with safety standards.
Implement Control Measures With Reciprocity ZenRisk
Determining your company’s threat landscape can be a daunting task. Cybersecurity risks change quickly and frequently, and a single assessment will not be sufficient to protect your company over time. So how can you be sure that your information security measures are accurate and up-to-date?
Reciprocity ZenRisk is an integrated platform that allows you to track risk throughout your company. By creating automated workflows, checklists, and alerts, ZenRisk will enable you to examine threats in real-time and develop control measures before they strike.
Schedule a demo today and learn more about how Recipricity ZenRisk can streamline your risk management process.