Guide to Risk Management Tools for Maintaining Compliance

Risk is an inherent part of all businesses; one cannot completely avoid every type of risk. With the right risk management strategies, methodologies, and tools, however, you can mitigate the harm of risk to your organization.

One way to reduce risk is by implementing appropriate controls and procedures. For instance, you can deploy firewalls and endpoint detection and response (EDR) systems, to protect your enterprise network from unauthorized users and cyberthreats. Or you can implement technical controls to assure segregation of duties and minimize the possibility of fraud.

You can also transfer risk if you can’t completely avoid or accept it. For example, cyber insurance can help minimize the financial consequences of a ransomware attack or data breach. You can also outsource certain back-end operations to transfer any associated risk to a contractor.

In some cases, you may choose to accept a risk if the cost of mitigating it is likely to exceed the cost of the risk itself.

You need the right risk management tools to support your risk management strategy, efforts, and goals. Such tools refer to techniques or models to streamline your risk management process. With a robust toolset, you can identify risk, perform risk assessments, evaluate risk probability and potential impacts, and create a risk response action plan.

Well, all of them, really. While the type of risk may differ from one industry or organization to the next, all companies need tools for risk identification, risk assessment, risk analysis, and of course, risk mitigation.

That said, specific industries can benefit more than most by investing in robust risk management tools. Conversely, they can also suffer prohibitive damage if they fail to invest in these tools. These industries are explored below.

Financial Services

Several new risks have emerged in the financial services industry in recent years. According to one 2021 survey, these risks fall into three categories:

• macroeconomic risks that hinder growth opportunities;
• strategic risks that prevent organizations from achieving their objectives; and
• operational risks that affect day-to-day operations.

Key risks include the rapid shift to remote work environments, shifting customer preferences, supply chain shocks, interest rates, new opportunities for fraud and financial misreporting, and the increasing frequency and scale of cyber attacks and data breaches.

There are also the risks of non-compliance with standards like PCI-DSS (Payment Card Industry Data Security Standard). Per one 2020 report, only 28 percent of organizations are fully PCI-DSS-compliant, even though payment data is a top target for cybercriminals. This makes cardholder data vulnerable to data breaches and increases the risk of fines and legal action against the organization.

Financial firms can benefit from robust risk management tools which can help them catch risks early, implement reliable data security and compliance controls, and comply with standards like PCI-DSS, SOX (Sarbanes Oxley), and SOC1 and SOC2.

Healthcare

Organizations in the healthcare industry face a host of risks. Third-party vendors create the most significant cybersecurity risks, which exposes healthcare firms to ransomware, phishing, distributed denial of service (DDoS), and supply chain attacks. Data breaches alone cost the industry a staggering $7.13 million per breach in 2020.

Vulnerabilities in medical devices affect the quality of healthcare and endanger patient safety. Inappropriate or ineffective procedures increase the costs associated with medical negligence. In 2020, the average settlement cost following such accusations was $405,025, which can be devastating for small to mid-sized healthcare organizations.

Compliance is another huge risk in healthcare. Organizations are required to comply with a host of regulations to protect patients and their data, such as HIPAA (Health Insurance Portability and Accountability Act), HITECH (Health Information Technology for Economic and Clinical Health), and ADA (Americans with Disabilities Act).

Non-compliance could result in significant legal, regulatory, and financial consequences, such as fines, costly corporate integrity agreements, litigations, and reputational losses.

Healthcare companies need robust risk management plans and reliable risk management tools to effectively manage all these risks and maintain compliance with critical regulatory requirements.

Energy and Utilities

Like financial services and healthcare, the energy and utilities industry also faces many risks that can be hard to manage without robust risk management tools. Two of the most critical risk areas are cybersecurity and compliance.

Per one 2021 report, the regulatory environment is a “top concern” in this industry, mainly due to the Biden Administration’s increasing focus on climate change and the enhanced global pivot towards ESG (environmental, social, governance) criteria.

Moreover, since the sector is highly regulated, companies typically report to dozens of local, state, and federal agencies to protect consumer interests and minimize fraud. They demand greater data transparency from organizations and impose complex risk reporting requirements, making compliance and risk management very complicated.

Cybersecurity is another huge risk in this sector because cyberattacks can affect the entire value chain from generation and transmission to distribution. These events can disrupt essential services, result in fraud, expose confidential information to bad actors, and result in substantial financial damage for the company.

Energy and utility companies need solid risk management solutions to guide their risk identification, assessment, and response efforts to prepare for these risks.

Several risk management tools have emerged over the years. Organizations in any industry can leverage these tools for compliance and risk management.

Here are seven tools that can help strengthen your organization’s risk and compliance management programs. Use them to protect your assets, people, and data against the risks affecting your organization and guide your compliance efforts.

1. Root Cause Analysis (RCA)

   Although RCA is used after a problem has already occurred, it is still a good risk management technique. This tool can help you identify and address the causes of a risk so that you can eliminate or mitigate it, instead of simply reacting to its symptoms and continuing to experience recurrence.

   RCA helps you answer three key questions:

   • What happened?
   • How did it happen?
   • Why did it happen?

   Once you find these answers, you have the information you need to develop an action plan to minimize the risk and even prevent it from happening again.

2. Risk Audit

   A risk audit (also known as a risk review) is a good tool for active risk management. It involves identifying and assessing your existing risks and using this information to create an action plan to deal with undesirable events that may harm the organization.

   By regularly auditing your risks, you can examine whether your existing risk responses are effective or if any changes are required. The audit will also help you review your processes and procedures to identify, assess, prioritize, respond to, and control risks.

3. SWOT Analysis

   A strengths, weaknesses, opportunities, and threats (SWOT) analysis can also help with risk identification. Identifying the weaknesses and threats can illustrate the likelihood of negative risks and how they might harm the organization. Strengths indicate what you are already doing well, and opportunities could point to positive risks to the company.

   Place these findings on a 4×4 grid with strengths in the top left, weaknesses in the top right, opportunities in the bottom left, and threats in the bottom right. This visual depiction will make it easier to analyze and cross-reference your findings when required.

4. Risk Assessment Template

   A risk assessment template is an easy and visual way to document and track various risks for evaluation and risk mitigation. It offers a standardized way to identify company assets, list relevant risks and potential threats, investigate points of vulnerability, and predict the likelihood of incidents that may harm the organization.

   Ultimately, the template enables risk and compliance managers to track risks and their probabilities, and prioritize their response accordingly.

5. Risk Register

   A risk register is a beneficial tool to identify potential risks, not only for risk management and risk mitigation, but also to fulfill regulatory compliance requirements. This tool identifies and describes various risks, their potential impact, and the planned response.

   For maximum usefulness, make sure your risk register includes information like:

   • A name or ID number to identify each risk;
   • Details about the nature and category of each risk;
   • Probable impact of each risk;
   • Risk owner;
   • Risk probability and priority;
   • Current risk response measures;
   • Planned risk response measures.

6. Risk Probability and Impact Matrix

   A probability and impact matrix helps you to prioritize identified risks based on the expected impact and likelihood of occurrence. You can rank risks in terms of severity which is a useful exercise for resource allocation and helps guide your risk response plan.

7. Risk Data Quality Assessment

   Use this risk management tool to analyze the information you have collected about each risk to understand its accuracy and quality. Such an assessment provides a valuable perspective to better understand risk, so you can perform more accurate risk assessments for mitigation and compliance purposes.

Apart from the seven risk management tools discussed above, you can use many other tools to inform and improve your risk and compliance management programs. For instance, a variance and trend analysis highlights whether there is increased uncertainty and risk due to mismatches (variances) between expected and actual results in costs or revenues.

You can also perform a strategic and capability risk analysis to identify, analyze, and prioritize top risks. A reserve analysis assesses whether management or contingency reserves are decreasing due to increasing risks. Brainstorming with team members is another tool for risk identification and assessment.

There are also specialized risk management tools with key features and modules for specific risk analysis and management areas. The tools you select will depend on your risk management and compliance objectives. Before selecting tools, define the processes for risk analysis and management, and make sure that the tool supports these processes.

In addition, your enterprise risk management software or tool should:

• Provide actionable insights and dashboards to support decision-making around compliance, resource allocation, and additional investments;
• Be accessible to all key stakeholders to create a single source of truth and promote collaboration during risk management and compliance;
• Include a management system for risk notifications and alerts;
• Integrate with other processes and tools for governance, risk, and compliance (GRC).

Actionable insights are crucial when it comes to enterprise risk management (ERM) and compliance risk management. ZenRisk from Reciprocity provides these insights in a user-friendly, visual format so you can easily quantify your risk posture and guide strategic decisions around risk management and compliance.

Plus, you get these insights in the context of your processes to identify the IT and cyber risks affecting them. More importantly, you can assess their impact, determine their probability, and take action to mitigate them. Ultimately, these features enable better management of your risk landscape to improve your security posture.

Eliminate manual spreadsheets and reduce uncertainties with ZenRisk’s capabilities. The platform offers guided risk management, in-app scoring methods, target inherent risk scores, and automated workflows so you can monitor risk in real-time and stay ahead of threats.

To see ZenRisk in action, schedule a demo.