Risk assessments are a critical step in the risk management process. To protect your company properly, you must first determine the threats you face and the damage each threat could cause. That’s what a risk assessment attempts to determine.
If you plan on performing risk assessments at your company, keep reading to learn more about the types of risk assessments that exist and best practices for assessing your risk effectively.
What Types of Risk Assessments Are There?
There are different levels of risk assessments depending on your needs and the information you hope to gather. Risk assessments can broadly be divided into two categories: quantitative and qualitative.
1. Quantitative risk assessments
A quantitative risk assessment is one where the information gathered can be expressed numerically. For example, “There is a 30 percent chance of system failure today, and for every hour of failure we lose $1 million in revenue.” Precise data and clear metrics are often helpful when presenting to board members and stakeholders or when tracking progress over time.
2. Qualitative risk assessments
Qualitative risk assessments rely on first-hand observations and interviews to determine the risks that may occur. A quantitative approach can sometimes omit this human perspective, or sometimes the best way to predict risk is by seeing it for yourself. And where quantitative risks might be expressed as percentages, qualitative risks are often expressed on some “low-medium-high” scale: “We have a high risk of data center failure due to hurricanes this season.”
The following risk assessment forms can be quantitative or qualitative, depending on your company’s individual needs:
As the name suggests, a generic risk assessment can be adapted to a variety of situations and environments. Hence the generic method is often used as a risk assessment template, or a first pass before moving on to more specific methods.
A site-specific risk assessment will focus on the location being assessed. Considerations may include the equipment used in the space, health and safety regulations required for the activities performed, the personnel employed there, or climate and weather conditions.
A dynamic risk assessment differs from the previous methods in that it is performed in a limited time span. This kind of assessment is usually performed when a safety risk occurs (or shortly after) to determine what steps should be taken to minimize the damage.
3. Semi-quantitative risk assessments
Semi-quantitative assessments combine qualitative and quantitative methods, but they provide more precise analytical assessments than the former and do away with the intense probability and asset value calculations of the latter.
Semi-quantitative assessments use a numerical scale (for example, one to 10) and give a definite value to each risk item. Items scoring lower, middle, and higher thirds are respectively categorized as low-, medium-, or high-risk.
4. Asset-based risk assessments
Organizations generally use asset-based assessments to evaluate IT risks. Common examples of assets include hardware, software, networks, and information. The assessment usually involves the following steps:
- Creating an inventory of assets
- Evaluating existing controls
- Identifying risk factors and vulnerabilities associated with each asset
- Assessing each risk’s potential impact
This type of risk assessment is popular as it aligns the culture, structure, and operations of an IT team; and provides a clear understanding of associated risks and controls.
That said, don’t expect these assessments to give you complete and detailed information on risk, because some risks are not part of the data infrastructure. For example, this assessment doesn’t consider “soft” factors like policies and business processes, which may expose your company to the same level of danger as unpatched software.
5. Vulnerability-based risk assessments
Vulnerability risk assessments go beyond an organization’s assets. They start by identifying weaknesses in your system and environments. Then assessors can determine the potential threats and their consequences.
While this approach produces more risk information than an asset-based risk assessment, it may only show some of the potential threats your organization faces.
6. Threat-based risk assessments
Threat-based methods allow for a more comprehensive evaluation of your risk posture. These assessments focus on examining each condition that gives rise to risk. They also involve audits of your IT assets to evaluate the controls those assets may or may not have in place.
It’s important to note that threat-based risk assessments consider the actual techniques employed by cybercriminals, going beyond the tangible IT infrastructure, to help you better strategize risk mitigation.
For example, employee training may be the top priority of an asset-based risk assessment. A threat-based assessment, on the other hand, may give insights into how frequent cybersecurity training reduces risk without additional expenses.
How Can I Choose the Best Risk Assessment for My Needs?
Sometimes a combination of assessments will yield the best results. Don’t stick with one method if using several will better meet your needs. You may also find that different departments in your company lend themselves to different assessments; it isn’t necessary to use the same technique for every organizational area.
A crucial question to ask when embarking on a risk assessment is simply: what are we hoping to learn? Consider whether your answer requires hard numbers or a holistic perspective. Your proposed time frame may also be a factor, as well as the experience and availability of your assessor.
How Do I Complete a Risk Assessment?
The risk assessment process will differ at every organization, depending on the kind of assessment you choose, the size of your company, and your overall goals. That said, most risk assessments will have the following steps in common:
- Identify hazards. Hazards and risks are not synonymous. Hazards are any possible events that could cause harm, while risks are the likelihood of harm. Your first step should be to list all potential hazards that your company or site might face.
- Identify the potential harm. After hazard identification, attempt to predict any harm from each hazard. Not all hazards are created equal, and determining what harm could be caused will help you prioritize and plan accordingly for every possibility.
- Determine necessary precautions. Once you’ve analyzed potential hazards, you’ll need to decide how to best prevent them or minimize harm. This might involve training, controls, or insurance policies.
- Record your results. It’s wise to create a risk register that contains all your potential risks and the control measures you’ve taken to prevent them, both for future training and for tracking your progress.
- Review and make changes over time. Risk is not static, and your current plans may not be sufficient as your company grows. So be sure to examine your risk prevention efforts and your risk landscape regularly over time.
Assess and Manage Risks With ROAR
Identifying risk is the first step to creating a successful risk management program. To provide the best possible defense, your company must be able to track the risks you’re facing and the mitigation efforts you’ve put in place.
How can you assure a complete risk analysis for your entire organization? If you’re searching for effective risk assessment tools, the RiskOptics ROAR Platform can help.
ROAR is an innovative framework designed to give you a real-time view of your company’s risk landscape. Automation and integration throughout your entire organization allows you to ensure all of your potential vulnerabilities are accounted for.
Schedule a demo today to learn more about how ROAR can help you build a successful risk management system for your company.