What Is Risk Control?

Risk control is a crucial part of the risk management process. It is the step where an organization evaluates the potential losses from a risk and then takes action to reduce or eliminate that risk.

Risk control uses findings from risk assessments, which in turn uncover various risk factors in an organization’s operations and management practices. Those factors include financial circumstances, technical and non-technical operations in the business, and other issues that could harm the company.

Risk control is important for the health of an organization because it helps the company attain its goals and profits by protecting against risks that may affect the bottom line. It is an internal control strategy with loss prevention at its heart.

What Are the Core Concepts of Risk Control?

Here are six core concepts that organizations can use to manage risk:

• Avoidance. Avoidance, as the name implies, is when you avoid a risk entirely. This isn’t always possible, but many times you can take measures to eliminate a potential risk completely. For example, your manufacturing team could find safe alternatives to hazardous materials or processes.
• Loss prevention. This strategy accepts a certain level of risk, but aims to minimize the chance that a threat will happen. For example, you can install security cameras and use secure storage facilities to prevent theft.
• Loss reduction. Closely related to loss prevention, above, loss reduction tries to reduce the chance of an incident – but also tries to limit the potential damage when the threat does happen. For example, you can install sprinklers in a warehouse storing flammable material to control damage in case of a fire.
• Separation disperses key assets to reduce the odds of a catastrophic event. For example, you can build a geographically diverse workforce so production can continue uninterrupted in the case there are issues in one warehouse.
• Duplication. This involves the creation of backup plans, often using technology. For example, you can use a backup server in case the primary
  server fails.
• Diversification. This strategy allocates resources to develop multiple lines of business, so that if one line fails to prosper other lines might still do so. For example, a restaurant can also sell its line of salad dressings, marinades, and sauces through grocery stores.

What Are the Objectives of Risk Management?

Any comprehensive risk management plan is based on the following five objectives:

1. Identify

   Identify the risks that may affect your business. Assess the source of the risk; understand the causes behind it or issues leading to it. Then ponder the best ways to handle these risks. For example, if your employees tend to fall victim to phishing attacks, educate them on the importance of opening emails only from people they know.

2. Measure

   Create a system to measure each risk you’ve identified above, and quantify each risk’s potential effect on your business.

3. Monitor

   Implement a system of continuous monitoring to keep track of the risks you’ve identified and measured. Also, watch for related factors and market conditions that may affect these risks.

4. Control

   This stage is about finding effective ways to deal with or control the identified risks.

   Evaluate the potential damage from the risk, and compare that number against the total cost of controlling it. This will help you prioritize risks that require immediate attention and understand whether a specific risk is worth spending time and resources to address. Thereafter, use methods such as risk transferring, risk treating, risk tolerating, and risk terminating to control them.

5. Transfer

   One can try to transfer the harm from risks using contracts, such as sales agreements or insurance contracts. This can be helpful to safeguard your business.

Risk Management vs. Risk Control

Although risk control is part of risk management, it is only one part; the two concepts are not the same.

Risk management is the entire, end-to-end process of identifying and handling risks. Risk control is a way for organizations to mitigate risks by implementing operational processes.

For example, a company might control the risk of equipment failure by performing maintenance according to a set schedule. That is not the same as the entire risk management process of identifying equipment failure as a potential threat, mitigating the threat through maintenance, assuring sufficient surplus equipment in case of a failure, and reporting on equipment maintenance to senior executives.

Put another way, risk control is specifically focused on preventing risk, reducing the effect of that risk, and reducing disruption should the risk actually happen.

Further reading: What’s the Difference Between Risk Appetite vs. Risk Tolerance?

What does Risk Control Include?

Also known as “risk treatment,” risk control includes the following.

• Risk avoidance. Apply safeguards that eliminate or reduce the business risks that can harm the organization’s assets. While risk management seeks to control the damages and financial consequences of threats, risk avoidance aims to avoid the threats entirely.
• Risk transference. Shift the risk to other areas of the business or to outside entities, such as an insurance company. The goal here is to let another entity accept the risk. For example, a company could outsource business processes as data storage or IT management, transferring that risk to providers of those services (under the logic that they are experts in those fields, better able to handle the task).
• Risk mitigation. Risk mitigation is about reducing harm. It means having policies and procedures in place to lessen the adverse effects when something happens. Risk mitigation strategies include incident response plans, disaster recovery plans, and business continuity plans.
• Risk acceptance. When you understand the potential consequences of a risk, sometimes the best course of action is to accept the chance of those consequences without control or mitigation. An organization might do this when it believes the chance of the risk happening is minimal, or the potential harm from the risk wouldn’t be significant.

Risk Control Best Practices

Having a comprehensive approach is crucial to effective risk control. Here are five key steps to consider:

• Identify and assess risks. Think about the potential risks and their possible impact on your business. This will help you better understand which risks should be prioritized and eliminated.
• Develop and implement risk management strategies. Brainstorm and apply strategies to manage potential and current risks. This can involve implementing safety measures, diversifying investments, and establishing an emergency response plan.
• Monitor risks. Have a plan to track and evaluate risks continuously, to gauge the effectiveness of your risk management strategies. This will also help you identify emerging risks and promptly make any required.
• Communicate risks. Communicate with stakeholders such as employees, customers, and investors about potential risks and how you plan to manage them, to maintain trust and ensure transparency.

Manage Risk With RiskOptics

The RiskOptics ROAR Platform is designed to help enterprise leaders and IT professionals manage IT and cyber risk while complying with applicable standards and regulations.

It provides a customized real-time view of risk and compliance based on your business priorities, helping you communicate the impact of risk to key stakeholders and make informed decisions to protect your systems and data. With the platform, you can quickly identify potential risks and quantify risk exposure to take strategic action and reduce risk.

The RiskOptics ROAR Platform connects threats, vulnerabilities, and risks, providing real-time scores that automatically alert you to changes in risk. This feature keeps you ahead of emerging threats and enables you to take the necessary steps to mitigate them.

Request a demo today to see what effective risk management can look like for your business.