Technology risk (also known as information technology risk) is a type of business risk defined as the potential for a technology failure to disrupt a business. What type of failure? Well, lots — everything from cyber attacks, to service outages, to old equipment no longer fulfilling your needs, and more.
Without an appropriate response, any technology risk has the potential to cause financial, reputational, regulatory, or strategic disruption. As such, it’s critical for companies to have an effective technology risk management strategy that anticipates potential problems and supports a strong security posture.
Risk Management’s Role in Technology Risk
Risk management includes the strategies, processes, systems, and people that a company uses to manage potential risks. Technology risk management is one subset of that concept; it aims to identify potential technology risks before they occur and then implement a plan to address them.
Risk management looks at the internal and external technology risks that could hurt a company. Risk management teams (usually composed of IT specialists) develop their technology risk management plans by identifying and analyzing technology risks and then implementing measures to reduce those risks to acceptable levels.
Common Technology Risks
Thanks to modern dependence on technology, businesses have numerous technology vulnerabilities. These will vary for each industry and the types of technology used, but some of the most common risks include:
Companies are bombarded with cyber attacks every day. Perhaps the most common attack is phishing, where employees receive bogus emails trying to dupe them into sharing confidential data — often by asking the employee to click on a link that connects them to an infected website, or by posing as a coworker and asking the target to send confidential data by email.
Meanwhile, malware is software installed by an outside entity (usually after someone falls for a phishing email) that causes harm to either the device or the company’s IT systems.
One common form of malware is the Trojan Horse. It’s malware that looks like a legitimate program. Once installed, a malicious code will execute the attacker’s plans: stealing data, spying on activity, or gaining backdoor access to closed systems. Another type of ransomware is malware, which locks a user’s computer until the attacker’s requests are met (typically paying a ransom or divulging confidential information).
Data breaches occur when sensitive information is stolen or leaked to unintended parties. Breaches can happen from external attacks such as hacks, malware, or phishing scams. Internal data breaches are also possible due to disgruntled or improperly trained employees. Regular internal audits of IT environments can help reduce instances of data breaches.
Keeping software up to date is often as simple as allowing regular or automatic downloads from the software provider. These updates include patches for new and developing cyber risks, helping to keep your sensitive information safe.
Many software vendors, however, cease supporting old products over time. This means that outdated equipment may not be as safe as new technology. Auditing IT hardware is important for mitigating technology risks, as it allows your organization to ensure continued software updates and security patches.
Benefits of Technology Risk Management
The most obvious benefit of technology risk management is that your organization can reduce its vulnerabilities. Active risk management plans reduce the likelihood that an anticipated risk will occur. That said, technology risk management has other benefits too, such as:
- Reduced costs. Every risk has an associated cost, and technology risk is no different. By reducing the likelihood of risks, your organization saves on the costs associated with financial and reputational losses.
- Improved agility. Technology risks cause disruptions which delay business processes and scatter daily operations. A successful technology risk management strategy helps your business respond to risk events in a more agile way, allowing for briefer disruptions and improved business continuity.
Technology Risk Management Process
The first step in the technology risk management process is a technology risk analysis. At this stage, the risk management team uses tools to identify and prioritize the technology risks so they can assess and resolve those issues.
Identifying technology risks should be an ongoing effort. Consequently, it makes sense to impanel a group of people to identify the sources of technology risks. These risk committee members should combine their knowledge and experience to scan the full range of possible technology risks, identifying which risk management frameworks are appropriate for each.
After the risk management team identifies the technology risks, the team should develop a risk management plan to address each risk identified. Next, the team should use a risk assessment software tool to categorize and prioritize those risks. Technology risks should be prioritized based on the potential harm they would cause the organization and the likelihood of the risk actually happening.
In addition, compiling a technology risk register — a formal record of identified technology risks — can help organizations identify potential technology risks that might derail their intended business outcomes.
Mitigating Technology Risks
Once your risk management team identifies the causes of the technology risks, as well as the potential impact and probability of those risks, the team can start to develop possible solutions to manage or prevent technology risks. As the team develops a response for each technology risk, that response should be broken into specific action steps, which become part of the risk management plan.
The risk management team should immediately implement whatever action steps they can to prevent the technology risks from occurring. If a risk does occur, the risk management team can retrieve the plan and implement the appropriate steps.
What Is Risk Management in Information Technology?
Risk management in information technology — or IT risk management — is specifically about protecting data and IT systems from adverse events. These risks range from human error and equipment malfunction to cyber threats and natural disasters.
When organizations identify and address vulnerabilities within their enterprise IT networks, they are better prepared to counter cyber attacks, which reduces the damage from any potential cybersecurity incident. By implementing a comprehensive IT security and risk management program, companies can navigate future decision-making processes for strategic information security risk control while focusing on achieving business goals.
What Are the Steps in Information Technology Risk Management?
An organization must undertake several steps to assure a robust and comprehensive information technology risk management strategy. Here is a step-by-step breakdown:
Step 1: Identify data vulnerabilities
Locate areas where valuable data is stored (and remember to include cloud-based storage, shared drives, web portals, email, and messaging services when you do). Understand that there’s an increased risk of data theft in cloud environments, so it’s critical to account for diverse data touchpoints, including relevant locations and users.
Step 2: Analyze data types
Conduct a comprehensive risk analysis by assessing the overlap and impact of each data asset’s risks. Calculate the level of risk by multiplying the likelihood and financial impact of a potential breach, and prioritize risks based on their severity.
Step 3: Evaluate and prioritize risks
Assess risks by analyzing the likelihood of a data breach and its financial harm. Calculate risk levels to prioritize responses, acknowledging the potential damage to low-risk data in high-risk locations.
Step 4: Set risk tolerance and establish processes
Determine your organization’s risk tolerance and decide whether to accept, transfer, mitigate, or refuse identified risks. Implement mitigating controls like insurance, firewalls, and encryption to manage risk while understanding their limitations. You should also establish robust IT risk management processes.
Step 5: Mitigate existing risks
Develop and implement mitigation measures for risks that exceed your defined risk tolerance. Deploy firewalls, encryption, data backups, hardware updates, and multi-factor authentication to reduce vulnerabilities and enhance security controls.
Step 6: Use a data security solution
Invest in reliable data security solutions, particularly for critical risk scenarios, to alleviate the burden on internal teams and enhance protection against critical risks. Be sure to entrust data access to security professionals to minimize potential threats.
Step 7: Continuously monitor risk
It’s important to maintain ongoing vigilance as malicious actors evolve their tactics. Regularly reassess controls to adapt to emerging threats like ransomware, cryptocurrency, and phishing. Ongoing risk monitoring is essential to address emerging vulnerabilities in an ever-changing threat landscape.
What Are Four Approaches to IT Risk Management?
In the complex landscape of IT risk management, there are four fundamental strategies for addressing potential risks:
- Risk avoidance. Withdrawing or refraining from participating in risky scenarios.
- Risk reduction. Implementing measures to keep risk at an acceptable level and minimize potential losses.
- Risk transfer. Shifting or sharing risk through mechanisms such as insurance or outsourcing.
- Risk retention. Accepting and accounting for identified risks within budgeting and resource allocation.
You can use these approaches as a framework to guide business decision-making and mitigate the effect of adverse events.
Reduce Technological Risks with ROAR
The RiskOptics ROAR Platform helps you manage technology risks across your organization. Automate third-party vendor processes, schedule risk assessments, and share quarterly reports with key information security stakeholders. The ROAR Platform’s robust tools allow you to seamlessly move from risk management to assessment to analysis and implementation all in one place.
Schedule a demo today to learn more about ROAR and how it can help.