The risk management process helps organizations to assure that they comply with all applicable laws and regulations, and it also allows them to protect themselves from the potential harms of risk—which, aside from non-compliance, can include things like data breaches and cybersecurity threats.
To start risk management, we first need to understand what risk evaluation is, and the part it plays in your organization’s overall risk management system.
Today we’ve compiled a list of frequently asked questions around risk evaluation, to help you get started defining your own risk identification, assessment, and mitigation plans.
Risk Evaluation Frequently Asked Questions
1. What best defines risk evaluation?
Simply put, risk evaluation is how you determine the severity of potential risks. The risk evaluation process has two components: risk assessment and risk analysis.
2. What’s the difference between risk assessment and risk evaluation?
Two terms might sound like they’re the same thing, but it’s important to appreciate the distinction between risk assessment and risk analysis.
Risk assessment is the process of identifying all the estimated risks to your organization. Then, during risk analysis, you evaluate and define the characteristics of each risk and assign each risk a score.
3. How do you evaluate risk?
To evaluate risk, we must determine the significance and severity of each risk. We can do that in two ways:
Qualitative Risk Assessment
Qualitative risks are defined as uncertain events that could have a range of possible outcomes, from harmless to severe.
A qualitative risk assessment typically maps identified risk factors along the x- and y-axis of a risk assessment matrix, so stakeholders can address those issues with the highest level of severity first, and then low-probability risks later.
This type of risk analysis is more subjective and experience-based than quantitative risk analysis. This makes it an ideal way to incorporate insights from those executives who know the business operations but have less experience in formal risk management.
Quantitative risks are those assigned an actual numerical value using algorithms and actuarial data. (For example, “A ransomware attack that locks us out critical systems for four hours will cost us $100,000 in lost revenue.”) While quantitative security risk assessment determines that numerical value, qualitative analysis is also often used to determine the full impact of a particular defined risk.
Evaluation and prioritization are important because you won’t be able to respond to every risk at once.
It’s important to understand risk impact and use risk scores when determining which issues require your immediate attention, versus those that have an acceptable level of risk and can be addressed later.
4. What are the five stages of a risk assessment?
Your risk assessment should include the following five stages:
- Identify any potential risks within your own organization, as well as risks your vendors or other third parties may pose.
- Evaluate risk criteria to determine the probability of a risk happening and its possible impact. (This includes a vendor risk assessment as well!)
- Determine which risks can’t be eliminated as well as acceptable risks, and set up a way to monitor them.
- Assess the extent of those outstanding risks.
- Design and implement risk management plans for each risk, based on your risk ratings and priority level.
5. How does risk evaluation fit into risk management?
Risk evaluation is just one piece of a risk management plan. Let’s take a look at the other parts of creating a risk management plan to help you get a complete picture of how this will all play out for your organization.
- Step 1: Assigning roles and responsibilities. Before embarking on this journey, leaders and other supporting team members must be identified, and each one must understand his or her role in the risk management plan.
- Step 2: Budgeting and cost-benefit analysis. You won’t be able to address all risks at once. Before prioritizing and mitigating risks, then, you should first determine the overall budget for your risk management plan. Then perform a cost-benefit analysis for each risk and its mitigation plans, to assure that you spend your budget dollars efficiently.
- Step 3: Process and timing. It’s imperative to lay out the risk management process and how risks will be evaluated before you start. It’s also key to clarify expectations around the timing and frequency of certain actions.
- Step 4: Risk evaluation and scoring. Once the groundwork has been laid, it’s time to define, score, and prioritize risks using both qualitative and quantitative risk analysis. Acceptable risks will be identified; unacceptable risks will be prioritized for remediation based on level of impact. Methods and scoring must be determined in advance to ensure consistency.
- Step 5: Documentation and communication. Next, determine how risks will be documented and how your team will communicate during risk evaluation. This includes communicating about the risks themselves, treatment, and status.
- Step 6: Tracking and auditing. This step involves how risk evaluation and treatment are recorded, reported, and stored for future auditing needs.
How ZenGRC Can Support Your Risk Evaluation Strategy
ZenGRC equips your security and compliance teams with a single, integrated experience that reveals information security risk across your business.
ZenGRC simplifies risk management and compliance with complete views of control environments, easy access to information necessary for risk evaluation, and continual compliance monitoring to address critical tasks at any time.
Our user-friendly dashboards show you which risks need mitigating, how to do it, and also track workflows, collects and stores the documents, and more!
To learn more about how ZenGRC and how it can support your risk evaluation efforts contact us now for your free consultation and demo.