Risk Management is one of the vaguest terms used in the cybersecurity and compliance environment. Ask “What is risk management” to 3 different people, and you will get 5 different answers ranging from financial, operations, technical, and cybersecurity. Ironically, misalignment in definitions and expectations increases risks. Organizations need to roll back the mystique to address the appropriate type and impact of risks.
We will not focus on the mechanics of Risk Management; we will point you in the correct direction for the “how to’s”. We will focus on establishing (or realigning) your program correctly while addressing some of the pitfalls’ organizations face. A well-established program ensures success and turns a rigorous, time-wasting activity into an organizational asset.
How to Get Risk Management Right
Understand Risk Management – This critical organizational thought leadership and program implementation does not receive the required attention. When it does, it is segmented into different teams misaligning with the organizational risk profile. Risk management should resonate at all organizational levels, and all members should consider risks in all activities. Risk should be used as an enabler and opportunity for improvement, not as an excuse for not doing something. For example, create a process empowering team members to improve/alter processes and activities when risks are identified. This requires a shift in culture and leadership.
Determine Your Risk Profile and Level – Risk profiles vary by organization and industry but follow common themes. Your risk profile is set by executive management or the board. Multiple factors should be included such as industry, regulatory requirements, organizational goals, leadership maturity, and investor comfort. Profile complexity requires diverse membership with representatives from multiple teams and board representatives. Communicate your risk profile across the organizations to ensure alignment; embed it into your culture and decision making.
Correct Teams – Your risk management team should include influential members across your organization. Each member represents their discipline and risk profile. Some teams like IT and Cybersecurity should have sub risk management activities to manage technology and cybersecurity risks and then report back to the organizational level team. Creating a single high-level organizational team ensures risk treatment is through a common lens and synergies are achieved between teams.
Correct Framework – Choose a framework aligned with your industry standards, governance, and regulatory requirements. Common frameworks, such as the NIST Risk Management Framework (https://csrc.nist.gov/projects/risk-management), provide a step-by-step process for risk management.
Adapt Your Framework – Frameworks should not be adopted as is; if you attempt to implement an entire framework, you will go broke and insane. Instead, evaluate purpose and intent, review each step, then document your program. Revisit your program at least annually, ensuring it aligns with your needs.
Scale – It is essential to scale all programs according to business requirements and risk profiles. The risk program impacts risk management effectiveness; if it is over/under built, the program loses its value. Periodically evaluate the program rigors, ensuring organizational alignment.
Active Program – The key to an effective program is its activity. Conduct periodic risk assessment exercises validating current posture; frequency depends on risk profile and required activities. Create mechanisms for accountability and follow-up. Consider sub teams like Accounting/Finance, Sales/Marketing, and IT/Cybersecurity for deep dives into discipline specific risks.
Avoid the False Sense of Security – You gather the team, you align with a framework, and you conduct periodic risk assessments, so what can go wrong? Common risk management pitfalls include :
- Not having a clear understanding of organizational risk profile leads to risk management members downplaying risk impact and risk management. Solution: Include risk management team members in creating and updating the organizational risk management profile.
- Members not understanding different members’ risk positions leads to downplaying risk impact and risk management. For example, representatives from accounting, sales, or HR do not understand IT or Cybersecurity risks resulting in inaccurate assessments and treatment. Solution: Balance the team, ensuring a voice for all members to contribute, challenge, and manage risk. Consider inviting members of other risk management teams to join your team. For example, having a finance member join the IT/Cybersecurity risk team may make budget requests easier.
- Lack of team participation or team members leaving because they do not see the value. Solution: Manage the team, ensuring value for members; create challenges and accountability with deliverables increasing each member’s stake.
- The risk management exercises, lists, and resolve become a “rubber stamping” exercise. Solution: Ensure members know their value, have a voice, and understand the impact of an effective risk management program. Hold members accountable to effect change and complete action items between meetings. Avoid having a single, strong voice from dominating conversation and avoid group thinking.
- Lack of effective risk framework or risk tracking mechanism leading to misidentification, classification, and risk treatment. Solution: Choose and create your risk framework aligned with your risk profile, industry, and regulatory requirements. Adapt your program from a well-established framework like the NIST Risk Management Framework. Periodically review your program, ensuring alignment with your needs. Consider a SaaS solution to manage your program.
- Organizations ignoring the risk program, evidence is failing to correctly budget for risk remediation and losses due to business and cybersecurity failures. Solutions: Establish risk management as a top-down initiative. It should be sponsored, actively managed, and embedded in organizational culture.
Take the mystic out of Risk Management and make it a foundational activity for your organization. Create an effective program by adapting a framework aligning with your organization’s business requirements. Evaluate program membership, ensuring the correct thought leadership and value derived from the activities. Risk management requires periodic program updates to ensure alignment with business requirements and risk profiles. Consider third-party support such as ISOutsource, to establish and support your program efforts. Click here to connect with an advisor. We can help!