The Best Ways to Manage Risk in Business

A Simple Formula to Calculate Your Business Risk Level

Risk can be defined as the combination of the probability of an event occurring and the consequences if that event does occur. The organization could use a formula to measure the level of risk in any situation: Risk = Likelihood x Consequence. Likelihood is the Probability of an impact affecting the environment meanwhile Consequence is the Environmental impact if an event occurs.

The C × L matrix method therefore combines the scores from the levels of impact that consist of qualitative or semi-quantitative ratings of consequence and the likelihood of a specific consequence will occur to generate a risk score and risk rating.

Four Controls to Reduce the Risk

Risk mitigation the act of taking steps to reduce the extent of exposure to a risk and/or the likelihood of its occurrence. The key to reducing risk in organization lies in the strength of the mitigating controls for business continuity program that divided into four controls: Technical controls, Management controls, Operational controls, Loss/damage controls.

First, Technical controls consist of hardware or software installations that are implemented to monitor and prevent threats and attacks to computer systems and services. Then, Management controls procedures that are implemented to monitor the adherence to organizational security policies. After that, Operational controls is security measures that are implemented to safeguard all aspects of day-to-day operations, functions, and activities. Lastly, Loss/damage controls is security measures that are implemented to prevent key assets from being damaged.

Steps for Initiating Vendor Risk Management Process

Risk does not only come from internal business but can also come from outside parties such as vendor.

A vendor is a person or company that provides services and products to organizations. On the surface, third-party vendor might seem guiltless, but it could be a potential source of cyber-related incidents for your enterprise. As a result, many organizations have adopted vendor risk management process to manage risks related to third-party products and services.

There are several first steps that could be used by organization to initiate the vendor risk management process: First, compile a list of all your vendors. Then, create a list of services you consider relevant to your organization. After that, create proper documentation and reporting associated with third-party relationships. Lastly, conduct periodic independent reviews of the risk management process.

Key Elements of Successful Vendor Risk Management

After the organization has decided to start its risk management process, there are several key elements that shall be known to deliver successful vendor risk management. Vendor risk management is basically the process by which organization assess and manage security risk of any third-party.

SR 13–19 Guidance states that successful vendor risk management program should include the following key elements: Risk Assessments, Due Diligence and Selection of Service Providers, Contract Provisions and considerations, Incentive compensation review, Business continuity and contingency plans, and Oversight and monitoring of service providers

Conclusion

The organization could use a formula to measure the level of risk in any situation: Risk = Likelihood x Consequence and the key to reducing risk in organization lies in the strength of the mitigating controls for business continuity program. Furthermore, risk does not only come from internal business but can also come from outside parties such as vendor and in order to deliver successful vendor risk management, there are several elements that shall be owned by organization.

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References

Anisimowicz, J. (2019, July 2019). How to Approach Mitigating Third-Risk Party [Blog Post]. Retrieved from https://www.isaca.org/resources/news-and-trends/isaca-now-blog/2019/how-to-approach-mitigating-third-party-risk

The Risk Management Association. (2019). 6 Core Elements of Effective Third-Party Risk Management [White Paper]