Gone are those days when Risk Assessment was carried out traditionally. With the advent of technology, the types of risk and the ways in which risk is mitigated have drastically changed. Organizations across industries have realized the importance of improving Risk assessment methods to improve the security of their business processes.
Data is the most important thing today that needs to be secured. Data can come in forms of personal data, a company’s confidential data about its projects, customers, processes, etc. Risk is always going to be there so risk assessment is carried out to identify and mitigate the risk, while not ignoring the risk scenarios. There are risks of system failure, data leaks etc., so we need to improve the ways to mitigate cyber risk. With inter-connected systems that are dependent on each other, there are chances that the risk is also interconnected and the crisis will be cascading in nature when there is a breach.
Such modern risks can be mitigated with the use of modern techniques of quantitative analysis and improved decision-making techniques. Four important Guidelines for improving Risk Assessment in 2020 are:
- Scenario analysis is carried out for proactive identification of risks in business units, areas, process, or functions by making some clear assumptions through brainstorming and discussions.
Impact-criteria is another technique that helps in measuring the risk tolerance capacity and risk-taking appetite of an organization. Impact criteria will highlight the areas which are most important to an organization’s vision and mission, those that can’t be compromised upon viz. financial, legal, employee security, productivity losses and, tangible losses, etc.
- When there is no method defined for proactive risk identification in an organization, and since it is possible that there is a lack of proper authority for reporting the risks, then such risks will show up during audit processes.
To avert such conditions, performing qualitative or quantitative analysis on the identified threat is a good option. When such threats or concerns are analyzed for a significant loss or impact on business, then methods like Maximum Foreseeable Loss (MFL) or Maximum Probable Loss (MPL) with a set of scenarios having well defined assumptions should be used to understand the impact it will have on the business.
- Preparing a risk register, when a certain risk is out of tolerance from the criteria of the above methods is advisable as it will have a plan of action for a response and what should be done next? This plan involves further risk analysis, cost justification and determining an effective course of action to avert risks.
Using Monte-Carlo modeling and simulation analysis will help in prioritizing the list of risks in the register and help in charting out the further plan of action accordingly. This method views the risks as number of times and probability an event will happen and its impact on the business. However, using this method is not always advisable for making risk-transfer and Annual Loss Expectancy (ALE) decisions.
- Monitoring and reporting the risk under management involves development of risk indicators when the risk is considered to be within the acceptable range of the business. This can be done using 2 methods i.e. Root cause analysis (RCA) and Goal-Question-Indicator-Metric (GQIM). Both these methods provide feedback on improvement of risk management processes.
Summing it up, we can say that using above risk management techniques, risk can be mitigated in an improved manner. Thus, reducing the chances of happenings of unforeseen events. It is advisable for all the businesses, to carry out risk management for improveing their business processes.
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