As a reminder, in step 5, all risks from the risk inventory were analyzed and prioritized individually based on the institution's risk appetite. Risks must then be addressed in the final step based on the underlying prioritization order (risk control). That is what this blog post is for.
Treat and monitor your risks
Gross risk acceptance is not always the only and best risk treatment option (risk control). In general, there are four primary ways to handle risk in the professional world, irrespective of the industry. They include:
- Avoid risk
- Reduce or mitigate risk
- Transfer risk
- Accept risk
A widespread problem with this four-step approach to risk control is knowing which step is appropriate for which risk. After all, each industry is different. In addition to that, each company will assess risks differently.
(a) How to Avoid Risk
In many cases, the strategy of protecting oneself from any perceived danger by avoiding risk is outdated. However, in some situations, the call for an avoidance approach to risk management is indeed necessary. If the activity has a high likelihood of occurring, and it will also cause significant financial harm, it’s better to avoid it entirely.
In the context when local and nationwide regulations apply to your industry, one significant risk is breaking the law. Avoiding this risk in this scenario has an easy answer: don’t break the law. By following the guidelines regulators establish, you avoid the risk of fines, penalties, and defense costs.
(b) How to Reduce Risk
Implicitly, reducing risks requires a good understanding of the activities space that has the potential of reducing the likelihood of occurring and positively affecting the underlying financial impact. Let's illustrate risk-reducing activities through a simple example of technology-savvy fintechs that grow from a technological backbone. Clearly, one of the most significant dangers to these companies is due to cybercriminals.
As a result, many companies in this industry deploy a risk management plan to reduce their exposure to these criminals by:
- Establishing identity management
- Supporting security awareness
- Correcting security flaws
Note that none of these best cybersecurity practices can completely prevent a cybercriminal from harming a business. However, it mitigates this particular risk significantly.
(c) How to Transfer Risk
In particular, in case a financially devastating activity occurs, it is probably the best option of risk control to share or even transfer the risk. Handling the risk all alone could lead to significant setbacks, if not a complete shutdown of the business. Most of the time, risks in this category are highly unlikely to happen. However, the possibility is still there, and transferring the risk poses the best option.
Examples of such risk types can arise from the potential of natural disasters, e.g., a fire or violent storm could wipe out an entire production building, costing loads of cash for restoration and lost production time. Investing in property insurance is probably a good approach as long as the insurance company will pay for the damage.
(d) How to Accept Risk
It’s not always that businesses can avoid, reduce, or transfer risk. Sometimes, what remains is to accept the risk. In fact, if accepting the risk is more profitable than any other option, then it’s the optimal strategy. After all, every industry has unavoidable risks that come with the territory. While accepting risk is difficult, after all, some risk is necessary to do business in the modern world.
Experience in IT-Risk Treatment (Risk Control) Matters
As far as the treatment of risks is concerned, SRC consulting brings the relevant experience to understand your risk appetite, and propose individually optimized best-practice solutions for each risk detected. The support by SRC consulting includes the technical and/or organizational implementation of the measures to your satisfaction.
Combining the six steps:
- Understand your assets that need protection
- Determine the criticality of assets requiring protection
- Target-performance comparison of security measures
- Include security deficiencies in your risk inventory
- Analyze and prioritize your risks
- Treat and monitor your risks
together results in a holistic approach to systematically identifying and addressing information security risks. Modern information security requires automated and integrated management systems. In the area of information security, or even in basic IT protection, Excel is often the tool of choice - generally usable and suitable for a quick representation of guidelines such as ISO 27001. However, in times of complex and rapidly changing contexts, new global risks, and dynamic business processes, Excel has many weaknesses. Shortcomings in the representation of correlations, high maintenance effort, little to no automation, no assurance of compliance, and no interoperability are some of the reasons that speak against MS Excel. SRC consulting advocates replacing it with a holistic digital approach, where consultants guide you through these six steps in an advisory and implementation capacity.