What is IT Risk Management? + Why It Matters

Anthony Gagliardi , Compliance Manager
August 10, 2022

Illustration of a risk scale.

IT and the equipment surrounding it are just as vulnerable to disruption as any other business aspect. Disruptions can be accidental like servers going offline and software errors or actively malicious like phishing, compromised actors, or ransomware. 

Given the importance of IT in day-to-day business operations, systems being down can quickly spiral to other parts of the business. No program is perfect, some things will break, but if you’re not planning for it or prepared for it, the fallout could be detrimental.

Being proactive about risk assessments will help identify vulnerabilities but a plan must be put in place to mitigate those risks. Therefore, it’s important for teams to understand what risk management entails, why you may need it, and how to implement it. 

Read all about risk management in our guide below. 

Information Risk

Information risk is an estimate of the probability that something or someone will gain access to and maliciously or unintentionally manipulate the confidentiality, integrity, or availability of the data your organization handles. Here are some helpful terms that will help you better understand information risk: 

Threat Actor

A threat actor is a human or non-human entity such as malware that exploits a vulnerability in your information systems.

Vulnerability

Some common vulnerabilities that threat actors take advantage of are a lack of data encryption, missing means of authentication, weak passwords, and more. 

Outcomes

Outcomes are the result of the exploited vulnerability. This may be a threat actor gaining access to confidential information or widespread malware on company devices.

Impact

Not to be confused with outcomes, impacts are the consequences of outcomes. 

For example if a threat actor gained access to confidential user information, customers may no longer trust your company with their information. It could also result in legal/regulatory issues for your organization and negative public relations.

Asset

An asset is a foundational piece of information risk. It’s the data, process, or piece of technology that has been exposed to the threat actor through a vulnerability.

What is IT Risk Management?

IT risk management is the constant and continuous process to identify, assess, manage, and monitor risks in an organization that could impact its security, reputation and financial health. These risks are associated with vulnerabilities to information, information systems, and the organizations that rely upon information for their operations. 

There are three components of IT risk management that make up this process.

Risk Assessment

Becoming aware of the risks facing your company is the first step in preventing threat actors taking advantage of them. Assets cannot be protected if you don’t know what weaknesses may exist in your security program or information system. IT risk assessment involves identifying and evaluating your organization’s risks, the risk impacts that may occur, and developing risk-reducing measures to combat them.

Risk Mitigation

Risk mitigation efforts refer to the implementation of the risk-reducing measures that were recommended from the risk assessment. This includes prioritizing, implementing, and maintaining these measures throughout the organization. This will make it more difficult for unauthorized users to gain access to company assets and reduce the chance of harmful impacts.

Evaluation and Assessment

Maintaining a consistent evaluation process will enable your risk management procedures to expand as your company scales. 

More employees, new software updates or device changes, additional locations or global expansion are all positive business developments, but leave new holes for nefarious activity to strike. Scheduled and routine updates are key for implementing a successful risk management program.

Why Does It Matter?

Risk management processes are important aspects of IT security programs. But as organizations become increasingly technology-reliant, the primary function and goal of risk management processes is to protect the organization and the ability to perform its mission. Its importance should be emphasized in all aspects of the business, not just for the security team. Effective programs involve all teams and job functions.

The backbone of frameworks and regulatory compliance is monitoring the risks associated with information security, data storage, and processing. Having a process in place will only further support your organization’s compliance goals.

Assessing Risk

Adopting the right risk assessment methodology is necessary for companies to be aware of potential threats and create mitigation strategies in the face of these threats. Below we outline the steps mentioned in NIST SP 800-30 to help inform your assessment.

1. System Characterization

System characterization involves characterizing the IT system through an intense review of the company’s information systems and infrastructure. System-related information is collected through questionnaires, on-site interviews, document review, and use of automated scanning tools.

2. Threat Identification

When determining a threat, you must consider potential threat sources and their motivations. Threats come when a vulnerability in a system is exploited or accidentally triggered. 

For example, a malicious actor could be trying to access confidential information and a poorly trained employee may accidentally trigger a threat through a successful phishing attempt.

3. Vulnerability Identification

A vulnerability is typically paired with a threat during a risk assessment to understand how they may be exploited. Such as a disgruntled former employee (a threat-actor) accessing proprietary data if their information has not been immediately removed from the system upon termination (the vulnerability). 

A method for identifying system vulnerabilities might be the development of a security requirements checklist.

4. Control Analysis

Controls must be put in place to lower or eliminate the chance of a threat-source exploiting a system vulnerability. These security controls may be technical, like an authentication and authorization mechanism for company software, or non-technical, such as a security policy.

5. Likelihood Determination

As it sounds, likelihood determination is the probability that a vulnerability may be abused by a threat-source. This is usually characterized by ratings from low to high. 

A low rating means that controls have been put in place and the malicious actor has low motivation or capability to act. A high rating may be considered that the actor has high motivation and capability to act and the controls in place are rendered ineffective.

6. Impact Analysis

Impact analysis determines the harmful impact that would result from a successful threat exercising a vulnerability. The impacts are described in terms of failing the following security goals:

  • Loss of integrity
  • Loss of availability
  • Loss of confidentiality

Impacts may be measured in quantifiable means such as a monetary value or how many hours it takes to restore a system’s functionality. Other impacts such as a loss of public confidence or credibility are qualitative and harder to assign a number to. 

7. Risk Determination

Risk determination means quantifying the level of risk a particular threat may be to the IT system. To determine this, you may deploy a risk scale—ranging from low to high—and a risk-level matrix. 

These ratings are subjective as different threats have higher or lower levels of risk and impact depending on the company. Risk scales help organizations prioritize the risks they’ve identified.

8. Controls Recommendations

During this part of the process, controls that could mitigate or eradicate the prior identified risks that are a threat to the company’s operations are recommended. By this step, these controls have already been determined feasible and justified in a cost-benefit analysis during the risk mitigation process.

9. Results Documentation

Once the assessment has been completed, a risk assessment report should document results to inform future updates or changes to protocol.

Implementing IT Risk Management

There is a lot that goes into raising awareness of risks, creating an action plan, and implementing an effective process. With the potential for varying degrees of impact, it’s crucial to get your program up and running quickly and efficiently to be well equipped against liabilities. 

Implementing your IT risk management plan and executing a risk mitigation strategy based on your risk assessment report are the last steps in the process.

Senior management uses the risk assessment report to influence the methodology they use to mitigate the identified risks with these options:

Assumption/Acceptance

The assumption option means to accept a potential risk that may occur and continuing with the current system in place. Or instead, implementing a control to lower the risk to what senior management deems acceptable. Your risk assessment policy will define which risk scores must be mitigated versus which can be accepted. 

Avoidance

Risk avoidance is defined as eliminating the risk cause altogether by no longer using certain aspects of the IT system or shutting it down when risks are discovered.

Limitation/Mitigation/Treatment

You can limit risk by adding controls that reduce the detrimental effects when impact occurs.

Planning

Risk planning is putting a risk mitigation plan in place that prioritizes, implements, and maintains controls.

Research and Acknowledgement

Through research and acknowledgement, you can reduce the risk of loss by noting the flaw in the system and researching controls to fix it.

Transference

Transferring a risk can be done by using other options to compensate for the loss, like purchasing cybersecurity insurance.

A combination of these options will likely be chosen to handle the risk associated with the company’s mission and objectives. A risk mitigation strategy is then executed to put controls in place as needed and implement a safeguard plan for when threats arise.

Risk Mitigation Strategy

A risk mitigation strategy is then executed to put controls in place as needed and implement a safeguard plan when threats arise. The steps are described below.

  1. Prioritize control implementation actions based on risk levels.
  2. Evaluate recommended controls on feasibility and effectiveness for your organization’s operations and IT system.
  3. Conduct cost-benefit analysis that describes the cost and benefits of implementing or not implementing the controls.
  4. Have management select the most cost-effective control(s) for reducing risk to the organization’s mission.
  5. Assign the responsibility of implementing controls to the appropriate parties (employees or contracted vendors).
  6. Develop a control implementation plan to outline the prior information as well as start date, targeted completion date, and necessary maintenance requirements.
  7. Implement selected controls, execute the safeguard implementation plan, and evaluate residual risk. 

Key Roles and Responsibilities 

There are several roles in a company that typically handle or touch risk management. Individuals and their teams should have clear expectations and knowledge of their duties for when a situation arises. This will help fast track solutions, eliminate potential enduring complications, and assist in limiting the impact to the organization.

We outline these assignments to give you a general idea of who to include in your risk management planning, implementation, and execution.

Senior Management

Senior management must ensure that necessary resources are given so an effective risk management process can be created and implemented. They review the results of the performed assessments and use it to influence their operational decisions. An effective program requires the support and involvement of senior management to be instituted company-wide.

Business and Functional Managers

The cooperation of business and other functional managers is necessary to minimize the likelihood of threats exploiting a vulnerability or from vulnerabilities arising. Actions like ensuring proper security training and that protocol is followed by their teams helps to mitigate risk throughout the organization.

Security Team 

The security team includes: system and information owners, security officers, IT security practitioners, and other security SMEs. They are responsible for proper implementation of controls into IT systems, evaluating new risks as the environment changes using the risk management process, and much more. 

Together, they are the backbone of the IT risk management process and security program.

Risk Management Software

When purchasing risk management software, you want to ensure that it has the capabilities your company needs to be proactive about risk and resolve issues as quickly as they arise. 

Creating a risk register enables you to identify risks, manage your program efficiently, and have cross-functional alignment with other teams. It can be a time consuming process to gather all this information in one place. Drata’s Risk Management module comes with a library of threat-based risks that identifies them for you and builds a risk register based on various frameworks like HIPAA, NIST SP 800-30, and ISO 27005.

At Drata we believe that strengthening your security posture requires a holistic approach that integrates risk management and regulatory compliance. Book a demo to see how Drata can help you manage risk and automate your journey to compliance.

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