Where to Start with Your Risk Management?

Understanding and identifying risks is essential to a well-built and sustainable business. Being in touch with the threats and the ways to counter them is essential for a safer working environment.

 

Risk Management is the most important instrument for Information Security Governance.  It provides a framework for assessment and successful management of risks. Sadly,  this is something  usually poorly done or even neglected completely by a surprisingly large number of organizations today. Risk management allows companies to devise and implement economically viable risk counter-measures. All activities involve risks, which are in turn a derivative of threats, vulnerabilities and impact. Properly identifying weaknesses and assessing the associated risks is essential, and pays off in the long run.

What are the methods applied?

There’s a wide spectrum of methods used for Risk Management today. For the most part, these methods consist of the following elements, performed, more or less, in the following order:

 

  • Identify and list assets
  • Identify and characterize threats before they appear
  • Assess vulnerability of critical assets to specific threats
  • Determine the possibility of a risk and the consequences it may bring
  • Identify ways to reduce or even remove risks
  • Prioritize measures based on a strategy

the general principle

Looking at the ideal Risk Management, a prioritization process is followed whereby the risks with the greatest loss (or impact) and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order.

In practice on the other hand,  the process of assessing overall risk is complex. On one hand, we have to consider the resources used to mitigate between risks a high probability of occurrence but lower loss. On the other, we have the mitigation resources for risks with high loss but lower probability of occurrence. Balancing between these resources can often be mishandled.

INFORMATION SECURITY RISK MANAGEMENT

 

 

NEXT are the choices for addressing assessed risks

The first one is acceptance – sometimes it is cheaper to leave an asset unprotected to a specific risk instead of spending the money required to protect it. Acceptance cannot be done without considering the risk itself and all options possible.

 

Second is mitigation – involves deciding on implementation of countermeasures aimed at lowering the risk to an acceptable level (as illustrated with the algorithm below). One should keep in mind, it is not possible to mitigate the risk entirely.

 

Next is transference – this is usually referred to as the “insurance scenario.” A conscious decision to hire an external company to assume the risk in return for remuneration. Transference of risk is also achieved through outsourcing, with its own risks.

 

Finally, avoidance – when risks discovered are high or extreme and cannot be easily mitigated, avoiding the risk (and the project altogether) may be the best option. The math here is simple: if you stand more to lose from mitigating the risk than what you will earn from this project, then avoidance is the way to go.

WHY DO IT?

Risk Management is at the heart of Information Security, because it provides an important instrument to balance and rationalize countermeasure expense with business success and expected Return On Investment (ROI).

 

When opting for one of the choices for dealing with risks, one has to take into account something called the Annualized Loss Expectancy (ALE), which is the expected monetary loss that can be expected for an asset due to a risk over a one year period. ALE is derived from Single Loss Expectancy (SLE) multiplied by the Annualized Rate of Occurrence (ARO) and can be used to directly analyze cost vs. benefit.

 

Regarding Risk Management, if spending on threat countermeasures is considerably higher than that risk’s ALE, then it may not be worth the investment. Or, in other words, one must evaluate the positive impact countermeasures will have on ROI by making sure the expense is not larger than the ALE.

 

Risk Management is meaningful only when decisions are made based on meaningful risk analysis, which in turn involves preliminary processes such as penetration testing, vulnerability assessment and objective audit.

the stages in the risk management process:

 

Preparation:

 

  • Obtain necessary data access to business process and operations structure
  • Identify and notify participants and decision-makers
  • Identify and distribute scope, objectives and requirements

 

 

Identifying risks:

 

  • Ensure participation of appropriate staff and management in risk assessment
  • Review scope, objectives, and process
  • Conduct risk identification, consolidate related risks

 

 

Assessing & prioritizing risks:

 

  • Identify and obtain consensus on impact, severity, probability
  • Identify time window when risk could occur
  • Assess and prioritize all existing risks

 

 

Deciding on control options:

 

  • Identify mitigation options for each risk
  • Identify risks to be accepted, avoided, transferred, or mitigated
  • Assign plan operative instructions for avoided, transferred, or mitigated risks
  • Establish/update risk database

 

 

Establishing mitigation plans

 

  • Develop draft mitigation plans and resources
  • Obtain manager review and approval of mitigation plans
  • Ensure mitigation plan is funded, directed, and integrated

 

 

Implementing mitigation plans

 

  • Finalize Risk Management plan
  • Devise mechanism to monitor triggers, cues, and mitigation
  • Implement mitigation as authorized, funded, and scheduled
  • Provide reporting on mitigation results and progress

 

 

Monitoring mitigation plans

 

  • Periodically review mitigation plan results
  • Stop or modify mitigation plans and resources
  • Retire risks when appropriate
  • Update risk database for mitigation process and retirement