We all face risks in our everyday lives, and it is seen as a part of every human endeavour. Some of these risks may seem unimportant, whereas others cause a serious difference in the way we live our lives. Needless to say, it is not only individuals who are subject to risk. Organizations are operating in a risk-filled business environment which means that their plans will not always play out as expected. Given that, organizations seek to manage risk exposures as much effectively as possible without sacrificing their strategic business objectives. So managing the risk, in a way that is practical and sustainable, is important. In this expert’s guide, we will have a deeper look at integrated risk management, covering its main focus as well as elements of it.
Definition of risk management
In simple terms, a risk is the chance of something happening, like uncertain future events, that will provoke a negative effect. Risk management, on the other hand, pertains to a process of comprehending and controlling the risks that the entity is inescapably subject to, in striving to accomplish its corporate objectives. Eventually, risk management can be regarded as a collection of actions that are incorporated within the broader context of an organization, which are aimed towards evaluating and calculating likely risk situations and finally, formulating the plans necessary for managing them.
Types of risk
Risks may have positive or negative consequences or may simply lead to uncertainty. Hence, risks may be associated with an opportunity or the existence of uncertainty for an organization. Actually, there is no such thing as a right or wrong subdivision of risk. Yet, we divide them into 2 main categories: hazard risks and opportunity risks.
It is highly likely that some risks only result in negative consequences. These risks are known to be hazard risks, and these may be regarded as operational risks. A common example of a hazard risk experienced by most organizations is that of theft.
At the same time, organizations purposely take risks, particularly commercial risks, and in doing so, they hope to achieve a positive return. This kind of risk can be seen as an opportunity risk. Usually, an organization will show a particular appetite for investment in such risks. Although opportunity risks are taken with the intention of having a good outcome, this is not guaranteed.
One may want to understand the distinction between hazard and opportunity risk, so we believe the example of using new software could be a perfect example. As a matter of fact, the activation of a computer virus is a hazard risk that will leave no benefit to an organization. So, normally the organization decides to upgrade its software. The selection of new software is an opportunity risk, which, after all, will help the organization attain better outcomes by installing the new software. again, if that software fails to operate properly and exposes the organization to cyber risks, the opportunity benefit will indeed not be supplied.
Recognizing new risks
Successful risk management today may start with governance, risk, and compliance, nonetheless it must not stop there. More and more organizations step into digital transformation, and thus, the business risks grow exponentially, so does the need to manage them in a more responsive manner. Today, the need has progressed from better handling compliance risk into better managing overall risk. New technologies create new opportunities, but the following two risks should not be overlooked.
1. Digital transformation risk
The first risk is digital transformation, whereas the second risk comes from third-party relationships. In regard to the former, it is obviously a strategic priority today and the need of the hour, but it widens the exposure to cyber risks. The main takeaway here is that for an effective digital environment to meet the desired objective, it is highly essential to contemplate risk areas beyond traditional risk.
2. Third-party risk
Third-party relationships, on the other hand, help companies meet customer demands while remaining competitive. There is nothing wrong with that, but they hold the potential to come with a risky dark side. The bad news is that the challenge of third-party risk is significant, yet the innovative solutions from a technological standpoint stay insufficiently improved. Having this in mind we have asked our expert to hold a free webinar – Third-Party Security Risk Management: Key Tactics to Consider – on October 27, where we will reveal the best practices in managing vendor cyber security risks and illustrate third-party risks from the vendor perspective. Make sure to register now so you do not miss out.
What is integrated risk management?
Risks and their management are intrinsic to all organizations, no matter their size. In reality, inadequate and lack of management of such risks can potentially bring severe consequences. Anything that could adversely affect an organization, whether it be an organization’s competitive position or strategic growth, must be anticipated, critically evaluated, and acted upon. With integrated risk management, organizations can obtain a structured view of the risk they have always wanted. Integrated risk management refers to a set of processes supported by a risk-aware culture and enabling technologies, that boost decision making through an integrated view across the dots between all types of risk.
It goes without saying that areas of risk within organizations keep growing beyond compliance risk only. Given that, the need to see risks as an integrated whole becomes a prerequisite. Obviously, there is a reason for this: it is not operationally sustainable to manage risks separately, utilizing several risk management platforms. Hence, organizations today should be able to use business processes to maximum advantage to establish a comprehensive picture of risk that intersects operational functions. Simply put, integrated risk management is to help organizations recognize, assess, and effectively manage the uncertainties that matter most to them.
Is integrated risk management the new governance, risk, and compliance (GRC)?
Well-established governance, risk, and compliance (GRC) strategy offer numerous benefits such as optimized decision-making, greater information quality, and less fragmentation among departments. Certainly, there are some subtle differences between integrated risk management and GRC. Gartner distinguishes integrated risk management from GRC by proposing GRC as a principally compliance-focused, utilized by technical practitioners. Integrated risk management, on the other hand, is risk-focused, and primarily used by business executives.
So, is integrated risk management a new paradigm? We already know that both GRC and integrated risk management manage risk and address compliance requirements. Both bank on thorough governance documentation to be effective. After all, both help organizations perform an integrated process architecture to reinforce coordination and collaboration across risk, compliance, and business functions. Without those essential elements, the deployment of these concepts will result in average results. Practically speaking, either a GRC or integrated risk management tool can be utilized to manage a cyber security program from strategic to operational aspects.
Elements of integrated risk management
Below are the four elements of integrated risk management:
- Developing the corporate risk profile: building the risk profile at the corporate level is planned to investigate threats as well as opportunities in the context of an organization’s objectives and available resources. Besides that, determining and evaluating the existing departmental risk management capability is another crucial step towards developing the corporate risk profile.
- Building an integrated risk management function: this refers to setting up the corporate infrastructure for risk management that is intended to increase understanding and communication of risk matters internally, to provide clear direction. To be efficient, risk management must be aligned with an organization’s overall objectives.
- Practicing integrated risk management: implementing a holistic risk management approach demands a management decision and sustained commitment. It is also designed to supply the realization of organizational objectives. Practicing integrated risk management makes sure that the risks are clearly understood, managed, and communicated.
- Ensuring continuous risk management learning: lastly, continuous learning is essential to more proactive decision-making, as it contributes to enhanced risk management, and strengthens the organizational capacity of risk management. A supportive work environment is a vital component of continuous learning the organization s should foster. An environment that motivates people to learn and value knowledge or new ideas as a vital aspect of the creativity that results in innovation
The big picture of integrated risk management
In this blog post, we discussed why integrated risk management is important. The world has indeed changed, and new risks seem to lurk around every corner. We at Swiss Cyber Forum are aware of the situation that dealing with this constantly changing ocean of risk demands new approaches and methods. Our intention is therefore to help organizations view their risks through new approaches so that they can better align their strategic goals with operational objectives.
Swiss Cyber Forum values education. We are making use of existing capacities and trends to increase public awareness regarding cybersecurity, and at the same time facilitating communication about cyber risks. To learn more about cyber security, keep an eye on our webinars, masterclasses, and other exclusive events. Also, do not forget to have a look at our CISO Interview Series, our new info-series where we interview with Chief Information Security Officers from different business sectors.