Risk is a big factor that all businesses need to deal with. Companies face many risks, from cyber-attacks and data breaches to financial risks and loss of intellectual property. By proactively managing these risks, businesses can protect themselves and maintain trust of their customers.
If you are looking to automate your risk management process within your organization, this article is for you.
Risk is the possibility of loss or damage, typically measured in financial terms, associated with a particular action. In other words, it’s the uncertainty of potential negative consequences that arise from an action. Risks can come in many forms: financial, operational, compliance, strategic, reputational, etc. Managing risk involves identifying, assessing, and prioritizing potential risks and implementing strategies to mitigate or avoid them.
What is risk management?
Risk management is identifying, assessing, and prioritizing potential risks to an organization or individual and taking steps to mitigate or minimize their impact. Risk management aims to reduce the negative consequences of unexpected events and maximize the potential for positive outcomes. This involves assessing potential risks, evaluating the likelihood and impact of each threat, and implementing strategies to mitigate or manage those risks.
Execution of risk management includes a range of activities, from risk assessment and analysis to developing contingency plans and implementing risk control measures. Effective risk management helps organizations and individuals make informed decisions, allocate resources effectively, and respond effectively to unexpected events.
Risk management is important because it allows businesses to plan and take action when needed. This means that companies are better equipped to handle unexpected events that could significantly impact their operations or financial situation. Managing risk involves identifying the risks associated with a particular decision and then determining the appropriate actions to minimize those risks. It’s about mitigating problems in advance, so they don’t get out of control.
Risk management is essential for several reasons:
- Protects against loss: By identifying and managing potential risks, organizations can reduce the likelihood of unexpected failures and minimize the impact of those that do occur.
- Improves decision-making: Risk management provides organizations and individuals with a structured approach to assessing and considering potential risks, which leads to better-informed decision-making.
- Increases efficiency and effectiveness: Organizations can allocate resources more effectively by identifying and mitigating risks.
- Improves communication: Risk management aid centralized touchpoint for all risk-associated data, which surely enhances communication within the organization.
- Supports regulatory compliance: Risk management is a legal requirement in some industries, and failure to manage risks adequately can result in legal penalties.
Why should you automate Risk Management?
Managing risk manually can be cumbersome as humans are prone to errors, and it is challenging to identify risk ownership and track the progress of remedial action on the risk. Organizations can leverage technology adoption to automate the entire risk management process. Automating risk management allows you to cater to business-based contexts and all technical activities related to IT governance and cybersecurity.
Automating risk management ensures that all critical processes are fully integrated and aligned to produce the most effective business process. An effective automated risk management system will help identify real-time visibility into the process giving valuable insights into potential or existing risks.
How to automate Risk Management?
Risk automation can assist you in resolving risk management and compliance issues while fostering better business alignment and critical process maturity across compliance management, governance management, disaster recovery, third-party, and so on.
Scrut’s risk management module dashboard provides an overview of your organization’s overall risk posture, as shown in the screenshot below. The platform enables organizations to identify, assess, and mitigate risks and strengthen their security and compliance posture.
Identify risk & build a risk register
Understanding the scope and nature of your organization’s risks is the first step in automating risk management. Based on that, you can work to reduce the risk’s impact.
Now, let’s understand this with the example of our Scrut platform. Scrut allows you to create a risk register in minutes. The platform’s risk library contains common risks encountered by various organizations. Below is the screenshot of Scrut’s risk register.
To make your risk register, click the create new.
The platform allows you to create your custom risks. You can use the “Add Custom Risk” option.
Scrut allows you to choose from seven risk categories. You can filter categories based on your needs, as shown in the screenshot below.
In the end, you will have compiled a list of all the risks associated with your organization. Scrut also automatically maps these risks against different compliance frameworks and controls, as shown in the screenshot below.
Assess risk
The next step after identifying risks is to assess them. The identification of hazards that could have a negative impact on an organization’s ability to conduct business is known as risk assessment.
Now, let’s understand Scrut’s risk assessment. Scrut allows you to begin risk assessments in minutes by removing the time spent creating and mapping risks and threats. Risk scores are updated continuously and in real-time with Scrut. The platform calculates your risk score based on events’ likelihood and impact.
Risk = Likelihood * Impact
The screenshot below shows an example of employee separation management risk.
The likelihood of this event = 4 (high)
The impact in case the event occurs = 3 (moderate)
Thus, the inherent risk associated with this event is also moderate = 12 (moderate)
Likelihood (4) * Impact (3) = 12
In the end, the score ranges from 0 to 25. Here is a table that helps you interpret the final score.
Scrut also helps you visualize your risks with a heatmap, as shown in the screenshot below.
Risk Treatment
After risk assessment, the next step is to work on the risk. Risks can be evaluated in both inherent and residual forms. Many times, it is not possible to eliminate the risks. What remains after taking all possible risk-reduction measures is referred to as residual risk.
A risk can be treated in four ways:
- Avoid: To remove the possibility of risk by correcting an error.
- Transfer: To take action by transferring the risk to another entity.
- Mitigate: To take action to reduce the potential impact of a risk by putting in place mitigating controls.
- Accept: Sometimes, you have to accept the risk because the cost of treatment is greater than the damage caused by the risk.
Scrut simplifies your risk exposure by identifying and mitigating major risk areas.
Risk Transfer example:
Risk Acceptance example:
Risk Avoidance example:
Risk Mitigation example:
Users can also create mitigation tasks, as shown in the screenshot below.
You can refer to our website for more details on how Scrut helps manage risk.
How To Choose Risk Management Software?
The best way to automate risk management is by using a risk management software. Risk management software assists you in identifying, assessing, and documenting risks associated with various business processes and efficiently managing risk mitigation tasks.
The parameters that you should consider when choosing risk management software are listed below:
- One of the primary applications of risk management tools is to assist you in identifying risks. Your risk management tool must continuously scan data sources to identify emerging risks.
- Your risk management software should help you with risk assessment.
- The assessment of risks provides information about how various risks affect your organization. As a result, users can prioritize which risks to address first.
- An efficient risk management tool should also help with risk treatment plans.
- Another essential factor you should consider while selecting a risk management tool is employee security awareness training.
- Effective risk management software should provide continuous cloud monitoring. Scrut, for example, automatically tests your cloud configurations against 200+ cloud controls to ensure a strong InfoSec posture.
Click here for more details on how to choose risk management software.
