Tune Up Your Risk Assessment With These Five Steps

Risk is part of doing business, and try as you might, there is no way to completely evade it. Even the most careful organizations encounter risk. Success is less about avoiding risk altogether and more about identifying and navigating the risk landscape to evade and mitigate incidents.

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Not only is risk assessment and response crucial for doing business, but it’s also a requirement for many organizations. Governance, risk, and compliance (GRC) models are designed to address risks crucial to an organization and the applicable laws and regulations.

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Even if you have a risk assessment and mitigation process in place, chances are, it can be fine-tuned. Improving risk assessment needn’t be a monumental task. Taking a deliberate approach and keeping a few things in mind can dramatically improve your organization’s risk profile.

Start On the Right Foot: Don’t Underestimate the Power of the Right Team

This could be a step, but it’s substantial - foundational, even - enough to stand alone outside this list. Never underestimate the power of getting the right people involved. The team you rely on can make or break your risk assessment process.

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Ensure you involve the appropriate people, and that doesn’t mean simply filling roles. Building the right team requires a range of viewpoints and perspectives on risk and insights from a diverse range of stakeholders. That includes board members, the executive team, department heads, and operating business units.

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Paramount to building a high-functioning team is encouraging open, constructive dialogue amongst all team members. Effective project collaboration requires disparate perspectives, even if (especially if) they challenge the typical idea. When you build your team, create a safe space around them for sharing, debate, and innovation. This can be challenging when the room contains members from all layers of the organization, so the executive and board-level members should set a precedent.

1.??Take a Systemic Approach to Risk Identification

Start with risk identification. This should always begin with the end in mind: to uncover and address all risks across the organization and to improve mitigation tactics.

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Design a strategy to address risks and ensure this includes compliance and governance. Review the goals and objectives of your organization, including budgets, resources, and limitations. Then, consider two approaches:

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·??????A top-down approach starts with the organization's primary functions and then examines the processes and potential risks that could affect these processes by listing their supporting conditions and efforts.

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·??????Conversely, the bottom-up approach means identifying known threats, however unlikely the chances are of them coming to fruition – such as natural disasters, fire, security breaches, supplier failure and political or widespread economic instability – and evaluating their potential impact on the business should they occur.

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The outcome of this step should be a profile of your valuable assets and resources, along with an assessment of the impact on them of an incident. This will include the source of threats to those assets, the potential scale of internal disruption, along with identifying the vulnerability and conditions that enable this risk.

2.??Categorize, Evaluate Severity, and Prioritize Wisely

Now that you have a comprehensive list from your risk assessment, it’s time to categorize these threats. Categorization will help you to understand the severity of the risks, the departments required to support mitigation, and prioritize according to impact.

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Experts have identified four primary risk categories:

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Strategic risk affects reputation, customer relations, brand image and awareness, etc.

Financial risk is related to tax, liability, recovery, markets, etc.

Governance and compliance risks are those related to regulations, ethics, best practices, etc.

Operational risk means threats to data security and privacy, workers’ health, supply chain and logistics, natural disasters, etc.

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After categorizing, ensure you align each risk with respective departments and create a ranking system based on the business impact should these risks become incidents. This list should also include the likelihood of an event.

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Note: it’s crucial also to consider the business impact of disruptive change. Risk mitigation sometimes means changing business processes or workflows that may have reverberating effects.

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3.??Mitigate, Implement Changes, and Record Processes/Results

Mitigation and implementation is a category in and of itself and will vary depending on the nature of the risk. Mitigation actions are numerous and can consist of anything such as redundancy of systems and multi-skilling to avoid downtime to cyber insurance to reduce the financial fallout of an incident. Whatever steps you take to mitigate risk, ensure your workflow includes keeping thorough records of actions and results. This will not only help you learn from and replicate successes but learn from and not replicate mistakes.

4.??Review, Report, and Reassess

An integral part of the risk assessment process is reviewing changes and outcomes, reporting to stakeholders, and reassessing the approach(es). In some cases, you may also need to inform external stakeholders, such as partners and third parties. Ensure you understand the risks' root causes and report comprehensively on causes and outcomes.

5.??Continuously Monitor and Address Risks

The risk assessment process is not complete when you do a full sweep and take action. Now that you’ve designed and learned from the process, you must continuously monitor and assess risks. The good news is that once you’ve done it once, you’ll have an easier time incorporating these steps into your business plans. Armed with this new understanding, consider risks in decision-making processes.

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Note: don’t forget to look ahead. The lessons from this risk assessment journey can help you not only recognize but anticipate future risks. The best mitigation is proactive prevention.

Stay Ahead of the Curve

With well-designed strategies, a mind on risk, and the right strategic team, you are armed to protect your organization from preventable incidents. The risk landscape is ever-changing, and staying ahead of the curve means ongoing learning and upskilling. Find out how Certified in Governance, Risk and Compliance and (ISC)2 can help you discover your certification path, create your plan and acquire the knowledge and skills to effectively mitigate risk in your role. Download the Ultimate Guide to the CGRC.