Why your Organization Must Conduct an Annual Risk Assessment

Oct 28, 2022 | Tech Tips

risk assessment
By Mary Grlic

Technology makes our life so much easier. From accessing our emails anywhere to finding the nearest gas station using our mobile phone, technology is an essential. However this convenience may come with a cost. There are a lot of risks associated with technology, and without proper risk management, you might be putting a lot on the line. Every organization must conduct a yearly risk assessment to minimize IT threats. 

What is IT Risk?

IT (information technology) risk is the possibility of an unexpected threat or malicious act that may compromise your digital data’s confidentiality, integrity, and/or accessibility. Like with any risk, the consequences of such an event can be harmful to your organization’s security and privacy. An information risk can occur due to a human error, natural disaster, systematic error, or tech attack. To combat this possibility, it is important to have proper IT risk management.

Risk Equation

Threat x Vulnerability x Consequence = Risk

A threat is basically whatever may cause damage in the digital world. Threats may be within your organization or from an outside source. Some threats may arise from human error or malicious software. 

Next, vulnerability has to do with any shortcomings within an information system. For example, an outdated software or poorly protected data may threaten your security. SImilarly, any gaps within a security program may make your organization more vulnerable to data exploitation.

Finally, the harm caused by a threat and your system’s vulnerability is considered the consequence. This consequence may be more harmful depending on the relevance or importance of any data that has been risked. 

IT Risk Management

Also called information security risk management, IT risk management uses risk management techniques, policies, and procedures to prevent information system threats. With the proper management tools, organizations can identify any potential vulnerabilities within the IT network to prevent cyber attacks and minimize data threats. Organizations may identify risks by conducting a risk assessment, hiring a third party service for a risk screening, and investing in risk-analysis software or tools. 

A successful risk management program complies with regulations. Your organization’s program should focus on ways to control and present risk as well as maintain awareness of legal and requirements. 

Steps in IT Risk Management

Identification

Risk identification is the process of recognizing and assessing any potential threats. This may include security risks such as malware, viruses, natural disasters that may damage hardware, and any other risk that can harm a business’ successful operation.

Analysis and evaluation

Risk analysis evaluates the possibility of a threat. By analyzing and evaluating the situation, organizations can better gauge the cause and effects of any risk.

Mitigation

Risk mitigation is the set of processes and procedures that are used to prevent threats and protect any properties. These strategies can be used to monitor any risks that an organization experiences. 

IT Risk Assessments

An annual risk assessment is necessary for all organizations. With the right management tools, a business can mitigate risk and prioritize their success. A good risk assessment plan takes company size, location, and complexity into account.

What a Risk Assessment Should Look Like

IT risk assessments should answer any questions that pertain to network protection. The most effective approach includes both qualitative and quantitative aspects so that your organization can focus on financial, human, and productivity impacts of risks. Assessments might look similar to the steps taken in IT risk management (as mentioned above).

Understand your Organization

Your organization should first make sure that there is a list of all informational devices and assets. This tells the company what is prone to or vulnerable to threats. Identify any classifications for these assets. For example, systems may be public, internal, confidential, or restricted. This way, your organization can better identify the level of security and sensitivity for certain data sets. 

Identify Threats

Next, identify threats. What can possibly harm or pose danger to your information? Identified threats come in many forms and may include cyber attacks like hacking, malware, and ransomware (and many more). Think about any risk for an organization – whether it be as (seemingly) small as a human typing error or huge like a network failure. Similar to threats, identify vulnerabilities in your system. A weakness is anything that could lead to a breach of security, like an old operating system. Typically these threats can be avoided (for example, if you update your OS) to make your organization stronger. Also, take note of physical vulnerabilities. 

Implement Controls

Organizations should then implement any controls and measures to mitigate threats and vulnerabilities. Controls are any methods that is used to protect your organization. Some technical controls include updated computer software or better data encryption. Controls can be non-technical as well, like new security policies within a company.

Analyze the Likelihood and Impacts

Next determine how likely a risk is to occur and how it will affect your system. Depending on the way an organization operates, different scenarios will hold a different level of risk. For example, healthcare facilities store data in a certain way as per HIPAA. These regulations protect patient health information to put such data at a lesser risk. It is not as likely that a breach will happen in a secure healthcare database. If a medical organization has good cyber protection (backups, encryption, etc.), the effects of a breach may be less consequential. However, good management practices take priority. Without a plan, the threats to a system are probably a lot worse. So, make sure that your organization understands and makes risk assessments a priority. 

NIST Guidance for Cyber Risk Assessments

National Institute of Standards and Technology (NIST) released risk assessment guidelines to provide guidance to organizations who are starting to do risk assessments. NIST additionally provides a Cybersecurity Framework to help all businesses understand and reduce cybersecurity risks. To protect cyber data, the United States Congress ratified the Cybersecurity Advancement Act of 2014 (CEA), which provides an ongoing relationship to “improve cybersecurity” and “strengthen cybersecurity research and development.” Furthermore, the NIST Framework includes a common understanding of cyber risks to all organizations.

NIST is a great resource for industry standards when it comes to cybersecurity and network protection. The entire Guide for Conducting Risk Assessments details the risk management process, risk assessment, key risk concepts, and application of assessments. There is information about preparing, conducting, sharing, and maintaining the risk assessment as well. 

Why it is Important

Avoid Data Breaches

One of the best ways to avoid a data breach is to conduct a risk assessment. Unfortunately, data breaches can be harmful to your organization’s reputation, finances, and productivity. Therefore, it is best to avoid data breaches with risk assessments.

Stay Compliant

Help your organization stay up to date with state and federal guidelines. For example, in New York, the SHIELD Act details new safeguards for businesses to implement to protect information from unauthorized access. Organizations can conduct a risk assessment to make sure that they are following these guidelines. Facilities that comply with regulations like HIPAA or PCI DSS will also benefit from a risk assessment.

Avoid Downtime

Understanding risks before they happen allows your organization to take action.

Prevent Data Loss

By keeping up with yearly risk assessments, your company can avoid any data corruption. Such loss can impact an organization in many negative ways. For example, you can possibly lose unrecoverable information if you do not properly assess risks. 

Reduce Long Term Costs

By understanding threats and vulnerabilities, you can create strategies to protect your organization. This can help financially in the long run. For example, perhaps your organization will not have to pay a lot of money to get back lost data as long as a backup is stored correctly. 

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