This chapter is from the book
This chapter is from the book
This chapter is from the book
Risk Assessment
Risk assessment is the process of analyzing identified risks to evaluate the likelihood of their occurrence and their potential impact. This evaluation is required for prioritizing risks and formulating strategies to mitigate them effectively.
Risk is the possibility of, or exposure to, loss or danger from a threat. Risk management is the process of identifying and reducing risk to a level that is acceptable and then implementing controls to maintain that level. Risk comes in various types. Risk can be internal, external, or multiparty. Banks provide a great example of multiparty risk: Because of the ripple effects, issues at banks have effects on other banks and financial systems.
To determine the relative danger of an individual threat or to measure the relative value across multiple threats to better allocate resources designated for risk mitigation, it is necessary to map the resources, identify threats to each, and establish a metric for comparison. A business impact analysis (BIA) helps identify services and technology assets as well as provides a process by which the relative value of each identified asset can be determined if it fails one or more of the CIA (confidentiality, integrity, and availability) requirements. The failure to meet one or more of the CIA requirements is often a sliding scale, with increased severity as time passes. Recovery point objectives (RPOs) and recovery time objectives (RTOs) in incident handling, business continuity, and disaster recovery must be considered when calculating risk. BIA, RPOs, and RTOs are covered further later in this chapter.
Risk assessments should rarely if ever be a one-time event for an organization. The frequency with which these are conducted, however, can vary depending on various factors regarding the organization’s risk landscape, regulatory requirements, and level of change across their environments. For example, a small, stable private organization may find an annual risk assessment sufficient. On the other hand, a large, dynamic organization operating across high-risk environments, where emerging risks may pose challenges, should opt for more frequent assessments. Generally, risk assessments are conducted adopting the following frequencies:
Ad hoc
One-time
Recurring
Continuous
Ad hoc risk assessments are conducted in response to specific incidents or triggers. For example, if a company encounters a significant security breach, it would conduct an ad hoc risk assessment to understand the scope and severity of the risk posed by the breach. Ad hoc assessments can also be made if a new business opportunity arises, and the company needs to carry out an immediate assessment of the associated risks.
One-time risk assessments are often conducted for specific events or changes. For instance, when introducing a new system, launching a new product, or during a business merger or acquisition, a company would conduct a one-time assessment to understand the potential risks associated with these activities. A one-time assessment helps organizations anticipate and mitigate risks associated with the change.
Recurring assessments are conducted at regular intervals, such as annually, semi-annually, or quarterly, depending on the organization’s requirements and nature of the industry. Recurring risk assessments allow organizations to stay on top of any changes to their risk profile. The frequency depends on the level of risk an organization faces and the rate of change in its external environment, as well as internal factors such as a change in business strategy.
In a continuous risk assessment approach, the risk environment is monitored in real time, and risks are assessed on an ongoing basis. This approach relies on established key risk indicators (KRIs) to evaluate the company’s risk profile. When thresholds are breached, risk assessments are triggered. As with other approaches, a continuous risk assessment approach requires balancing risk visibility against resource commitment, but it may provide the most complete and timely understanding of risk in more volatile environments.