Businesses today are required to function in a constantly changing risk environment. From security breaches to compliance issues, political unrest to aligning social and environmental practices with business goals, reducing emissions and sustainable growth, they need to brave it out. For C-suite executives with a paucity of time and resources, weathering this storm is easier said than done.
Each of these risks can potentially cause major disruption, affecting profits and brand reputation. As the corporate world becomes more digitized, organizations need to rethink their security strategies. However, setting up risk management is a time- and cost-intensive task that can be quite daunting for many.
For a risk management strategy to succeed it is imperative that risk professionals and security teams have a thorough understanding of all the elements that affect their risk posture. To devise a justifiable blueprint, they will require to focus on three crucial factors:
Understanding context
Risks do not operate in a silo. The same risk may impact different companies in different ways. For instance, the pandemic disrupted businesses across sectors. While industries like hospitality, tourism, manufacturing, and retail were ravaged, others like e-commerce saw massive growth.
Both situations called for unparalleled risk and security considerations. Understanding the context in which the business operates aids organizations in better identifying and analyzing threats and working out ways to alleviate them.
Context can take various forms. It can have a direct correlation with business goals, or it can be related to time in terms of meeting targets as per schedules. Context can also be technical depending upon the gravity of situations. And it can be in relation to the location or even the risk itself.
Let’s look at the sectors impacted by COVID-19. Manufacturing companies were unable to achieve their production targets. Meanwhile, e-commerce companies were struggling to handle the supply chain effectively and keep up with demand. Both the sectors required effective strategies to navigate their specific circumstantial challenges.
The first step for an enterprise is to understand its business goals and objectives, its stakeholders as well as the overall extended ecosystem within which it operates. Risk mapping needs to be done against this background for it to be more impactful.
Co-relating risks to outcomes
After the context is set, the next step is for the organization to understand the risk ecosystem. Risks can be largely categorized as compliance risks, accidents, threats to security, and environmental or economic factors.
Each of these risks may have serious effects. However, it is not enough to simply identify the possible threats. Risk and security management teams must be able to create a direct link between each threat and business outcomes.
As such, every measure to manage risks is an investment and must be endorsed by all the stakeholders. For instance, spending on resilience and business continuity solutions is a sound risk management strategy. However, the decision cannot be made merely based on general recommendations.
Organizations need a clear understanding of how their functioning could be affected if they do not have a resiliency and continuity solution in place. They need to look at the ramifications in terms of revenue impacted, downtime, missed targets, and customer relationships. And this must create the premise for the decision on investing in the solution.
Furthermore, one size-fits-all global compliance and management solution does not work because not all risks are equal. Risks need to be graded as low, medium, and critical, based on their impact and the potential outcome.
Evaluating the cost of risk management
The impact of breaches is not limited to just the loss of crucial data. Every data breach has a direct impact on an organization’s profits, the value of shares, brand image, and reputation. As per IBM’s 2022 report, the global average cost of a data breach has hit $4.35 million. As many as 83% of organizations surveyed, experienced more than one data breach.
While the costs are immense, the impact on reputation, customer trust, and even share value is immeasurable. Investments in security and data protection solutions are expensive and call for due consideration.
When it comes to assessing possible solutions for stricter controls, organizations must look at varied factors like customer satisfaction and trust, and the impact on share values and reputation. Here comes the cyber risk quantification tool that presents risk in monetary terms and can help organizations justify and prioritise cyber security budgets as well as optimise the company’s cyber insurance. It is the obvious next step in the GRC program of any organisation wanting to improve its cyber security governance.
In the modern business landscape, security and risk management are pivotal topics of discussion in most boardroom meets. What organizations need today are integrated data models. These comprehensive data models will help link business objectives, business units, requisites, risks, and people. Such models will bring in more context for impact mapping and risk assessments, enabling security professionals as well as executive management to align their organization’s goals with investments.
(The author is Mr. Shankar Bhaskaran, Managing Director – India, MetricStream and the views expressed in this article are his own)
