Various institutions across industries have realized the importance of managing organizational risk. It is considered to be a very important element in the company’s security system. 69% of executives are still not sure of their existing risk management policies and practices. They do not know if the policies they have in place will be enough to meet future needs in mitigating risk.
A risk management framework creates an effective means to help companies select the required security controls which are deemed necessary to protect the organization, its team members, as well as all operations and assets of the organization.
What is Risk Management Framework?
The risk management framework is a six-step process created to engineer the best possible data security processes for institutions. The framework also helps in formulating the best practices and procedures for the company for risk management.
The framework is designed to access all the layers of the organization, understand the goals of each project, and monitor all operating systems to identify and analyze any possible risks. It is integrated with software in the organization. A risk management framework is used to provide key security information to businesses so they can create successful risk management and mitigation strategies.
The process involves six steps so that companies can complete all the projects they undertake in a secure, compliant, and cost-effective manner throughout their lifespan. It is a cost-saving measure as well because risk management platforms use the data they have collected from past projects to create predictions and future analyses for their projects. These insights are extremely valuable because they help in avoiding risks and putting risk mitigation processes beforehand.
The 6 Risk Management Framework (RMF) Steps
Here are the six steps involved in creating a risk management framework.
Step 1: Categorization of Information System
Before creating a framework, the IT system gets assigned a security role. This is created based on the project’s mission as well as the business objectives it aims to achieve. This role has to be consistent with the organization’s existing risk management strategy.
This step creates a foundation for the framework and its documentation of all processes as well as its security plan. The risk management system has to first categorize the information system as well as document the results from its categorization.
After this is done, one needs to put all the specific details in the system such as the system boundary. Organizations also create an identification of the system’s security professionals. Administrative details as well as other technical details are then added.
The third aspect of this step is to make sure that the risk management framework is implemented across all the necessary departments in the office. This is usually done with a program management office to help in monitoring all organizational systems.
Step 2: Selection of Security Controls
62% of organizations have experienced what can be categorized as a critical risk event in the past three years, according to a study done in 2018. This means that security controls for any organization have become more important than ever.
Any security controls that are undertaken for a project or the overall health of the organization need to be approved. These controls are selected by employees in the upper management and development departments. The common controls also have additional hybrid controls and system-specific controls in place to improve performance.
These security controls are all the hardware, software, and technical processes that are considered necessary to fulfill the basic compliance requirements in the project. These assurance requirements are also a part of the risk assessment strategy. The controls need to be monitored regularly and the means to do so should be undertaken in this step.
Step 3: Implementation of Security Controls
This step involves implementing the security controls that have been selected in the previous step. Once these controls have been put to use, they need to be monitored to understand whether or not they have achieved the minimum assurance and compliance requirements that were set.
This step selects all the right ways in which the information system is being used along with all the methodologies of security engineering. Implementing the right security controls for the organization is necessary to mitigate risk appropriately.
The organizations which experienced the critical risk event saw that the biggest and the most significant consequences they had to deal with (risks that produced large or severe impact) were in the following categories:
- Employee productivity was affected by 62%
- Operational efficiency such as disruption in systems and processes and so on was at 59%
- Employee safety was affected by 29%
- Competitive differentiation was reduced by 29%
- The brand and reputation of the organizations were hit by an average of 28%
This is why the successful implementation of a risk management framework is necessary. It helps maintain the overall health of the organization, upholds employee safety, and the brand reputation to the public.
Step 4: Assessment of Security Controls
Once all the security controls are in place and the assurance and compliance requirements have been met, an independent assessor is invited to the organization to review and approve these controls.
The reviewer will try to find any discrepancies in the security controls. In case any weaknesses or deficiencies are found, the organization will remedy the errors and then continue to document the security plan accordingly.
Step 5: Authorization of Information System
After all the assessment processes have been completed, the organization needs to present a package for authorization that will take care of all the risk assessments and risk determination for the business. The person in charge of this process will submit the authorization decision to all required stakeholders.
Step 6: Monitoring All Security Controls
The final step in the process of creating a risk management framework is continuous. The organization needs to monitor all the security controls regularly and efficiently. They also need to keep all the updates in mind based on any changes to the system or the environment.
The security status of the risk management framework needs to be updated regularly as well. The reports are made and sent out periodically to find out if any weaknesses need to be taken care of.
Checklist For Creating a Robust Risk Management Framework
The given checklist can be used as a step-by-step guide that comes with creating an effective risk management program. These areas should be considered a priority.
Effective Risk Management Governance
The board members are responsible for the material impact of any risk, regardless of where it is caused. This is why all employees and the board members need to monitor how effective the company’s risk management process is. They need to do so to ensure that it is implemented across all levels and departments of the company.
Internal auditors are used to confirm that the board has full knowledge of the material risks to the company. These risks also need to be disclosed to shareholders with proof that they are being mitigated.
Performance Management and Goal Management
Here team leaders need to divide different corporate objectives and implement them into unit contributions. After this is done, they need to identify the different processes used for achieving business goals in each department or project. These goals need to be made visible to managers that are involved in these processes. Once this is done there needs to be a link formed between all the contributing processes and the goals.
Consistent Risk Identification and Prioritization
The next step is assessing risks. These assessments need to address more than just high-impact risks. All effective assessments delve into different events of risk to discover their root cause. To do this effectively, the assessments need to be regularly conducted and based on common numerical scales across different departments.
Actionable Risk Tolerances
Companies need to understand their risk appetite and then take steps for creating actionable risk tolerance. This can help with creating a guide for making strategic decisions to manage risks. Risk tolerance acts as a technique to monitor performance goals and other risk metrics.
Centralized Risk Monitoring and Control Activities
Just creating processes to identify risks and then making appropriate responses for them is not enough. An important step that risk managers often miss is monitoring. This is used to gauge the effectiveness of the controls placed on mitigating risks. To do so successfully, the following needs to be considered:
- Spend less time on risks that are losing their impact by regularly adjusting risk assessments
- Identify areas where controls can be shared to increase organizational efficiency and reduce testing
- Prioritize risks and activities based on processes that should be monitored
- Regularly monitor various business metrics by looking for new and concerning trends that could have an impact on the organization
Forward-Looking Risk and Goal Reporting and Communication
Boards will need sufficient evidence of the positive influence of the risk management program to continue putting resources into it for the company. Risk managers should have an answer to how many risks were identified which can be concerning to the business objectives and different trends that were spotted that validate the effectiveness of a program.
Leadership Commitment To Building Risk-Management Culture
A risk management framework will only work successfully if it is integrated into the organization’s culture, which can only start from the top. The risk management framework needs to be designed and filtered through all departments and all levels of the organization. Business leaders need to step in to make this happen for their companies.
Team leaders and business leaders need to work together to align their business objectives with different risk management initiatives in the company. Resources need to be adequately allocated so that the risk management strategy can be properly implemented, monitored, and improved over time.
Creating An Understanding Of How Risk Management Fits Within An Organization
Risk management practices will go on during the company’s lifetime across all departments. A lot of organizations implement risk management activities without creating a structured framework to support and improve them, which is not good for the health of the company.
Risk management processes need to be used to promote better decision-making across the company and also identify and address all the risks to the company by creating plans to support the same. A framework acts like a process that is put in place to drive action and supports spreading information about risks to all parts of the organization.
A risk management framework is engaging and provides the chance for organizations to forecast and prevent any critical events in the future. The best risk management strategy comes with a framework that fits perfectly with a company’s organizational infrastructure and implements itself seamlessly.
Building an Organizational Infrastructure that supports Risk Management Initiatives
Varying organizational roles and responsibilities need to be established for a successful risk management process. The responsibility for decision-making needs to be assigned and resources need to be allocated to support the different risk management initiatives of the company.
Once all responsibilities are clearly defined, companies can shift their focus on creating a consistent process across the organization. Risk management strategies should also include enterprise-wide training programs and various cross-functional risk management teams. Whenever it is necessary, organizations should also call different risk management experts to evaluate the processes and make them more effective.
Conclusion
Organizations have come to realize that enterprise risk management is an ongoing and iterative process. Developing and implementing a strategy just once is not enough anymore. The risks to any company continue to evolve based on many changes in technology, the physical and economic climate, and more. This is why companies always need to be prepared to handle any risks that may come.
The three risk management frameworks are the most widely used ones by companies across the world. To implement these strategies, monitor them, and improve upon them regularly requires some amount of expertise. This is why there are many IT Security certification courses and training programs available so that employees at any organization can be trained appropriately to understand and manage the risks to their company.
