What risks can affect your organization, and what kind of impact will they have? In this video, you’ll learn about the importance of risk assessment.
When you’re assessing risk, you need to understand the threats. Some threats may be created by the environment around you. We need to understand what type of tornado, hurricane, earthquake, or severe weather threats may affect our organization.
There are also man-made threats that are important to understand, whether these threats are coming from inside the organization, or they’re threats that are coming from outside the organization. Usually, these threats on the inside are from our employees, and external threats may be organizations that are outside or not part of our direct organization.
It’s common to perform a quantitative analysis of the threats that you may be faced with. Part of these calculations might include an annualized rate of occurrence. This is the likelihood that a particular threat will affect you. This ARO is one that you can calculate based on how often in a single year might you be hit by a hurricane. This might be a very different calculation if your organization is in Montana versus an organization that may be located in Florida.
Another calculation that’s important is the SLE, or the Single Loss Expectancy. So if this single event occurs, if a hurricane comes through, if a laptop gets stolen, there’s a particular cost associated with that and you can determine what this SLE might be by looking at the risk itself. So if a laptop is stolen, the asset value for replacing that particular asset is $1,000. That is the cost of our single loss expectancy.
Now that we know what a single event may cost, we need to understand how many events might happen in an entire year. This would be the ALE, or the Annual Loss Expectancy. So you would multiply the annualized rate of occurrence by the single loss expectancy to calculate the annual loss expectancy. If we know that a laptop being stolen is going to cost $1,000 and we can estimate that there will be seven laptops stolen in a year, we can multiply $1000 times 7 to come up with our annual loss expectancy, or $7,000.
When providing these calculations, we also have to think about the overall business impact. Being able to replace hardware has a quantitative cost associated with it, but there’s a qualitative impact because there will be people not working because they don’t have a laptop or there may be services that we can’t provide to our customers because we don’t have a laptop for someone to provide those.
One way to evaluate risk during a project is to create a risk register. We know that every project has a project plan, but at each step along the way there will be some type of risk associated with that step. Once we have identified each of those risks, we can now create some possible solutions that might help us avoid that risk. And now that we’ve identified and documented the risk and the solutions we can monitor to see what type of risk we may find during the process of this project.
We might also need to evaluate risk for something as common as your supply chain. This is the process that’s used to get a product or a service from the very beginning supplier to the final product. A supply chain is usually not just an internal organization, but there are also third parties you have to work with. There’s usually a set of coordination that must occur between all of these different groups.
By examining the supply chain, you can then identify areas where the supply chain might be improved and look at the IT systems to see if there may be optimizations that could be put in place. Once you’ve provided this evaluation, you can then document what the business processes changes might be to be able to make the supply chain that much more efficient.
For risks such as losing a laptop, there’s an obvious cost associated with that, but what about the other types of processes in your organization where you’re not able to put a quantitative analysis on those steps? Instead we’ll want to use a qualitative risk analysis to be able to determine where the risk may be. One way to perform a qualitative risk assessment is to identify different risk factors and then identify categories of risks associated with those.
There may be an impact in annualized rate of occurrence, there may be cost of controls and an overall risk value. You may want to give those different values between 1 and 10, or you could use a traffic light grid where you’re looking at a red, yellow, or green to determine how risky these might be.
If you’re performing a risk assessment, then you’ll need to create a business impact analysis. We need to know what the critical business functions are for your organization and document those. Once we know what those are, we’ll know what the impact of losing them might be. Will we lose revenue, will there be some type of legal impact, or will we lose customers because we’re not able to provide that particular service?
It’s also important to know how long this particular business function will be impacted. We may need to get additional people or resources or we may need to get emergency equipment brought in to be able to provide this business function. This analysis might also allow you to determine if making an investment in disaster recovery may be an advantage to the organization. Once you’ve added up all of these numbers associated with the risk, you’d be able to determine if it’s a good financial move to have a disaster recovery plan or if you should be able to make other arrangements instead.
Many of the systems that we use in our organizations contain sensitive data. They may have financial information or health care information or some other type of private information from our customers. We want to be sure all of that data is safe, so it’s common to perform penetration tests, vulnerability scans, and other tests against those systems.
One challenge with performing these tests is you’re never quite sure how a system may react to a penetration test or vulnerability scan. I can tell you from personal experience that a simple vulnerability scan could impact a system and make it unavailable for other people to use. It’s very common to get formal authorization before performing these tests then. This allows you to remove any legal liability for the people that are performing the tests and this also determines how you’re going to be doing the testing.
If you want to perform a relatively noninvasive test you may do some vulnerability scanning, but if you’re performing an active penetration test there may be systems made unavailable. The penetration test itself may install back doors, it may create denial of service attacks, or transfer sensitive data off of those systems.
There are many different ways to respond to business risk. One way is to simply avoid the risk completely. If you’re participating in an activity that contains risk, you simply stop participating in that activity and you therefore do not have any more of that risk. That’s not an option for most of us. Instead, we need to continue performing those functions, but we need some way to mitigate the risk.
One way to transfer the risk from us to another person might be to purchase insurance. Now instead of accepting all of the risk ourselves, we’ve mitigated that with some type of third party insurance. This may be a situation where you simply accept the risk. You know there’s no insurance that you can purchase, there’s no way to mitigate this risk, it’s part of doing business and we’re going to accept any risk that comes with that.
Almost all of our computing systems have some type of risk mitigation built in. For example, if you put a firewall between the users of an application and those application servers, then you’re decreasing the risk level that somebody may be able to take advantage of a vulnerability on those systems. One of the most common ways to minimize risk in an organization is to institute some type of formal change management process. This means that we need to follow this formal change management process if there’s any type of change.
This might be upgrading an operating system or changing the software that’s on a system. It might be adding or removing a server or changing a firewall rule. In organizations that have a formal change management process, this is a normal part of business. This happens very frequently and usually you’re meeting with the change management team every week. In organizations that have not created a formal change management process, the environment can be a bit more chaotic. Without any formal change management process, there’s no way to know when a change might be made and what impact that change might have for the organization.
A formal change management procedure will have very clear policies and rules. You’ll know exactly when the change management is going to occur, the duration of that occurrence, what the installation processes might be for those changes, and you’ll know what the fallback procedures might be if the change is not able to be implemented successfully.
For organizations that don’t have formal change management process, it might be very difficult to implement one. When it’s so easy to simply log on to a system and make a change, no one wants to create a formal process that slows that down, but the addition of change management will not only provide more up time and availability, it will decrease the risk for your entire organization.