What is a risk management framework?

If there’s one constant about innovation, it’s that it is rarely contained to one entity. When industries progress and advance, the benefits quickly become clear, and others rally to imitate. So when the National Institute of Standards and Technology (NIST) developed a template to identify, minimize and eliminate potential risks, it became a guideline for organizations to incorporate into their policies and governance.

Because a risk management framework sets out all the necessary references and tools for decision makers to counteract cyber security risks, invest in reliable risk maturity models, and bolster overall company security.

What are the main components of a risk management framework?

Identify

Every business faces its own unique challenges. Similarly, every business will also face unique risks including legal, strategic, operational and privacy. What’s more, as technology grows and your organization rises in prominence, these levels of risk escalate and evolve. As such, risk identification is an on-going process to guarantee company security.

It’s best to think of risk identification as a regular check-up with the doctor. Diseases and viruses continue to shift and change, and you want to make sure you have the best coverage to prevent infection.

And that’s just inadvertent risk, importance should be doubly given to avert deliberate attempts to jeopardize your company’s wellbeing.

Measure and assess

Once risks have been identified, they need to be categorized and analyzed. The best way to do this is to create a risk profile for every single one; assessing the nuance and specificities that could bring harm to your company. And there are multiple ways to go about this, it largely depends on your priorities.

For some companies, capital is king. So the highest priority will be afforded to the fiscal damage that this particular risk presents. For others it could be tarnished prestige or losing the edge – such as if you have a niche product that could be susceptible to theft or piracy. And then there’s data security, guaranteeing confidential information remains confidential.

Mitigate

But not all risks require the same severity of response or even attention because the risk of a delayed response leading to a negative impression, is nowhere near equal standing to the risk of financial ruin or corporate malfeasance. This is where mitigation comes in.

By assigning the appropriate resources to counter or prepare for various risks, your organization can rest assured that the necessary action will be taken. For example, investing in cyber insurance is a healthy way to limit the impact of an attack. But if your industry specializes in the protection of information, you would need to invest heavily to instill customer confidence.

Report and monitor

Over time, your risk management framework will require adjusting. In addition to identifying new threats and challenges on the horizon, a prudent company will need to take stock of their current levels of mitigation and reconstruct where needed.

Granted, several areas of risk, such as employee safety and cyber security, will always require assessing. But as technology changes and laws are passed, businesses may find some of their framework redundant or outdated. Regularly monitoring the likelihood of risk, allows companies to divert resources and minimize risk elsewhere.

Governance

The final component of the risk management framework is possibly the most imperative. Going through all the effort to identify, measure, mitigate and monitor risk, is without worth if it is not properly implemented.

That’s why it is of the utmost importance that the framework is adopted throughout the company and that employees are not only notified of these steps, but they are enshrined in policy and adhered to on a daily basis.

By guaranteeing every member of staff, at every level, is consciously aware of your risk management framework, your company will have already taken the greatest step toward protecting itself against risks current and new.

What are the benefits of a risk management framework?

In the simplest terms, a risk management framework provides uniform prevention and protection against risk, across your entire organization.

By standardizing the process, your company has a clear strategy to continually evaluate the level of each threat and prioritize where resources should be directed to nullify them. It also creates a confidence and harmony for your staff, as they have the protocols and guidance in place to act accordingly wherever your business is exposed to risk. What’s more, your prestige, value and others’ perception of your organization elevates, solidifying your reputation and prowess.

Risk management framework: step by step

So, with all these benefits and components in mind, how do you actually go about building a robust risk management framework? And who is responsible for its creation? Well, as with most things, these decisions start at the top, with your company’s executive team.

Once a budget and priority has been set, this can then be handed over to an individual or team tasked with running through a seven step process.

Prepare

This opening section may feel somewhat redundant. After all, any endeavor starts with preparation. But ensuring your organization is prepped to give the necessary time and attention to rolling out a formalized strategy, makes every other stage flow with incredible ease. This is down to a unified purpose, clear goals and a projected outcome. Not only in how these changes will be realized, but also the assigning of individual roles and responsibilities.

Categorize

Most companies will have some sort of protection in place. Unless your business is a start-up, it’s vey unlikely this will have to be done from scratch. That said, categorizing each individual risk that has been identified, means the impact can then be evaluated. Doing so allows for prioritization. As stated earlier, each company will have their own order of concerns, which will dictate where efforts are focused.

Select

With a clear impression of affected systems and vulnerable processes, it’s now time to select the controls to mitigate these risks. These controls could involve investing in an entire infrastructure, widespread training, and possibly a new way of daily operation. It can be a demonstrable product such as cyber security systems. Or it could be a change in policy that impacts work ethic and practices. And each control will have multiple options available from a variety of sources; so thorough investigation is paramount.

Implement

Once risks have be identified and the requisite controls selected to minimize or eliminate them, it’s time to implement these solutions. Communication and implementation go hand-in-hand to guarantee success. Because if your workers are unaware of newly adopted measures, the results will not manifest. In fact, without a correct, all-encompassing rollout, the effects will be largely ineffectual.

Assess

After measures have been taken and solutions implemented, companies will need to assess the impact. The first stage is to ensure the implementation phase has been performed accurately. Because if you are still not achieving the desired result, there could be a number of pressing issues.

It’s possible that the chosen solution is a poor fit (despite initial projections stating otherwise). Or the inclusion of this new mechanism, could have a knock-on effect, creating risk elsewhere in the company. Regardless, assessment is required to guarantee your controls are performing as intended.

Authorize

This step will not crop up every time but it’s worth noting. The team in charge of assessing and constructing your risk management framework may require a level of authorization that sits above their remit. This is where the executive team may have to step back into the process to review and approve measures. Especially if they are widespread and have significant financial implications.

Monitor

To provide ongoing situational awareness, companies will need to monitor the results. Not only of the chosen controls and the framework itself, but also of changes across the organization and industry you operate in. Doing so guarantees the investment made is a lasting and effective one. And should the need for adaption arise, there are already policies and procedures in place to reduce, minimize and eliminate any potential risk.

For a list of noteworthy upcoming speakers and topics, explore our upcoming UNLEASH America 2023 agenda.