By starting with business objectives, the risk management process aligns to current as well as future goals.
Risk Identification: The second step in creating a risk management plan lies in reviewing digital assets such as systems, networks, software, devices, vendors, and data. Cataloging these assets then allows the team members to identify risks to the assets. A risk, or uncertain event, can be a positive or negative condition that has a financial, operational, or reputational impact.
Risk Assessment: After identifying risks, the risk management team needs to assess the risk. Positive risks, such as early product delivery, can also lead to negative risks, such as a customer’s inability to meet a payment schedule. The organization needs to foresee risks in order to find a way to analyze their potential impact.
Risk Analysis:For each risk identified and assessed, the team must look at the likelihood the event will occur and then estimate impacts to the business if it does occur. Multiplying likelihood by the estimated impact can give insight into a risk’s effect. A risk with a low likelihood leads to a devastating financial impact. Meanwhile, a risk with a high likelihood may have no impact. Part of the quantitative or qualitative analysis is creating the risk assessment matrix. This allows the risk management team to use the risk analysis and assign ratings such as high, medium, or low.
Risk Tolerance:After assigning risk ratings,