A risk management framework (RMF) is a set of criteria dictating how businesses should be structured and monitored to protect their assets.
Risk is a natural part of business. Any investment, new product, expansion into a new market, or even a shift in structure or employee responsibilities may cause disruption, and that’s to say nothing of ever-present outside risks. On the other hand, taking too firm of a stance against risk may stunt business growth, preventing a company from reaching its potential. Instead, top businesses understand how to approach dangers strategically, calculating rewards vs. risk so as to minimise risk potential without also hindering their growth opportunities.
To do this, many businesses adopt an enterprise-wide approach to securing operational processes, in the form of a risk management framework.
An RMF takes a systematic approach, helping to identify and mitigate business risks of all kinds. It is also worth noting that there could be specific versions of RMF required. One example is the mandate that U.S. federal government agencies comply with the NIST version of RMF.
Although there are different variations for specific use cases, most risk management frameworks consists of essentially the same five components:
Before a business can protect itself from risk, it needs to be able to recognise dangers as they arise. The identification component of risk management helps define the risk universe—a complete catalogue of all possible known risks facing the organisation and its assets. These risks should be broken down into specific categories, including digital risk, ESG risk, vendor/third-party risk, quality risk, business continuity risk, people risks, environment, health, and safety risk, ethics and compliance risk, privacy/legal risk, financial risk, operational risk, and technology or cyber risks. With a clear idea of potential threats and uncertainties, the business next needs to further categorise the risks as either core risks (essential risks that help drive growth) or non-core risks (unnecessary risks that can and should be eliminated wherever possible).
Understanding the risks themselves is only part of the equation; risk management demands that businesses next look at themselves in terms of the likelihood of a specific risk or risk category, and what the organisation stands to lose in the event that they encounter the risk. In calculating these risks, businesses must remember to consider the overall impact of the risk. This will help them prioritise risks based on damage potential and likelihood of occurrence to determine their risk threshold.
After identifying and prioritising risks, the next step is to develop effective risk mitigation plans. A proper risk mitigation plan will allow the business to determine which core risks to accept, which ones to minimise or eliminate, and where to start. At this point an effective issue or POA&M management process should be used for tracking and to establish an audit trail.
Throughout the RMF process, monitoring and reporting remain of paramount importance. Depending on the business and industry, risk management reporting should be automated and accessible real-time via dashboards . These dashboards should be accessed not only by qualified risk personnel who take on the responsibility of adjusting risk-exposure elements to better account for current dangers, but also the front line and C-suite. Any industry specific reports should be created for review and authorisation. Proper risk monitoring and reporting may also play a part in maintaining compliance with established standards.
A risk management framework is just that: a framework for supporting and structuring risk management in business. It is not a complete risk management solution by itself; it relies on everyone involved to adopt and follow the practices established in the framework. The governance components in RMF solutions are designed to help employees understand their roles and responsibilities, assign duties, and establish the authority of risk management leaders.
Risk management frameworks exist to help protect every aspect of business from possible dangers. This includes the risks posed by unwanted or faulty products, volatile markets, poorly executed business plans, etc. But with the ongoing proliferation of digital systems, some of the most obvious risks facing organisations today are risks to IT systems.
IT risk management frameworks are designed to help businesses and even government institutions identify possible data risks, determine which systems they pose a threat to, and what options they have for preventing or remediating said risks. The steps across various RMF standards are very similar, let’s take NIST RMF as an example. It is one of the most stringent and used to authorise systems within the U.S. federal government. It can be broken down into five essential stages:
Review and categorise all IT systems within the organisation. Define system boundaries and identify which kinds of information types are associated with the system. Likewise, take into account relevant information relating to the organisation itself, the system’s operating environment, connections to other systems, and intended use.
Next, choose the right security controls. An organisation’s security controls are the management, operational, and technical safeguards available to an organisational information system, designed to help protect the integrity, and availability of the system. Different security controls are naturally more effective for specific kinds of systems and information, and choosing the right controls may mean the difference between adequate protection and system vulnerability. Once the selection is complete, implement the chosen security control and establish usage policies.
With the security controls in place, the next step is to assess their functionality and outcomes. Are the controls correctly installed and operating as intended? If so, are they meeting required security requirements? If not, then the controls will not be as effective at protecting business operations and data.
Once the security controls have been implemented and vetted, it is time to authorise control over the system and allow it to get to work. Correctly implemented, RMF automated workflows will begin operating to help protect the business.
Authorising system security controls is not the final step in IT risk management; ongoing monitoring of security controls help ensure that the risk management framework remains viable throughout its use life. Document changes, regularly conduct impact analyses, and continue to report on security controls’ statuses to establish ongoing efficacy.
As previously addressed, business risk is everywhere. And, as IT systems expand and evolve, the modern digital business landscape is becoming increasingly complex. The right risk management frameworks help organisations navigate this landscape, providing a number of key advantages in the process.
Top benefits of risk management frameworks include the following:
Modern supply chains are becoming ever more complex, creating significant risk for businesses that rely on them for goods, resources, and product delivery. Effective RMF solutions make it possible for organisations to improve the quality and usability of supply-chain-relevant data streams, such as weather reports, social media trends, world news agencies, and more. As a result, they are better able to gain accurate insights into the factors that may be impacting essential supply chains.
A business is only as secure as its assets. Risk management frameworks help protect those assets, identifying relevant information, understanding and prioritising risks, and empowering organisations to respond quickly to mitigate and resolve emergent risks. The right framework provides a set of standards and a plan of action to ensure that the business’ most vital assets remain secure.
Risk management frameworks likewise dictate how intellectual property may be protected against theft and misuse. Backed by relevant data and clear standards, businesses can operate, secure in the knowledge that their intellectual property is better protected and the likelihood of theft is minimised.
Having a clear criteria of security and operational standards available and in place through all levels of a business keeps security processes consistent. This improves risk mitigation, and reduces the danger of data exposure. This in turn helps protect the business from costly mistakes that could negatively impact public perception and lead to reputational damage.
In aggressive markets, understanding competitors can be just as important as understanding oneself. Risk management frameworks incorporate disparate outside information sources, such as social media, blogs, news reports, etc., so that organisations can keep a close eye on their competition, and react quickly when necessary.
Before a business can enjoy the advantages listed above, it must first select the risk management framework that best fits its needs. There are many RMF solutions currently available, but some stand out as better, more well-rounded options than others.
Here, we briefly detail four top-level risk management frameworks:
The Federal Information Security Modernisation Act (FISMA) is a United States legislation designed to establish legally-backed guidelines and security standards for government systems and institutions. That said, the FISMA approach has been adopted by non-government entities across a range of industries and geographic locations. This approach consists of a series of steps for selecting, implementing, and monitoring effective security controls.
Taking a more generic approach to risk management, ISO 31000 is designed to be an effective way to manage the impact of a variety of business risks, and is relevant for organisations in essentially any industry. The ISO 31000 approach helps develop effective risk philosophies and culture throughout the company, and creates different organisational processes, roles, and responsibilities as a part of the risk management process.
Not as flexible as FISMA or ISO 31000, the COSO Enterprise Risk Management Framework consists of four categories (strategic, operations, compliance, and reporting), making it ineffective for organisation-wide implementation. That said, COSO is nonetheless a reliable approach to establishing a risk-focused culture.
The National Institute of Standards and Technology (NIST) framework integrates security, privacy, and cyber supply chain risk management into system development and can be applied to new or legacy systems within any type of organisation; large or small; in any industry.
There should always be some risk in business to ensure it stays competitive. However, with the right risk management solutions, resources, and strategies organisations can effectively manage that risk, while helping to ensure resilience and continuity in the face of an uncertain future. ServiceNow, the leader in IT management and workflow automation, is at the forefront of this movement.
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