An organization’s viability depends more than ever on its ability to maneuver a minefield of emerging risks. That’s a formidable challenge, particularly in an era in which cyberthreats can disrupt operations overnight and prompt a volley of questions from business leaders the next day.

After a disruption results from a cyber or IT failure, for instance, executives will want to know why the IT team didn’t prevent the disruption – or at least anticipate it and respond more effectively and quickly. They may also ask why estimates of the duration and consequences of the event were inaccurate or lacking.

If the organization has unified enterprise and IT risk management, the combined team can more readily answer these questions. Integrated enterprise risk management (ERM) and IT risk programs help a company consolidate enterprise risks and IT threats and vulnerabilities. This makes it easier to identify vulnerabilities and proactively facilitate risk management across the enterprise. Alignment also ensures that the integrated risk management strategy incorporates the organization’s business objectives.

Focus on likelihood, impacts, and velocity

Once the foundational elements are in place, organizations can use qualitative and quantitative metrics to further refine the integrated plans using risk evaluation. Robust metrics examine three key dimensions of risk: the likelihood, potential consequences, and velocity of risks. Companies can calculate risk severity by measuring possible hindrances to overall enterprise objectives. The following outlines metrics for the three risk dimensions.

1. Likelihood — Plot the likelihood of risks on a numeric scale and include a threshold at which a risk becomes a business priority. For instance, a company might assign a risk value to threats on a numeric scale of 0 to 25 and prioritize those ranked at 15 and above. 

2. Impact — Estimate potential damage by identifying likely consequences such as lost productivity, lower revenues, system downtime, reputational damage, and response and remediation costs. For a more complete forecast, factor in the duration of impact: the hours, days, weeks, or months that systems and processes will be compromised or inoperable.

3. Velocity — Understand the destructive capacity of risks by factoring in velocity. This comparatively new metric tracks the speed at which a threat can spread and affect operations across the enterprise. Organizations can measure velocity by using simple qualitative metrics like high, medium, or low. A quantitative comparison will be similar to the duration of impact.

These metrics help organizations plan pre-emptive controls and post-incident responses to address threats and mitigate impact more quickly.  Companies should embed the results of the metrics in corporate strategy, business drivers, and a risk-aware corporate culture, then align them with overall ERM and organizational priorities.

An integrated response to digital risks

Rapid changes in technologies, compliance requirements, and threat complexity make it more difficult to prepare for and mitigate risks. Alignment of ERM and IT risks helps organizations implement a defined, effective, and repeatable approach to assess and prioritize threats. It can also improve processes and reduce the costs of disruptive incidents. The most agile organizations develop their integrated risk management plans as a digital program and integrate it with digital transformation initiatives.

Contact

Bhavesh Vadhani, Principal

703-847-4418