Many organizations have realized the benefits of managing organizational risk. It’s a crucial element in an organization’s security system. However, 69% of executives are unsure of their existing risk management practices and policies—meaning they don’t know if their measures are sufficient to meet future needs.
A risk management framework (RMF) creates adequate means to help you choose the required security controls to protect your company, its employees, and all its assets and operations.
Why Do I Need a Risk Management Framework (RMF)?
A risk management framework (RMF) is a structured process that can identify potential threats and defines a strategy for reducing or eliminating the impact of those risks.
RMF covers these risks:
- Operational
- Strategic
- Financial
- Compliance and regulatory
...and completes these tasks:
- Identify organizational threats
- Gauge and evaluate the impact and likelihood of those risks
- Prioritize business risks
- Develop an action to limit and eliminate risks
- Document your mitigation plan
- Follow-up, review, and schedule governance
While a risk management framework is mandatory for organizations working with the United States Government, executing a robust risk management system benefits many companies. The primary goal of achieving RMF compliance is creating a solid data and asset governance system that offers maximum protection against the cybersecurity risks you might face.
In short, a practical risk management framework provides these:
1. Asset Protection
A valuable risk management framework prioritizes understanding your company’s cyber risks, helping you take the necessary measures to safeguard your assets and your organization. That means a robust RMF can help you secure your data and assets.
2. Reputation Management
This is a crucial aspect of modern business practices. Reducing the adverse effects of cybersecurity attacks plays a pivotal role in protecting your reputation. A solid risk management framework can help you quickly identify gaps in enterprise-level security controls and develop a roadmap to limit and thwart reputational risks.
3. Competitor Differentiation
Further, creating a practical risk management framework is beneficial to the fundamental operations of your company. By identifying the risks you face and taking the necessary measures to limit or thwart them, you’ll also collect valuable information about your customers, giving you a competitive edge.
4. IT Protection
Almost every organization must protect its intellectual property, and an RMF applies just as much to this type of property as it does to your assets and data. You’re vulnerable to potential Intellectual Property theft if you offer, sell, provide, or distribute products or services that give you a competitive advantage. An effective RMF can help you protect your company against potential losses of competitive edge, legal risks, or business opportunities.
What Are Some Examples of Risk Management Frameworks?
Against the possible benefits of creating a customized RMF, enterprises must weigh the pros of using a tried-and-tested framework. Using an existing RMF allows you to draw on the experiences of others, so it’s crucial to explore current examples of risk management frameworks.
Various risk management frameworks exist, including the following:
NIST Cybersecurity Framework
The NIST Cybersecurity Framework (CSF) is a flexible set of guidelines meant to mitigate business risks and strengthen overall business security. NIST CSF is based on existing policies, standards, and practices for US private businesses to better manage and limit cybersecurity risk.
Besides helping businesses to identify, prevent, and mitigate cyberattacks, this framework also aims to enhance risk management communications and cybersecurity among external and internal stakeholders.
COBIT Risk Management Framework
The Control Objectives for Information and Related Technology is a risk management framework that governs the management and governance of organizational IT. The Information Systems Audit and Control Association (ISACA) established this framework to set reliable auditing guidelines, as computers and information systems play a crucial role in financial systems.
COSO Enterprise Risk Management Framework
The Committee of Sponsoring Organizations (COSO) established this framework to help organizations manage their business risk. This framework was established in 2004, but COSO has updated it several times as risk management strategies have evolved.
One of the pros of the COSO ERM framework is that it facilitates greater transparency around business risk, benefiting ERM stakeholders and employees. Also, it serves as a lens through which an organization can assess its ability to align its risks with performance and strategy.
ISO/IEC 27001
This global security standard regulates data security via a code of regulations for information security management. ISO/IEC 27001 issues various standards covering multiple aspects of information security, including information technology, information security management systems (ISMS), information security requirements, and information security techniques. You can leverage this cybersecurity risk management framework to implement robust risk controls to limit and eliminate risks.
What Are Some Key Framework or Strategy Components?
When implementing the risk management framework, you must break down the risk management requirements into different components. These key components can help you work toward developing a robust risk management system, from identifying the most critical cyber risks your organization faces to mapping how to mitigate them effectively.
Risk Identification
The first and most critical component of the RMF is to conduct risk identification. According to NIST, organizations’ typical risk factors include vulnerability, threat, likelihood, impact, and predisposing condition. During this stage, brainstorm all the potential risks you can think of across all your information and systems and then prioritize them based on these factors:
- Threats are events that can hurt your organization by destruction, intrusion, or disclosure.
- Vulnerabilities are weaknesses in the security, IT systems, controls, and procedures that hackers can exploit.
- Impact measures how severe the damage to your organization would be if a specific threat or vulnerability is compromised.
- Likelihood measures risk factors based on the possibility that a cyber attack on a specific vulnerability would occur.
- Predisposing conditions are specific factors inside your organization that can increase or decrease the likelihood or impact that a weakness will come into play.
Risk Assessment and Measurement
After identifying the vulnerabilities, threats, likelihood, impact, and predisposing factors, calculate and rank the risks your company must address.
Risk Mitigation
You can now take the previously ranked threats and determine how to mitigate them based on their severity. Then, at some point in your list, you should decide the risks that aren’t worth addressing because there’s little probability of those threats getting exploited by bad actors or if there are too many greater threats that require immediate attention to fit low threats into your work plan.
Risk Reporting and Tracking
A risk management framework requires businesses to maintain a list of known threats and track the known threats for compliance with the NIST policies.
How Can I Create My Risk Management Framework?
Risk management frameworks help organizations gain a clear picture of all their overall risk levels. Organizations often use RMFs to define risk management strategies because they offer a comprehensive springboard to analyze threats, define preventative measures and assess the results of an action plan. A solid RMF safeguards an organization’s earnings and capital base without hampering growth. Further, investors are more willing to invest in businesses with effective risk management practices. Thus, implementing strong RMF can help you lower your borrowing costs and improve your long-term performance.
Here are a few steps to help you create an effective risk management framework:
Steering Committee
It’s crucial to involve senior leadership in developing your enterprise risk management framework. Besides signaling the importance of this framework to the rest of your employees, the steering committee will play a vital role in determining roles and accountabilities within your RMF.
Ensure Every Employee Understands Risk
Besides all the vital topics, understanding the terminologies around risk varies significantly within an organization. Thus, establishing a consistent frame of reference and common terms is a crucial early step.
Set Out Accountabilities and Roles
Who will be responsible for what in your RMF strategy? There are roles not just for senior leaders and board members; managers, department heads, and other employees throughout every function should all have a role to play, and their roles must be well-stipulated. Thus, a risk management framework is far from being a preserve only for your internal audit, risk, and compliance teams—but their expertise means they’ll have a central role in the RMF process.
Identify Your Risks
Your risk management team should work with your business units to develop an elaborate list of organizational risks. Evaluate your risks, including their likelihood and severity, the internal security controls that manage them, and your plan to mitigate them.
Document Existing Risks, Potential Risks, and Your Risk Appetite
After identifying your company’s existing and potential risks, ensure every department captures them in a formal statement. And ensure you don’t just document your organization’s risks but also your plan to mitigate them. Which risks should you avoid at all costs, and which risks can you tolerate? Are there risks you actively take because potential opportunities outweigh those threats?
Prioritize Your Risks
Prioritize all the risks your company faces or may face and put a mitigation plan in place for all those risks you can avoid.
Establish an RMF Methodology
This encompasses putting in place consistent and agreed-upon definitions of key terms, roles, and processes to identify, assess, monitor, and report the risk factors your organization faces.
Monitor and Report on the Threats You Face
Getting an RMF isn’t a one-and-done thing. It involves continuously monitoring your company’s risks; these will constantly change in today’s volatile cybersecurity landscape. So, your RMF must be adaptable, agile, and frequently reviewed to ensure it aligns with your organization’s risks.
What Tools Do I Need to Strengthen My Risk Management Framework?
Here are some of the best risk management tools you can leverage to build effective plans and guard your organization against inevitable issues, risks, and changes.
RiskRecon Priority Risk Matrix
Today, many companies largely trust third-party service providers with their operational functions and most confidential data. But these business relationships broaden the complexity and scale of a company’s risk surface, where many cyber breaches tend to aggregate.
RiskRecon Priority Risk Matrix can help you protect your digital ecosystem from third-party risks by offering you real-time visibility of your third-party service providers' cybersecurity performance. With this priority risk matrix, you can identify and track third-party risks and quickly act on risks with the highest potential to damage your business.
Risk Data Quality Evaluation
With a risk data quality evaluation technique, you can use data you’ve collated for the individual risks you’ve identified. Then you can use that information to determine which data are relevant to your organization. This helps you understand the reliability, accuracy, integrity, and quality of the risks related to the gathered data.
For every risk you list, this tool requires you to determine how much you know about the risk, collect any available data, the reliability and quality of that information, and its integrity. You can only have an accurate assessment by examining these parameters of risks.
Risk Register
This risk management tool controls potential risks your organization may face. It gathers, documents, and tracks risks, allowing you to strategize and respond effectively to potential threats. Essentially, this tool can help you:
- Prioritize existing and potential risks
- Assign employees to resolve those threats
- Add updates on risk progress and resolution
How Can RiskRecon Help Me Make an RMF?
Are you ready to create a practical risk management framework? RiskRecon, a Mastercard company, can help you determine how to avoid catastrophic and major risks that can hurt your company’s reputation.
Our Priority Risk Matrix sorts prioritized third-party threats based on risk severity, value at risk, and the magnitude of impact if your systems are compromised. Regardless of your technical expertise, we’ll ensure our passive risk-detection systems protect your data and other assets.
With our help, you will get more clarity into the risks you may face after partnering with third-party service providers. If you’re interested, unlock our 30-day trial and start building a safer future!
