The Role of Cybersecurity in Enterprise Risk Management (ERM)

As businesses continue to undergo digital transformation, cybersecurity must be included in the enterprise risk management framework. Without a comprehensive ERM program that addresses various risks  – such as strategic risks, operational risks, and cybersecurity risks – organizations are limited in their ability to effectively identify and assess potential risks.

By adopting a holistic approach to risk management, risk managers and senior management across complex organizations can align on strategic goals Integrated risk management is now the preferred method for chief risk officers, business stakeholders, and company leaders as it helps balance risk appetite across all risk categories and ensures a proactive stance in addressing potential threats.

What is enterprise risk management (ERM)?

Enterprise risk management (ERM) is the process of identifying and understanding the risks that threaten standard business operations. This ongoing process engages risk professionals and company culture to establish corporate governance and cyber enterprise risk management policies that protect the business. Examples of direct risks include natural disasters affecting assets, while compliance risks or legal risks may stem from unmet regulatory requirements.

For effective risk management, organizations must implement robust incident response plans that enable them to quickly address and mitigate security events, minimizing operational disruptions.

In order to manage risk successfully, you must have a complete understanding of everything happening across your organization and any external factors that may impact it. This includes evaluating your security posture to check the organization is equipped to address evolving cybersecurity threats and mitigate the likelihood of a cyber incident. Incorporating risk tolerances into this evaluation allows organizations to prioritize resources effectively and respond within acceptable thresholds.

Why is cybersecurity important to enterprise risk management?

It’s important to know that cybersecurity is a problem that will never be eliminated, but rather, a risk to be managed. In the digital age, cyber risk has become an issue for the entire business, not just the tech or IT department.

Cybersecurity represents an entire risk landscape that businesses must continuously address, as cybersecurity threats are persistent and pervasive. Cyber risk management not only focuses on compliance but aligns with strategic objectives to achieve business performance and meet regulatory compliance. Addressing security risks requires understanding how these risk exposures impact the entire business. Leaders can focus on risk through data-driven decisions to manage operational risk and secure their business model.

A dedicated cyber risk management team plays a pivotal role in helping organizations integrate incident response plans within their enterprise cyber risk management strategies. By examining risks from a business perspective, executives can make decisions that prioritize protection and operational success. Implementing comprehensive cyber risk assessments is critical to ensure risks are identified and mitigated effectively, reducing the potential for disruption.

Leadership and Ownership

Effective enterprise risk management relies on visible support and active participation from senior management, which sets the tone for risk management efforts. When leaders champion ERM, they send a clear message from the top, strengthening the culture of risk awareness across a wide range of functions and ensuring business strategy aligns with security policies and risk management processes.

When you have a strong ERM program and evidence-based data from SSC, you’re all speaking the same language and are more aligned. It sets the standard internally and creates harmony with stakeholders.

This commitment also empowers security and business teams to coordinate effectively, so that security controls and risk management practices directly support the organization’s objectives and are resilient against cyber threats.

Advantages of including cybersecurity in your enterprise risk management (ERM) program

The argument for an enterprise cyber risk management program has already been made. The challenge now is to convince your executives that cybersecurity should be included in the ERM planning process.

Let’s take a look at three advantages of working cybersecurity measures into your enterprise risk management program:

1. Align more closely with strategic business objectives

Cyber risk management programs are often built around meeting compliance standards and regulations, which can make it difficult to align with the needs of the business. By making cybersecurity a business issue, security and business leaders can create an ERM that more accurately serves the greater goals of the organization. This alignment ensures that enterprise cyber risk management integrates seamlessly into broader risk management strategies.

2. Focus on the risk profile unique to your organization risk strategy

With emerging technologies designed to increase efficiency, each organization’s ERM program should be unique to serve their specific operational needs. A business’s technology needs are not universal, and what works for one organization might not work for another. An enterprise risk management strategy tailors its risk response to each organization’s unique digital ecosystem, including factors like financial risk and regulatory compliance.

3. Increased visibility and transparency

Comprehensive visibility and transparency make it easier to identify connections between risks and impact and assess the threats facing your organization. ERM’s broad view helps security professionals monitor issues across the entire enterprise, achieving a complete picture of risk that supports rapid, coordinated risk response, and enhances resilience against cyber incidents.

How to get the most out of your enterprise risk management (ERM) platform

Many organizations already have the information required to create a business context within an enterprise. Initiatives like meeting compliance standards, business continuity, disaster recovery, and data protection work together to highlight threats and their potential impact. The problem arises when organizations try to efficiently manage all of that data and turn it into actionable intelligence.

A cyber risk management platform can help facilitate this process by putting all of the data necessary for risk evaluation in one place, making it easier to identify connections between threats and predict the scope of impact.

Here are a few best practices to keep in mind when looking for an enterprise cyber risk management platform:

Continuous monitoring and reporting

Continuous monitoring and real-time reporting are essential for enterprise risk management to be truly effective. This approach enables organizations to maintain a clear, up-to-date view of potential cybersecurity threats and their impact, allowing for rapid response to new and emerging risks. Regular monitoring helps ensure that your security controls remain effective and aligned with evolving risks.

By integrating real-time visibility, organizations can ensure a proactive stance in their ERM efforts, identifying risks early and making swift adjustments to mitigate them before they escalate.

Quantification and measurement

Quantification is key when building an enterprise risk management program. You cannot manage what you don’t measure, so you must be able to quantify the cybersecurity risks facing your organization in terms of definite numbers, figures, and percentages. The data should be jargon-free and simple to understand so that the entire C-Suite and stakeholders can easily review relevant insights and ensure everyone is aligned.

Use all data

An enterprise risk management program that does not take advantage of all available data will not be as successful at mitigating risk. When information is separated into silos, it can lead to unexpected threats or an underestimated exposure to risk. Aggregating all of the data allows for maximum visibility and enables security managers to highlight opportunities and connections across the enterprise.

Effective comparisons

Comparing your organization’s risk management program to those of your competitors can give you a better understanding of its efficacy. This way, you can deep dive into any issues that may be affecting your industry and better prevent them from impacting your business operations.

Leverage threat intelligence

An ERM platform should empower organizations to proactively address cybersecurity and utilize all available threat intelligence, both past and present, to identify threats and other malicious activity. By understanding what has and hasn’t worked before and what risks are common within your organization or industry, you can create a strong, informed foundation to build your ERM program on. This foundation helps establish a strong enterprise cyber risk management strategy that evolves with emerging threats.

Manage your third-party vendors

Most organizations rely on third-party vendors to carry out day-to-day operations, so it’s important to consider the additional risk that they may pose to your network. Your ERM platform should help you to identify any low performing vendors and make risk connections across groups of companies. This will allow you to actively manage third-party risk.

How SecurityScorecard can help with enterprise risk management (ERM)

A cyber risk management platform should combine all the data necessary for building an effective enterprise risk management program, including both business and IT sources. SecurityScorecard supports a robust ERM platform designed for risk professionals seeking a holistic approach. 

SecurityScorecard utilizes security ratings, threat reconnaissance, compliance standards, and vendor cyber risk assessments to provide risk managers with everything they need to make important connections within the enterprise between risk and impact.

This helps security managers prioritize vulnerabilities and provides them with the insights needed to determine the next steps. A data-centric approach to enterprise risk management creates a common ground for executives and security managers that encourages collaboration across the entire organization.