What is IT Risk Management? A Complete Guide

As your company embraces its digital transformation strategy, you’re increasing your reliance on cloud services providers (CSPs). With more vendors accessing your information, you increase the complexity of your enterprise risk management program. A compromised vendor doesn’t even need to be a company with whom you do business.

In addition to third-party vendors, fourth or fifth party service providers who experience a data breach can leave your organization’s information vulnerable to malicious actors. Understanding information risk management and how to mitigate these risks can be the first step to protecting yourself and your customers.

What is information risk?

Information risk — also known as technology risk — is a calculation based on the likelihood that an unauthorized user will negatively impact the confidentiality, integrity, and availability of data (the three core components of the CIA triad) that you collect, transmit, or store. More specifically, you need to review all data assets to ensure:

• Confidentiality: Establish and enforce appropriate authorization controls so that only users who need access have access
• Integrity: Establish and enforce controls that prevent changing information without data owner permission
• Availability: Establish and enforce controls that prevent systems, networks, and software from being out of service

What is information technology (IT) risk management?

IT risk management — also called information security risk management — consists of the policies, procedures, and technologies that a company uses to mitigate threats from malicious actors and reduce information technology vulnerabilities that negatively impact data confidentiality, integrity, and availability.

Why is IT risk management important?

By identifying and analyzing potential vulnerabilities with an enterprise IT network, organizations can better prepare for cyber attacks and work to minimize the impact of a cyber incident, should it occur. The procedures and policies implemented with an IT risk management program can help guide future decision-making about how to control risk while focusing on company goals.

What are the steps in the IT risk management process?

Critical steps that organizations engaging in an IT risk management (IRM) program need to perform include: identifying the location of information, analyzing the information type, prioritizing risk, establishing a risk tolerance for each data asset, and continuously monitoring the enterprise’s IT network.

Breaking down these 7 steps further shows how they are relevant for an effective IT risk management program:

1. Identify potential points of vulnerability

Conceptually, identifying the locations where your data resides seems simple enough. Most organizations start with their databases or collaborative applications. However, as more companies embrace cloud-first or cloud-only strategies, data becomes more dispersed and vulnerable to cyber threats.

Organizations no longer solely store data in on-premises servers. Many now use serverless or other cloud-based storage locations such as shared drives. Additionally, many organizations collect data in new ways such as via customer-facing web portals. New data transmission channels, such as email and messaging services, also change how organizations share information with internal and external stakeholders.

Cloud-based data collection, transmission, and storage locations pose a higher risk of theft because organizations often lack visibility into the effectiveness of their controls. Thus, server hardware in an on-premises location may be a lower risk than a cloud-based server. When engaging in an information risk assessment, you need to identify the myriad of locations and users who “touch” your information.

Essentially, the traditional enterprise risk model has changed, and you need to be prepared to expect the unexpected. Different technology risks don’t stay in their own swim lanes. Security and vendor risk management teams need a holistic and integrated approach to adequately identify and continuously monitor potential points of vulnerability within your business ecosystem.

2. Analyze data types

Not only do you need to know where your data resides, but you also need to know what data you collect. Not all types of data are created equally. Personally identifiable information (PII) includes data such as name, birth date, social security number, or even IP address. Since malicious actors often target PII because they can sell it on the Dark Web, the information is a high-risk asset.

Meanwhile, you also store low-risk information, such as marketing copy. If malicious actors obtain a copy of a blog post, for instance, they can’t sell that online.

Identifying the types of data your organization stores and aligning that to the locations where you store your information act as the basis for your risk analysis.

3. Evaluate and prioritize the information risk

Now that you’ve reviewed all data assets and classified them, you need to analyze the risk. Each data asset type resides in a particular location. You need to determine how the risk each poses overlaps and impacts the potential for a malicious actor to attack. The best way to do this is to calculate:

Risk Level = Likelihood of a data breach X Financial impact of a data breach

For example, a low-risk data asset, such as marketing copy, may be in a high-risk location such as a file-sharing tool. However, the financial impact on your company if a malicious actor steals the information is minimal. Thus, this might be categorized as low or moderate risk.

Meanwhile, a high-risk data asset, such as a consumer medical file, in a moderate risk location, such as a private cloud, would lead to a large financial impact. Thus, this would almost always be considered a high risk to your organization.

4. Set a risk tolerance and establish IT risk management processes

Setting your risk tolerance means deciding whether to accept, transfer, mitigate, or refuse the risk. An example of a control for transferring risk might be purchasing cyber risk liability insurance. An example of a control for mitigating risk might be to put a firewall in place to prevent access to the location where the data resides.

Mitigating controls, such as firewalls or encryption, act as roadblocks for malicious actors. However, even mitigating controls can fail.

5. Mitigate existing risks

Along with establishing risk management processes, you will want to establish mitigation techniques for the risks identified as beyond the risk tolerance. These controls include:

• Executing well on basic security measures
  • Employing firewalls, encryption, multi-factor authentication, and intrusion detection systems to protect against cyber threats.
  • Regularly updating and patching software to address known vulnerabilities and weaknesses.
  • Conducting security awareness training for employees to educate them about potential risks and how to mitigate them.
• Data Backup and Recovery
  • Establishing a robust backup and recovery strategy to ensure that critical data can be restored in the event of data loss or system failure.
  • Conducting regular backups and storing them in secure offsite locations to protect against physical disasters like fires or floods.
• Business Continuity and Disaster Recovery Planning:
  • Developing and regularly updating a comprehensive business continuity plan to ensure that essential business functions can continue in the event of a disruption.
  • Testing the disaster recovery plan periodically to validate its effectiveness and make necessary improvements.

6. Leverage a data security solution

To reduce the burden on internal teams, it’s recommended to invest in a data security solution for critical risk scenarios. Investing in data security solutions can decrease the potential of internal threats by keeping access to data in the hands of security professionals.

7. Continuously monitor your risk

Malicious actors never stop evolving their threat methodologies. As companies get better at identifying and protecting against new ransomware strains, malicious actors have responded by focusing more on cryptocurrency and phishing. In other words, today’s effective controls might be tomorrow’s weaknesses.

What are the best practices for information risk management?

An effective IT risk management program should use a combination of different policies and strategies, as attacks can come in many forms and what works for one data asset might not be successful for another. However, there are overarching actions that all organizations can take to begin strengthening their cybersecurity posture. Most importantly, it is imperative that enterprise security teams have continuous monitoring in place to ensure that cybersecurity efforts are keeping up with the evolving threat landscape.

Here are 6 best practices for managing your organization’s IT risk management program:

1. Monitor your IT environment

Continuously monitoring your IT environment can help your organization detect weaknesses and prioritize your remediation activities.

Key components of effective real-time monitoring include:

• Utilizing advanced monitoring tools to track network activity, system performance, and security events in real-time.
• Setting up alerts and notifications to promptly identify and respond to unusual or suspicious activities.

For example, many organizations struggle with cloud resource configuration. News reports often mention “AWS S3” buckets. These public cloud storage locations are not inherently risky, but a failure to appropriately configure them leaves them open to the public, including attackers. Continuously monitoring your IT environment can help detect misconfigured databases and storage locations to better secure information.

2. Monitor your supply chain

Third-party vendor risk mitigation also acts as an important part of your IT risk management strategy. While you can control your vendors (by establishing clear contractual agreements that define security expectations and responsibilities), you may not be able to assert the same contractual obligations against their vendors. As part of your holistic information risk management strategy, you need visibility into the cybersecurity posture across your ecosystem.

For example, if your vendor’s vendor uses a cloud database and stores data as plain text, then your information is at risk. Continuously monitoring your supply chain for encryption, a way to make the data unreadable even if an attacker accesses it, provides visibility into your ecosystem’s cyber health.

3. Monitor compliance

As data breaches command more new headlines, legislative bodies, and industry standards organizations have released more stringent compliance requirements. Several new laws such as the General Data Protection Regulation (GDPR), DORA, and the recent SEC rules make it clear that a robust cybersecurity program is essential for regulator compliance.

To create a compliant IT risk management program, you need to be monitoring and documenting your activities to provide assurance to internal and external auditors. As you continuously monitor your enterprise’s IT ecosystem, you need to prioritize remediation actions and document your activities, providing your auditors proof of governance.

4. Having an Incident Response Plan

A proactive incident response plan helps minimize the impact of security incidents or technology failures and facilitates a swift return to normal operations. Key components of effective incident response include:

• Developing a comprehensive incident response plan that outlines roles, responsibilities, and actions to be taken in the event of a security incident.
• Conducting regular drills and simulations to test the incident response plan and improve its effectiveness.

5. Educating and Communicating to Stakeholders

Clear communication and education of stakeholders, including employees, partners, and customers, are vital components of a robust technology risk management strategy.

• Employee Training:
  • Providing regular training and awareness programs to employees to educate them about potential risks and the organization’s technology policies and procedures.
  • Encouraging a culture of security and accountability among employees.
• External Communication:
  • Communicating openly and transparently with customers and stakeholders about the organization’s approach to managing technology risks.
  • Providing information about security measures, privacy policies, and incident response procedures to build trust and confidence.

6. Continuous Improvement and Adaptation

Technology risk management is not a one-time effort but an ongoing process that requires continuous evaluation, adaptation, and improvement. Organizations should stay updated on emerging technologies, evolving threats, and best practices in risk management to enhance their strategies and effectively mitigate future risks.

Conduct regular reviews of the risk management strategy to assess its effectiveness and make necessary adjustments based on changes in the technology landscape and organizational needs. And of course, learn from incidents; analyzing security incidents and technology failures to understand the root causes and implement preventive measures to avoid similar incidents in the future is foundational to continuous improvement.

How SecurityScorecard enables better IT risk management

SecurityScorecard’s security ratings platform provides continuous insight into the effectiveness of your IT risk management program. Our platform collects publicly available information from across the internet and then correlates that information for insight into ten factors, including IP reputation, DNS health, web application security, network security, leaked credentials, hacker chatter, endpoint security, and patching cadence.

Using an easy-to-read A-F grading system, SecurityScorecard’s platform provides at-a-glance visibility into an organization’s holistic cybersecurity posture, drilling down to the individual factors. These ratings help organizations view their strengths and their weaknesses so that they can prioritize their IT risk management strategies.

SecurityScorecard also includes capabilities for third-party risk management to help manage supply stream information risk more effectively. The platform incorporates portfolio creation so that you can review vendor risk by the individual vendor, cohort, or industry. These capabilities alert you to potential risks so that you can communicate with vendors to better secure your information.

With the right IT risk management program, organizations can confidently analyze and manage their networks – including those of their vendors and service providers – mitigate risks and vulnerabilities, and stay ahead of threat actors.