Risk management, where to start?

Risk management is an increasingly important part of business operations. Not only to manage risks but also to see and capitalize on opportunities. There are many, more or less complex theoretical models and principles that we try to bring back to the core to keep it simple and practical to implement. In this blog we explain how to get started with risk management.

The purpose of risk management

The goal of risk management is to identify, assess, and respond to risks. The ideal risk management process for an organization is a clearly defined method for understanding which risks and opportunities exist, how they might affect the organization, and how to respond to them. The four essential steps of the risk management process are: 1. Identify the risk. 2. Assess the risk. 3. Address the risk (blog). 4. Monitor and report on the risk. Below, we’ll take a closer look at step 1—identifying risks—and step 2—assessing risks.

Step 1: Risk identification

The first step in the risk management process is identifying all events that could have a negative (risk) or positive (opportunity) impact on the organization’s objectives. These events can be recorded in a risk register. Of course, you could list these risks yourself, but that’s quite a bit of work. That’s why Perium offers you the solution. Perium already includes the most common and relevant security and privacy risks, which are available for your organization. All you have to do is assess them (see step 2). With Perium, you can easily keep track of all possible risks, and if you want to add specific risks, you can do so with just a few clicks. It’s important that risks have owners. These are the employees who are responsible for the risk and have the knowledge and authority to manage it. In the Perium platform, you can add owners and specific actions to address the risks.

Step 2: Assess the risk

There are many ways to conduct a risk assessment. These range from a pragmatic workshop with a few employees to detailed methodologies. It’s important that the approach aligns well with the organization’s needs and that the right people are involved in this step. We do recommend documenting the approach so that this process is repeatable and becomes (increasingly) reliable. You can assess risks—and, in particular, record the results of that assessment—in Perium. You can efficiently record the results of the process, regardless of the specific process your organization has followed.

How do I conduct a risk assessment?

Basically, there are two main elements that need to be determined: 1. The risk score (probability x impact) 2. The risk strategy These elements affect your risk management. This is because when you determine the risk score, you get an overview of the likelihood of risks occurring and the impact these risks can have on the business. You then use the risk strategy to manage the risks to an acceptable level.

The risk score

A risk assessment helps you determine the likelihood that a risk will materialize and what impact that would have on the organization. The results are recorded in the risk table with a score for gross risk (also known as inherent risk before implementing control measures) and net risk (also known as residual risk after implementing control measures). Probability and impact are typically scored on a scale from 1 (low probability, low impact) to 5 (high probability, high impact). Probability multiplied by impact equals the risk score. A gross risk is therefore a risk without control measures, and a net risk is a risk that includes (active) control measures. Ideally, the probability and consequences of a gross risk are first assessed, and then it is determined whether any control measures are already in place that reduce the probability or consequences of the risk. If the existing control measure is functional or effective, the probability or consequence of the net risk is lower. It is, of course, important for your organization to know how this risk score relates to the risk tolerance threshold. The risk tolerance threshold refers to the risk that the organization is able and willing to bear. Threshold levels for risk exposure are approved in advance. If these thresholds are exceeded, the matter must be escalated to management, for example. The level of risk is determined by the net risk score (= probability × impact) and is compared to the risk tolerance threshold. The result of this step provides insight into which risks are acceptable and which are not. These elements (risk score, probability and impact, gross and net risk, risk tolerance threshold) are also available in Perium. Perium also provides a link between the risks and possible control measures. This allows you to manage risks clearly and centrally in one place.

Risk strategy

The next step is to determine how to control the risks, which you as an organization do not consider acceptable, and bring them back to an acceptable level. There are several ways to control or mitigate a risk:

• Avoidance. For example, when policy choices or a business process within your organization involves too much risk, you may choose to change the policy or end the process.
• Reduce. Addressing the cause of the threat is also part of reducing the risk. Management measures are used to try to reduce the probability and impact. These measures are, as it is called, repressive, damage control.
• Outsource. If the organization is risk-averse, it may choose to outsource an entire process, for example. The party taking over the process then also takes on the risks. This is also called transferring or outsourcing.
• Accept. Is the risk too small, or does the necessary investment outweigh the positive outcomes after taking control measures? The possible consequence of the occurrence of the risk is then accepted.

You therefore determine your risk strategy based on the risk scores and the type of risk you face—and, ultimately, the risk you’re willing to take. In Perium, the risk management platform , you can easily make this assessment because you’ve assigned all risks to the responsible individuals, have a clear overview of the risk scores, and know the extent to which you’re willing to take risks. Based on the steps above, your organization can determine how to address the risks in a risk treatment plan. In the next blog post, we’ll delve deeper into this and also discuss monitoring and reporting on risks.

Risk Management with Perium

Risk management is an important step for every organization. With Perium, you can carry it out effectively and efficiently. Perium is the platform for risk management. You’ll be up and running in less than half an hour. Plus, you can easily add specific management requirements to the platform.