Investments in IT security and risk management continue to be on the rise. The main reason is that there’s a lot to lose. According to a recent report from the International Business Machines Corporation, the average cost of a data breach in 2023 was $4.45 million, a 15% increase since 2020. 

Any technology solution that is deployed in your organization to help defend against cyberattacks, hacking and other risks must be coupled with a strong IT risk management program and best practices that are a seamless part of every employee’s workday. 

What is IT Risk Management? 

IT risk management is the continuous process of identifying, analyzing and mitigating risks while continually monitoring for new threats. While typically managed within IT departments, to be effective, IT risk management must be practiced by everyone in the organization. 

This is because any threat or vulnerability can negatively affect the integrity of your data and impact your ability to access and disseminate any information. Additionally, systems can be hacked, rendering them inoperable, causing shutdowns that can cripple any organization. 

It is critical to take the necessary steps now to measure current threats and anticipate any potential threats. Establish a clear strategy and put it into action to minimize any impact of an attack. This strategy includes technical defenses such as multifactor authentication, firewalls and anti-virus software. 

Steps in the IT Risk Management Process 

IT risk management can be broken down into five steps. All of these steps should be regularly revisited as a part of managing an IT risk management program. 

1. Identify and categorize all your IT systems and the data stored in each system. If data is stored independently of a system, understand how this data is being managed and who is managing it. Analyze the data types to understand their nature and use: is it personal, sensitive or private? Could any false usage of this data harm your business or one of your employees? In addition to evaluating your data, assess internal practices for any potential weakness, such as weak or undocumented policies and procedures or an overreliance on third-party contractors. 
2. Identify potential risks. Determine the nature of potential risks and how they can impact your organization. Generally, risks can come from inside and outside the organization, where they are deliberate or accidental. Differentiate the type of IT risk, such as cyber threats, physical threats (e.g., a fire or flood), software or technical failure, infrastructure failure (e.g., your internet connection being down), or human error. 
3. Analyze the risks. Determine how serious each risk is to your business by considering several factors such as the likelihood of appearance, potential regulatory impact, impact on business operations, financial impact and reputational impact. Perform an IT risk assessment that can take the factors you have considered and apply both qualitative and quantitative impacts. For example, quantitative measures can be the probability of the risk occurring and potential monetary loss. Qualitative measures are typically a judgment call of how likely a risk will occur, such as low, medium or high, as well as the potential impact of each of these likelihoods. 
4. Prioritize and rank all risks. Once you have analyzed the risks and created a matrix, rank each risk with respect to importance and potential impact. Which risks pose the most danger to your company’s finances, reputation and business continuity? Which risks may cause you to run afoul of regulatory rules? Once you have ranked all risks, develop a strategy that explains how you will respond to each one should an incident occur. 
5. Continuously monitor and review all risks. Risks are constantly changing, with new ones appearing every day. The IT risk management team must regularly revisit Steps 1-4. Activities that may trigger an automatic assessment could be if a new system is deployed, a large group of people are onboarded or if business processes significantly change. If a risk occurs and impacts the organization, perform a post-mortem to understand why the incident occurred and how it was managed. 

IT Risk Management Strategies 

Once all risks are prioritized and ranked by business impact, determine how IT will prevent or manage each risk. Typical strategies for preventing and managing IT risks are risk avoidance, mitigation, transfer and acceptance. 

The most common strategy is to avoid risks, such as consolidating systems or removing personal data from all systems and databases where possible. 

If the risk is unavoidable, mitigating the risk by minimizing the likelihood of occurrence will come next. That can include limiting access to certain systems, as well as limiting access to data. Look for ways to limit exposure by removing all technology that is not business-essential. 

Transferring the risk may be another option. For example, purchasing cyber insurance may protect your organization from a cyberattack or data breach. Implementing redundant systems and data backups is another way to transfer risks. Make sure your organization can make the best use of any backups by creating a business continuity plan that regularly tests your backup in case of an incident. 

Lastly, accepting a risk typically means that the cost of mitigation or transfer is greater than the potential impact of an occurrence. 

Key Risk Indicators 

As a part of an IT risk management program, well-governed organizations leverage key risk indicators, or KRIs, that monitor risk trends and indicators between risk assessments. KRIs enable your organization to monitor and quantify IT risks so that action can be taken quickly. 

Typically, KRIs link back to key business objectives and activities that relate to business operational risk, reputational risk, financial risk and regulatory risk. For example, if your organization has an operational objective to minimize data and system breaches, one KRI might be the number of concurrent system logins using the same ID. If the threshold is set to one, when there is more than one login using the same ID, an alert can be generated so the proper action can be taken in real time. 

In addition to being linked to business impact, KRIs are often used as leading indicators, current indicators and lagging indicators, thus providing valuable information on risk trends and events that may happen, your current risk state, as well as events that took place in the past that may happen again. 

When designing and creating a KRI, check that it has the following characteristics: 

1. Measurable: Indicators must be quantified and recognized as meaningful. 
2. Reportable: Indicators must be simple to collect and report. 
3. Relevant: Indicators must be directly related to key business objectives. 
4. Actionable: Any indicator must enable the right individuals to take the proper action immediately. 
5. Comparable: Indicators must be benchmarked against industry standards. This is especially important when setting thresholds. 

Create a Culture of Compliance 

Reducing IT risk and keeping a watchful eye on potential issues is not just the job of those in the IT risk management group. Employees outside of this group must play a role in the execution of a company’s IT risk management strategy. 

In a 2022 study by Tessian, just 39% of employees surveyed said they were very likely to report a security incident. Even more startling, when asked why, 25% of those surveyed said they don’t care enough about cybersecurity to mention it. 

A good way to start engaging employees is to make sure that they understand the risk culture directly from the top. The approaches taken by senior leaders when it comes to managing risk should be well understood. This is an important step that should be embedded into everyday activities so that all employees feel motivated to manage risk the same way that senior leadership does. 

Once all employees understand the leadership commitment toward risk, the IT risk management team will want to perform activities that educate and remind employees about risks and how to mitigate them: 

• Messaging: Promoting a strong risk culture across your organization means having clear and consistent messaging while using vocabulary that helps all employees understand the risk culture better. 
• Training: IT risk management and cybersecurity training must be a part of the IT risk management plan. Make sure all new employees are trained, and when employees change their role or receive a promotion, provide customized training based on their new role and responsibilities. 
• Metrics: Publish updated metrics for everyone to review. This dashboard should align with the organization’s goals for risk tolerance. Metrics could include the number of IT incidents (including severity and frequency) and actions taken to avoid, mitigate, transfer and accept risk. Consider sharing any IT risk management metrics presented to executive leadership with all employees. This will provide further motivation to improve the culture of compliance. 

Learn more about managing IT risk by exploring these related resources on KnowledgeLeader: 

External Access Risk: Key Factors You Need to Know
Consider Different Approaches When It Comes to Cybersecurity
Topic Spotlight: Risk Assessment