Aligning IT risks with Enterprise Risk Management (ERM)

Unlike ERM, IT risks are often addressed within siloed departments such as cybersecurity, regulatory compliance, business continuity, IT operations, and project management. 

To help pave the way to successful integrated risk programs, leaders in IT, security and risk leaders should:

- Explore and identify risks by category, such as financial, reputational, regulatory, operational, and strategic. Be sure to consider the entire lifecycle of risks.

- Determine your organization’s tolerance for risk, and then identify processes and controls that can reduce the likelihood and impact of inherent threats. Risk mitigation also should include opportunities to improve IT processes and overall operations.

- Develop a custom risk-response strategy and implement measures to contain risks at acceptable levels. Organizations should integrate this strategy with business continuity programs to create a comprehensive plan for resuming core operations for the short, middle, and long terms.

Once the foundational elements are in place, organizations can use qualitative and quantitative metrics to further refine the integrated plans using risk evaluation. Robust metrics examine three key dimensions of risk: the likelihood, potential consequences, and velocity of risks. Companies can calculate risk severity by measuring possible hindrances to overall enterprise objectives. The following outlines metrics for the three risk dimensions.

1. Likelihood — Plot the likelihood of risks on a numeric scale and include a threshold at which a risk becomes a business priority. For instance, a company might assign a risk value to threats on a numeric scale of 0 to 25 and prioritize those ranked at 15 and above. 

2. Impact — Estimate potential damage by identifying likely consequences such as lost productivity, lower revenues, system downtime, reputational damage, and response and remediation costs. For a more complete forecast, factor in the duration of impact: the hours, days, weeks, or months that systems and processes will be compromised or inoperable.

3. Velocity — Understand the destructive capacity of risks by factoring in velocity. This comparatively new metric tracks the speed at which a threat can spread and affect operations across the enterprise. Organizations can measure velocity by using simple qualitative metrics like high, medium, or low. A quantitative comparison will be similar to the duration of impact.

These metrics help organizations plan pre-emptive controls and post-incident responses to address threats and mitigate impact more quickly.  Companies should embed the results of the metrics in corporate strategy, business drivers, and a risk-aware corporate culture, then align them with overall ERM and organizational priorities.

Rapid changes in technologies, compliance requirements, and threat complexity make it more difficult to prepare for and mitigate risks. Alignment of ERM and IT risks helps organizations implement a defined, effective, and repeatable approach to assess and prioritize threats. It can also improve processes and reduce the costs of disruptive incidents. The most agile organizations develop their integrated risk management plans as a digital program and integrate it with digital transformation initiatives.

Bhavesh Vadhani, Principal

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