What do you understand the good concept and tools for risk management? How to manage risk as an entrepreneur?
Introduction
Digital security risk is the threat that causes certain losses or damage to computer software, hardware, data, or information (Digital Security Risk - Protection & Solutions | ProofPoint US, 2020). A few main types of digital security risks include DDoS attacks, phishing attacks, data breaches, ransomware, and many more. All these malicious events will damage entrepreneurship by data leaking, server unavailable, and damage to credit scores (Ernest, 2023). To avoid all these potential losses, entrepreneurs should know the essentials of risk management to prevent the potential threat to the organization.
Risk management is a kind of strategy that helps entrepreneurs monitor, address, and treat the arising risks from digital transformation (RiskOptics, 2023). However, knowing the management of risk is not enough for an entrepreneur to avoid and eliminate the risk. This is because the malicious event trick emerges endlessly, disaster will come at any time if entrepreneurs are not concerned about this issue. Therefore, entrepreneurs also require rich knowledge of a variety of risk management concepts and tools in their business.
In this
blog, we will be looking at a few famous risk management concepts and tools
that could help entrepreneurs minimize or eliminate the digital security
risk that might be faced by entrepreneurship.
Root
Cause Analysis
Root Cause Analysis (RCA) is one of the risk management tools to discover the root causes of problems to identify appropriate solutions
to solve them. This process assumes that it was more effective to
systematically prevent and solve the underlying issues compared to just
treating ad hoc symptoms and putting out the fire (Root Cause Analysis Explained: Definition, Examples, and
Methods, n.d.).
The concept of the RCA works in a few steps. Firstly,
identify and understand the problem and it is vital to analyze the
organization’s issues that call for reallocating resources to address the
solutions at hand. Secondly, determine the potential causes and collect data to
determine whether there are any correlations between the variables. Finally,
perform the data analysis to find the causative variables and the core causes
of those causal factors to develop the final recommendation solution (BasuMallick, 2022).
In conclusion, a good Root Cause Analysis not only reveals a
system of causes but can also provide more opportunities to reduce the
risks.
ISO
31000 Risk Management
Effective risk management is critical for an organization to
consider all risks it may encounter, that could affect its strategies and
goals. One of the effective tools that can effectively help organizations
conduct risk management is the ISO 31000 Standard, developed by the
International Organization for Standardization (ISO). The standard has five
main steps: identify risks, analyze possible impact, evaluate risks, handle
risky situations, monitor outcomes, and make necessary modifications (Tucci
& Stedman, 2023).
To maximize the use of the Standard, ISO worked with COSO to
develop a widely recognized framework, the COSO Enterprise Risk Management
Framework. This framework provides better integration of industry and
government compliance regulations, as enterprise risk management procedures
come under heightened regulatory and board-level scrutiny. Referring to the
COSO ERM Cube, there are eight key components on the front panel: internal environment,
objective setting, event identification, risk assessment, risk response,
control activities, information and communication, and monitoring. All these
components must be worked and integrated together to perform high-quality of
risk management (Sadoian, 2023).
Key
Risk Indicators
Moreover, Key risk indicators (KRIs) are one of the risk management tools that are used widely among users and organizations. KRIs are measurements
that can provide insight into potential threats and give data to assist users
in prioritizing how they respond to various threats. KRIs can be used to set
baselines, track changes over time, and evaluate several facets of an
organization's security posture (Shearman, 2023).
KRIs are essential for quantifying and reducing exposure to
cyber risk. KRIs could incorporate cybersecurity threat indicators, such as the
number of malware infections found, phishing attempts, or efforts at
unauthorized access. Another crucial feature of an efficient KRI is the
continuing process of analyzing KRIs and metrics to identify any changes that
require management assessment and potential action. This guarantees that
the risk monitoring process is dynamic and responsive to new threats and
organizational changes, hence improving risk management effectiveness (Kirvan
& Tucci, 2023).
SWOT
Analysis
In the area of digital security and business,
entrepreneurs can use SWOT analysis as a tool for risk management, which offers
several advantages. This organized approach begins with a thorough assessment of
both internal and external variables, providing an entire overview of the
business environment's risks and opportunities. SWOT analysis was created for
strategic planning, but it is also beneficial in digital risk management.
SWOT analysis also allows entrepreneurs to identify internal
strengths and weaknesses, such as strong encryption procedures or inaccurate
software systems, as well as outside possibilities and threats, such as
new cybersecurity regulations or evolving hacking techniques.
Furthermore, SWOT analysis enables enterprises to create
specialized strategies that capitalize on digital advantages and opportunities
while reducing weaknesses and risks. For example, identifying strengths in
employee cybersecurity training programs can be used to reduce the threat of
phishing attacks, while identifying imperfections in network security protocols
can encourage investments in improved cybersecurity protections (SWOT Analysis:
Definition, Guide, & Example | SafetyCulture, 2023b).
Conclusion
As we
enter the era of technology, digitization has quietly permeated every aspect,
particularly integrating into the strategies of various enterprises or banks.
However, this integration of digitization has also led to rapid development and
almost reformation of the field in a short period. Regardless of
customer experience, revenue, or cost, the integration of digitization has
brought about obvious positive results （Ganguly
et al.，2017）.
Nowadays, many large enterprises are gradually paying attention to and
attempting to incorporate digital management. Due to the massive scale of
enterprises, inevitable resource and talent fragmentation have reduced overall
allocation and efficiency（Bevan et al.，2019）.
Therefore,
after attempting digital management, it is evident that the benefits outweigh
the risks, instilling more confidence in digital management among many
enterprises. Given this scenario, and based on various information provided,
the importance of digital risk management is evident. In conclusion, digital
risk management should be continuously strengthened. It is hoped that through
continuous development and digital risk management, the benefits in all aspects
can be upgraded again, achieving a state of high risk but still stability.
References:
SWOT Analysis: Definition, guide, &
example | SafetyCulture. (2023, December 13). SafetyCulture. https://safetyculture.com/topics/swot-analysis/
Shearman, P. (2023, June 30). Key risk
indicators in cyber security - Red Goat. Red Goat. https://red-goat.com/key-risk-indicators-in-cyber-security/
Kirvan, P., & Tucci, L. (2023,
September 8). key risk indicator (KRI). CIO. https://www.techtarget.com/searchcio/definition/key-risk-indicator-KRI
Sadoian, L. (2023, November 8). Effective
Risk Management: the COSO ERM Framework | UpGuard. https://www.upguard.com/blog/coso-erm-framework#:~:text=The%20COSO%20Enterprise%20Risk%20Management
Tucci, L., & Stedman, C. (2023,
September 11). What is risk management and why is it important?
Security. https://www.techtarget.com/searchsecurity/definition/What-is-risk-management-and-why-is-it-important
Digital Security Risk - Protection &
Solutions | ProofPoint US. (2020, September 18). Proofpoint. https://www.proofpoint.com/us/solutions/digital-risk/digital-security-risk-protection-solutions
Ernest. (2023, August 22). Digital
Security Risk: Overview, types, and key applications - Security Boulevard.
Security Boulevard. https://securityboulevard.com/2023/08/digital-security-risk-overview-types-and-key-applications/
RiskOptics. (2023, February 9). What Is
Digital Risk Management? https://reciprocity.com/blog/what-is-digital-risk-management/#:~:text=Digital%20risk%20management%20refers%20to,IT%20systems%20that%20process%20it.
Root Cause Analysis explained:
Definition, examples, and methods. (n.d.). Tableau. https://www.tableau.com/learn/articles/root-cause-analysis#benefits-goals
BasuMallick, C. (2022, August 18). What
is Root-Cause Analysis? Templates and Examples - Spiceworks. Spiceworks. https://www.spiceworks.com/tech/devops/articles/what-is-root-cause-analysis/
Ganguly, S., Harreis, H., Margolis, B.,
& Rowshankish, K. (2017, February 10). Digital risk: Transforming risk
management for the 2020s. McKinsey & Company. https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/digital-risk-transforming-risk-management-for-the-2020s
Bevan, O., Freiman, M., Pasricha, K.,
Samandari, H., & White, O. (2019, April 25). Transforming risk
efficiency and effectiveness. McKinsey & Company. https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/transforming-risk-efficiency-and-effectiveness
WORKLOAD TABLE
Name | Topic |
ERIN CHUNG SHING (TP070387) | Key Risk Indicator (KRI) |
FOO JING SZE (TP070845) | Root Cause Analysis |
CHUAH XIN YI (TP070340) | SWOT |
CHONG PEY SHAN (TP070414) | Introduction |
GOO MAY SHYN (TP070055) | ISO 31000 Risk Management |
LEE WAN CHIEN (TP070220) | Conclusion |
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