The essential guide to implementing risk management frameworks

Every business engages with risk. When you invest in a new product, undergo a leadership change, or enter a new market, you're introducing risk to your organization. With some risk appetite, it's easier to reap the rewards of these efforts. 

Too much risk, either internally or from external threats, can stop your operation entirely. To find the balance, you need robust procedures to help you understand and manage risks proactively.

A risk management framework (RMF) will help your business identify, categorize, evaluate, and manage risks in accordance with your business objectives. This will help you better protect your data, safeguard your investments, and secure long-term growth. 

Let’s explore how to implement a successful risk management framework from the ground up to ensure your business continues to thrive. 

What is a risk management framework?

A risk management framework (RMF) is a set of protocols that help your business identify and manage risk. It's all about creating a robust foundation of policies and procedures that you can use to uncover threats and develop best practices to mitigate or avoid them. 

Every risk management framework is different. It depends on your business's challenges and current risk maturity model. That said, most RMFs will contain five primary components: 

• Risk identification: Identifying and categorizing your company's risks to gain an overview of your risk landscape.
  
  
• Risk assessment: Measuring your exposure to each risk and the probability that those risks could impact your business, for example vendor risk.
  
  
• Risk mitigation strategies: Deciding which business risks you should eliminate, avoid, minimize, or retain.
  
  
• Risk monitoring and control: Regularly evaluate and report on risk to ensure risk levels remain acceptable.
  
  
• Risk governance: Establishing policies and assigning roles and responsibilities to ensure all risk procedures are followed organization-wide. 

A risk management framework isn’t a one-and-done concept. It’s an ongoing commitment. You’ll usually update your RMF when you embark on a new strategy or expand your workforce. You’ll also iterate your RMF when new threats emerge and in response to evolving compliance obligations. 

Why are risk management frameworks important?

In today's interconnected business landscape, organizations face risks from all angles. There's much to consider between cyber threats, regulatory changes, supply chain concerns, and financial risks. 

Organizations must manage risk to ensure business continuity. It only takes one mistake in the digital age to negatively impact your reputation and suffer serious financial consequences.

What are the benefits of effective risk management frameworks?

To elaborate on why risk management frameworks are so important for organizations, let’s briefly explore some of the benefits. 

• Improved decision-making: Understanding your risk universe allows you to take a definitive stance on the threats you face. This enables more decisive decision-making, reducing resource wastage and improving efficiency.
  
  
• Enhanced organizational resilience: When you know how to identify and mitigate risks, you’re better prepared to deal with threats. This makes you more resilient and supports business continuity management.
  
  
• Compliance with regulations: A robust RMF helps you continuously comply with legislation such as the GDPR, SOC 2, ISO 27001, or other laws relevant to your organization.
  
  
• Cost savings: Implementing an RMF may seem like a steep expense, but it’s much cheaper to prepare proactively than it is to deal with threats and risks retroactively. Your risk management framework may be one of your business's smartest investments. 

What are the most popular types of risk management frameworks available?

There is no single definitive RMF. While the National Institute of Standards and Technology (NIST) framework is the most common, many options are based on your requirements. Let’s explore a handful now. 

NIST cybersecurity framework

The NIST RMF was created in 2014. It offers a voluntary cybersecurity framework to protect organizations' critical infrastructure against cyber risks. 

This global standard is widely considered the model for a risk management framework. As such, it is especially popular with government, finance, and healthcare organizations that need a high degree of cybersecurity. 

COSO ERM framework

The Committee of Sponsoring Organisations of the Treadway Commission (COSO) is a private-sector initiative integrating risk management with strategy and performance management. It contains six essential steps:

1. Categorize: Classify your data through an impact analysis 
2. Select: Use risk assessments to determine the security controls required
3. Implement: Implementing security controls to mitigate risks
4. Assess: Evaluate the established controls to measure their effectiveness
5. Authorize: An authoritative individual in the business makes the system operational
6. Monitor: Continuously monitor the controls and adapt as risks evolve

The COSO ERM is one of the most comprehensive risk management frameworks, meaning it is commonly used by governments and financial businesses that require robust risk management strategies for data protection and privacy. 

ISO 31000

The ISO 31000 international standard offers guidelines for managing risk for organizations of any size in any industry. It prioritizes integrating risk management with every aspect of an organization, such as decision-making processes and day-to-day procedures. 

OCTAVE

Operationally Critical Threat, Asset, and Vulnerability Evaluation (OCTAVE) helps organizations manage information security risks. It offers a framework to help businesses identify crucial information, evaluate threats, and work to patch vulnerabilities that could leave information at risk. 

COBIT 5

COBIT (Control Objectives for Information and Related Technology) is a framework developed by the Information Systems Audit and Control Association (ISACA). It helps IT-based companies manage risks, control requirements, and resolve technical issues. The framework covers every aspect of risk management related to IT assets, operations, and procedures. 

TARA

Threat Assessment for Remediation Analysis (TARA) offers a framework for identifying, evaluating, and combating cyber vulnerabilities. It involves identifying both the objectives and methods of threat agents and using this information to build out an effective cybersecurity strategy. 

FAIR

Factor Analysis of Information Risk (FAIR) offers a unique cybersecurity framework for understanding and measuring information risks. Rather than relying on qualitative methods, it creates a common, quantifiable language for communication between technical and non-technical.

How to implement a risk management framework?

Choosing one of the risk management frameworks above is good practice as a basisfor your risk management strategy. You can then customize your framework to suit your needs and objectives. 

Before you begin with this process, we recommend completing two precursory steps:

• Set objectives: Make sure your key stakeholders and leaders are aligned on the goals of your risk management strategy.
• Define your risk appetite: Establish how many calculated risks your organization can handle without compromising stability.

These two steps will align your entire organization and ensure everyone has the same mindset as you create and implement your RMF. 

1. Understand your risk universe (risk identification) 

Before you can protect yourself from risks, you need to know where those risks lie. Every successful risk management framework begins with a firm grasp of the existing and emerging threats that make up your risk universe. 

Start by identifying potential risks and sorting them into specific categories. We recommend having different subsets for risks, such as:

• Cyber risk
• Data breach risk
• Compliance risk
• Third-party risk
• Data risk
• Supplier risk
• People risk
• Geopolitical risk
• Health and safety risk
• Financial risk
• Privacy risk
• Reputational risk
• Strategic risk

You can further categorize identified risks as either core risks or non-core risks. 

• Core risks are the risks that promote business continuity, such as entering a new market. This is a risk, but it could also help your business grow.  

• Non-core risks are risks you’d rather avoid, such as falling victim to a cyber attack. You should take the necessary steps to eliminate or mitigate this risk. 

Identifying and categorizing risks is personal to every business. Smaller businesses may be able to rely on brainstorms and SWOT analyses to uncover potential risk factors. 

However, taking a quantifiable approach based on data analytics is a good idea for enterprise risk management frameworks. Take stock of where your data lies using a records management solution like RecordPoint. This will allow you to uncover risks quickly and develop a data-led approach to risk identification that you can apply across all business units. 

2. Prioritize risks per your risk appetite (risk assessment)

The next step is to prioritize risks based on your risk tolerance. Ultimately, before you can implement your RMF, you need to take a look at each risk and decide whether to:

• Mitigate the risk if the benefits outweigh the impact, and there are actionable steps you can take to reduce the likelihood of the risk. 
• Accept the risk if the benefits outweigh the impact and it is too challenging to mitigate. 
• Refuse the risk (avoid the risk) if the impact outweighs the benefits and you cannot quickly mitigate the risk. 
• Transfer the risk if the impact outweighs the benefits, and you can shift the risk to a third party.

For each risk, estimate:

• What is the likelihood of this risk occurring?
• What is the potential impact if this risk materializes? 

Following this, you can categorize your risks into a risk matrix such as the one below:

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By classifying risk this way and comparing each assessment to your risk appetite, you can determine whether the risk is worth taking, mitigating, avoiding, or eliminating.

3. Select suitable security controls

Next, you must use all the information you’ve gathered to treat the risks. This includes integrating adequate external and internal controls to protect your infrastructure. Examples could include:

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• Physical controls
  • Fences, gates, and walls
  • Guards and security
  • Access cards and biometrics
  • CCTV
  • Fire suppression systems
  • Humidity controls and HVAC
    
    
• Technical controls
  • Firewalls and antivirus software
  • Intrusion detection systems (IDSs)
  • Constrained interfaces
  • Access control lists
  • Cybersecurity systems
    
    
• Administrative controls
  • Policies and procedures
  • Employee training
  • Employee hiring guidelines
  • Equipment usage protocols
  • Data classification requirements
  • Internal audit management

The proper security controls to mitigate risk will depend on the nature of the risk itself. It's essential to take a granular approach to risk management. An effective control for one risk is not necessarily the proper control for another. Choose a control that aligns with your understanding and evaluation of each threat. 

4. Implement and communicate with teams

Once adequate security controls are identified, it's time to implement them and communicate this to your team. 

Risk management is an ongoing process. Ensuring your teams do their part to work within your RMF is crucial. This is the concept of risk governance, the idea that everyone has to create a risk management culture within an organization. 

A strong risk culture lives and dies through practical training. All employees should clearly understand their role in the framework and what they need to do to fulfill it based on policies and procedures.

5. Risk reporting and monitoring to improve

Finally, you should consistently review your risk management program to iterate and refine it. Use data analytics to continually evaluate your risk, gain insights into the effectiveness of your RMF, and make informed decisions. 

Constant monitoring is essential for two reasons. First, it lets you view where your RMF is succeeding and failing. Second, it allows you to identify new risks and evolving potential threats, enabling you to introduce new security controls as additional risks emerge. 

Keep a written record of your progress during this time. Document policies and risks at all times so your entire organization is aligned with your framework. These risk records can also serve as evidence to help with regulatory compliance. 

How can RecordPoint help support your risk management?

With Recordpoint’s cloud-native solution, you can discover, govern, store, and control your data records in place, no matter where they lie, without ever having to move a thing.

Our data inventory and categorization tools will help you identify, classify, and label unstructured and structured data stores, giving you an overview of all risk vectors. You can also automatically classify personally identifiable information (PII), so it’s easy to locate and audit. 

With an understanding of your data stores, you can implement security measures to achieve data security and protect your sensitive information. With total visibility of your entire data catalog, you can proactively contain risks, safeguard your data, and automate compliance.

Effective risk management starts with knowing your data. RecordPoint can help enable you to build a reliable RMF that safeguards your assets and drives business continuity. 

Schedule a demo today or read our helpful guide on how RecordPoint can help you discover and manage data throughout its lifecycle. 

FAQs

Can a small business benefit from using a risk management framework?

Yes. Any business of any size can benefit from an RMF. No matter your industry or scale, a risk assessment process can help you prepare for the future and make more informed decisions across every business unit. 

How often should a risk assessment be conducted?

At least annually, though we recommend conducting risk assessments more regularly; threats evolve fast, especially regarding cyber risks. The more you review and monitor your risk assessment process, the better prepared you are for the unexpected. 

Is there a standard risk management framework that suits all industries?

No single framework is built for all industries. That said, many can be adapted for different businesses. The ISO 31000 risk management framework is an excellent example of this. 

Which risk management framework is best for cybersecurity?

The NIST cybersecurity framework is typically regarded as the best for cybersecurity risks. It’s one of the most comprehensive frameworks available, which is why it’s regularly used by federal agencies, healthcare, and financial businesses that have a surplus of sensitive data.