IT risks are business risks. They are associated with the use, ownership, operation, influence and adoption of IT within a company. Positive risks could be enablers for new business initiatives and efficient operations, which increase a business' competitive advantages. Negative risks could cause service interruptions, security problems, poor project quality, and project overruns, which bring negative impact on the business operations. And, of course, there are also compliance issues to consider.
Applying good risk management practices should provide tangible mitigating strategies and business benefits, e.g., fewer operational surprises and failures, increased information quality, greater stakeholder confidence, reduced regulatory concerns, and relevant and innovative applications supporting new business initiatives.
IT Risk Categories and Identification
- IT Benefit/Value Enablement
- IT Program and Project Delivery
- IT Operations and Service Delivery
Not all IT risks are negative. IT benefit/value enablement risks are associated with opportunities to use technology to improve efficiency or effectiveness of business processes, or as an enabler for new business initiatives.
These IT risks are associated with the contribution of IT to new or improved business solutions, usually in the form of projects and programs. Examples of the risks are project quality, project relevance, and project overrun.
IT operations and service delivery risks are associated with all aspects of the performance of IT systems and services, which can bring destruction or reduction of value to the company.
Managing IT Risks
- Align IT risks with overall Enterprise Risk Management (ERM)
- Connect IT risks to business objectives
- Establish acceptable and well-defined tolerance levels and accountability from the top
- Implement controls to address risks based on cost-benefit analysis
- Promote fair and open communication
- Promote continuous improvement and is part of daily activities
- Identify key processes and associated risks
- Understand of impacts on achieving objectives
- Identify triggers that indicate when an update of the framework or components in the framework is required
Understand business objectives and the company’s risk appetite and tolerance. The company’s decision-making processes should consider the full range of potential consequences and opportunities from IT risks. IT risks are integrated into business, and the company has a consolidated risk view.
IT risks are business risks and treated as business risks. The IT risk management approach should be comprehensive and cross-functional. The understanding of business process and IT-related resources should be obtained.
Engage senior management, business owners, board of directors, etc. in IT management. There is a clear assignment and acceptance of risk ownership. A risk-aware culture is actively promoted from the top. Risk decisions are made by authorized individuals, with a focus on business management, e.g., for IT investment decisions, project finding, major IT environment changes, risk assessments, and monitoring and testing controls.
Risk is prioritized and addressed in line with risk appetite and tolerance. Controls are implemented to address a risk and based on a cost-benefit analysis. Existing controls are leveraged to address multiple risks or to address risk more efficiently.
Risk communication is a key part of the IT risk management. All information exchanged should be clear, concise, useful, timely, aimed at the correct target audience, and available on a needed-to-know basis. Technical findings are translated into relevant and understandable business terms. Communication does not always need to be formal. Timely face-to-face meetings between stakeholders as just an important.
IT risk management is an iterative, perpetual, ongoing process. Every change brings risk and/or opportunity, and an organization should prepare for this by giving advance consideration to changes in the organization, in regulations, in IT, and in the business. Attention should be paid to consistent risk assessment methods, roles and responsibilities, tools, and techniques.
Management of business risk is an essential component of the responsible administration of any company and or organizations. Almost every business decision requires the executive or managers to balance risk and reward.
The all-compassing use of IT can provide significant benefits to a company, but it also involves risk. IT is the foundation for the overall business. IT risk should be treated like other key business risks, such as strategic risk, environment risk, market risk, credit risk, operational risks and compliance risk. While these other risks have long been incorporated into corporate decision-making processes, many executives tend to relegate IT risk to technical specialists outside the boardroom.
For more information on how to manage IT risks, please contact Carrtegra.