Risk Assessment: What Is It and How Is It Done?

Keeping a business on track is no easy task for any manager. In addition to the common challenges faced daily in the corporate world, it’s necessary to have a contingency plan for potential crisis scenarios that could delay goals or even undo months or years of effort. This is where risk assessment can be an effective ally in keeping your company on course.

When it comes to cybersecurity, risk assessment can help identify potential incidents that could expose your company’s data and information. It also helps you understand that investing in information security is essential to avoid dangers such as data leaks, theft of sensitive information, industrial espionage, and other cybercrimes.

Stay with us and learn why every company should conduct risk assessments regularly and how proper planning of its stages and strategies can ensure your company’s data security, avoiding headaches for managers. Happy reading!

What is risk assessment?

Risk assessment is a series of actions involving the identification, analysis, and decision-making about risks that may arise during a company’s journey. It can involve the entire corporate operation or smaller processes like a specific project or sales action plan.

In the context of cybersecurity, these risks could manifest as attempts by cybercriminals to invade company systems. These attacks might aim to steal access credentials, create backdoors for spreading malicious files, or engage in other criminal activities.

Who is responsible for risk assessment?

Risk assessments are usually assigned to senior executives within the company—it's even recommended to be done this way—referred to as Risk Managers. Following a top-down approach, the person in charge of risk assessment will identify potential risks to which the company may be exposed.

Additionally, risks should be listed from macro to micro, meaning larger risks should be identified and mapped before smaller, more detailed risks that may be scattered across broader company processes, such as employee training, machine maintenance routines, software updates, etc.

The CISO (Chief Information Security Officer) is a good example of a role that can become a risk manager for situations involving a company’s digital assets. They are responsible for overseeing and organizing all security processes that may directly or indirectly influence the virtual environment, including employee changes, implementation of new technologies, new work dynamics, or the company’s involvement in new projects.

What is the purpose of risk assessment?

Risk assessment is a way to foresee, identify, and control crisis scenarios that could impact the business operations of a company. When a crisis arises, managers will be better prepared to deal with it more effectively since prevention remains the best way to combat vulnerabilities and keep cybercriminals away from your company.

Companies that do not consider risk assessment are navigating in the dark, with no guarantee of what may lie ahead. Being unprepared when exposed to vulnerabilities can lead to business interruptions, unnecessary or poorly calculated expenses due to the “surprise factor” of the presented risk, and damage to the company’s reputation in the market.

Therefore, risk assessment paired with cybersecurity is the best way to understand all facets of a company and learn to use them to your advantage, managing data security and determining which strategies best fit your business model.

What are the stages of risk assessment?

As mentioned earlier, risk assessment allows managers to get to know the facets of their company. To discuss this more specifically, we need to talk about the first step in understanding the organizational context of your company and implementing a risk assessment:

SWOT Matrix

The SWOT matrix is a strategic planning tool created to set objectives and test trial and error in any project. Its name is an acronym for:

• Strengths;
• Weaknesses;
• Opportunities;
• Threats.

Once the SWOT matrix is created, all the characteristics corresponding to the above points involving the company should be systematically cataloged and analyzed. This way, the executive responsible for the risk assessment will have a complete understanding of all areas of the company and where more attention is needed.

Once this "diagnosis" is complete, it’s time to implement the stages of risk assessment.

1. Organizational Context

This is the moment when managers should consider: where is the company currently? What are the current security measures? How can they be improved?

It’s essential that this information is clear and part of the risk assessment because any ongoing activities within the company will alter the course of creating protective measures.

For instance, if the company is investing in expansion or involved in a new project, the analysis of the organizational context should include these details.

The number of employees, their roles, and the quality of the equipment they use can be crucial information for shaping data security plans. Encouraging stronger password creation, implementing multi-factor authentication, and other best practices for data use will make all the difference in protecting your company.

2. Risk Identification

With a better understanding of the company’s security level, it’s time to consider situations that could arise and become obstacles to achieving goals, completing projects, or simply ensuring the company’s full operation.

This process takes into account both severe, specific threats like DDoS (denial-of-service) attacks and broader, day-to-day issues such as employee behavior, correct use of digital assets, physical and virtual security policies, and the regular and secure updating of endpoints.

3. Risk Analysis

Once risks are identified, the next step is to assess the impact they could cause and calculate the effort needed to mitigate them.

During this stage, it’s important to analyze risks in descending order, from highest to lowest. This is because addressing a major risk may lead to the emergence of smaller ones, and the sooner they are detected and considered, the better.

4. Risk Evaluation

Now it’s time to define counter-strategies for each identified risk, including considering any residual risks and determining how problematic they may be and what actions should be taken.

At this stage, the risk manager can make one of four decisions: accept, mitigate, transfer, or avoid the risks.

5. Risk Treatment

This is where deadlines and responsible parties are assigned to implement the measures that will mitigate the listed risks. Each risk should have a designated manager since, when it comes to threats to a company’s digital assets, time and focus are critical, right?

6. Risk Monitoring and Response

In the final stage of the risk assessment process, it’s time to review whether the listed risks and their protective measures yielded positive results or not.

It’s also crucial to evaluate whether any adaptations were necessary during the process, how this affected the overall procedure, and whether any residual risks were created as a result. This stage should be performed periodically throughout the process and after its completion.

It’s worth noting that companies may sometimes face the same type of vulnerability at different times. Therefore, it’s important to create databases of previous risk assessments so that future managers can identify patterns and address recurring problems in the same or even more efficient ways.

How does Bug Bounty help optimize risk assessment?

Bug Bounty is a reward program for bugs in digital assets that involves the constant investigation of thousands of information security professionals in search of vulnerabilities that could compromise the security of companies.

The reports generated by these programs provide detailed information about the criticality of vulnerabilities and flaws that may exist in a system, as well as an accurate forecast of the potential damage they could cause.

Since risk assessment focuses on identifying and screening risks to a company, Bug Bounty is the perfect ally to ensure your business's cybersecurity.

Want to know more about how Bug Bounty can help maintain your company’s cybersecurity? Click here and schedule a conversation with us.

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