If you do a search on the internet for risk appetite, you will find many explanations that define risk appetite as the level of risk that your organization can tolerate. An end-to-end risk management mindset is the essential element that sets resilient organizations apart from the rest in mitigating cyber risks, minimizing damage, and recovering swiftly from any breach incidents. With an approach based on a consistent and accurate definition of risk appetite for the organization as a whole, prioritized and revised as appropriate, executives can give clear guidance on cyber risk to all levels of the organization.
Your risk appetite is a measure of the amount of risk you are willing to take for potential gains, and it is vital that an organization operates within its risk appetite as set by the board. Among other things, boards should have a clear understanding of your organization’s cybersecurity risk profile and who has primary responsibility for cybersecurity risk oversight, thus ensuring the adequacy of the organization’s cyber risk management practices and organization insurance coverage for losses and costs associated with data breaches.
All appropriate measures must be taken towards achieving a high level of operational risk awareness and the establishment of a rigorous operational risk management system. A key aspect of cybersecurity is cyberspace and its underlying infrastructure, which is vulnerable to a wide range of risks stemming from both physical and cyber threats and hazards. Your risk management services should enhance your current internal effectiveness by identifying hazards and reducing risk in support of your continual improvement commitment. When it comes to cybersecurity governance, one of the most important things a board can do is set the proper tone and align with management on the appropriate risk appetite related to cybersecurity.
There are several private cybersecurity organizations that evaluate the cyber risk of enterprises and issue security ratings based on their own expertise and data algorithms. In a study examining coordination between cybersecurity and enterprise-wide risk management functions, all but one organization had designated a cybersecurity risk executive, but none could claim to have fully implemented any other practices. Cyber risk management and compliance can become something of a feedback loop, from front line controls to general strategy setting the overall strategic approach and assessing and managing risk, and the risk appetite that fits with business goals and the firm’s environment outlining the budget, roadmap, and implementation approach.
To be effective, there must be a working relationship between the boards and the CISO, where goals are aligned, strategy drives protection options, and the business plan gives leadership clear risk appetite choices. These elements will influence your organization’s risk management appetite and, in turn, that risk management appetite will dictate the kind of controls. After you have determined what risks exist for your projects and assessed their importance, you need to choose a strategy for dealing with each risk if and when it comes into play.
The hallmark of a good risk management program will have to be a pervasive risk culture that starts at the top and is built on a sound risk philosophy and appetite, as well as having incentives that are structured around ethical and risk-intelligent behaviors. It provides an opportunity to identify areas where existing cybersecurity processes can be strengthened, or where new processes can be implemented, to achieve a better overall risk profile.
Despite limitations on applicability to industrial control systems, several information security standards are used extensively in industrial control system risk management. Risk management involves identifying, analyzing, and taking steps to reduce or eliminate the exposures to loss faced by your organization. As attackers become more and more sophisticated, and as IT innovation continues to pick up pace, the escalation of cyber risk can easily overwhelm organizations with limited resources.
Independent audits or reviews are used to identify cybersecurity weaknesses, root causes, and the potential impact to business units, as well as avoid risk by stopping an activity that is too risky or doing it in a completely different fashion. While businesses use great caution when sharing information about their technology, both internally and externally, to protect their business operations, cyber attackers have the luxury of operating at the opposite end of the spectrum.
Want to check how your Risk Appetite Processes are performing? You don’t know what you don’t know. Find out with our Risk Appetite Self Assessment Toolkit: