Risk Mapping in Risk Management. Welcome
to the Risk Management of Everything
channel. On this channel, you will find
videos on risk management and the
application of risk management to
diverse areas and sectors.
If you are new here, please consider
subscribing to our channel and press the
notification button so you can be
notified when we upload new videos.
Thank you. Risk mapping in risk
management is discussed in this video.
In this video, we'll discuss how a risk
map can be used by an organization to
manage its risks in an
easy-to-understand
way. Now, let us start.
Meaning of a Risk. Risk is the
uncertainty of a financial loss.
A risk exists where there is an
opportunity for a profit or a loss.
In terms of losses, we commonly refer to
the risks as exposures to loss,
or simply exposures. Fire is an exposure.
Defective products or defamation are
liability exposures.
The loss of business that results from a
damaged building or tarnished reputation
is also an exposure. Risks can come from
various sources including uncertainty in
international markets,
threats from project failures (at any
phase in design
development, production, or sustaining of
life-cycles),
legal liabilities, credit risk, accidents,
natural causes and disasters, deliberate
attack from an
adversary, or events of uncertain or
unpredictable root-cause.
There are two types of events which are:
(1)
negative events which can be classified
as risks or threats;
and (2) positive events that may be
classified as opportunities.
What is Risk Management? Risk management
is the process of identification,
analysis, and acceptance or mitigation of
uncertainty in investment decisions.
Organizations face many risks and they
must decide where to focus their
mitigation resources.
To handle or manage risks, organizations
usually have the options to avoid,
control, accept, or transfer risk. The
adverse effects of risk can be objective
or quantifiable like insurance premiums
and claims costs,
or subjective and difficult to quantify
such as damage to reputation or
decreased productivity.
By focusing attention on risk and
committing the necessary resources to
control and mitigate risk,
a business will protect itself from
uncertainty,
reduce costs, and increase the likelihood
of business continuity and success.
Meanwhile, a risk map can be used as a
tool to improve the risk management
system of an organization.
What is a Risk Map? A risk map, also known
as a risk heat map,
is a data visualization tool for
communicating specific risks an
organization faces.
A risk map is a graphical depiction of a
select number of a company's risks
designed to illustrate the impact or
significance of risks on one axis and
the likelihood or frequency on the other.
Risk mapping is used to assist in
identifying,
prioritizing, and quantifying (at a macro
level)
risks to an organization. This
representation often takes the form of a
two-dimensional grid with frequency
(or likelihood of occurrence) on one axis
and severity
(or degree of financial impact) on the
other axis;
the risks that fall in the
high-frequency/high-severity quadrant are
given priority risk management
attention. A risk map helps companies
identify and prioritize the risks
associated with their business.
The goal of a risk map is to improve an
organization's understanding of its risk
profile and appetite,
clarify thinking on the nature and
impact of risks,
and improve the organization's risk
assessment model.
In the enterprise, a risk map is often
presented as a two-dimensional matrix.
For example, the likelihood a risk will
occur may be plotted on the x-axis,
while the impact of the same risk is
plotted on the y-axis.
A risk map is considered a critical
component of enterprise risk management
because it helps identify risks that
need more attention.
Identified risks that fall in the high-frequency
and high-severity section can
then be made a priority by organizations.
If the organization is disbursed
geographically and certain risks are
associated with certain geographical
areas,
risks might be illustrated with a heat
map, using color to illustrate the levels
of risk to which individual branch
offices are exposed.
Why it's Important to Create a Risk Map?
A risk map offers a visualized,
comprehensive view of the likelihood and
impact of an organization's risks.
This helps the organization improve risk
management and risk governance by
prioritizing risk management efforts.
This risk prioritization enables them to
focus time and money on the most
potentially damaging risks identified in
a heat map
chart. A risk map also facilitates
interdepartmental dialogues about an
organization's inherent risks and
promotes communication about
risks throughout the organization. It
helps organizations visualize risks in
relation to each other,
and it guides the development of a
control assessment of how to deal with
the risks and the consequence of those
risks.
Benefits of Using Risk Heat Maps.
Risk heat maps can offer significant
benefits to organizations.
Here are some of the benefits of using
risk heat maps by an organization:
A visual, big picture, holistic view that
can be shared to make strategic
decisions;
Improved management of risks and
governance of the risk management
process;
Increased focus on risk appetite and the
risk tolerance of the company;
More precision in the risk assessment
and mitigation process;
and Greater integration of risk
management actions across the enterprise.
The Importance of Risk Mapping Business
Organizations.
Why should your organization be using
risk maps?
Building a risk map brings valuable
benefits.
You will have a thorough understanding
of your risk environment
and how individual risks compare to one
another.
You can use this to strategically
prioritize your risks and determine
where to use your limited resources.
The map can help the company visualize
how risks in one part of the
organization can affect operations of
another business unit within the
organization.
A risk map also adds precision to an
organization's risk assessment strategy
and
identifies gaps in an organization's
risk management processes.
A risk map is built by plotting the
frequency of a risk on the y-axis of the
chart and the severity on the x-axis.
Frequency is how likely the risk is or
how often you think it will occur;
severity is how much of an impact it
would have if it did occur.
The higher risk ranks for these
qualities, the more threatening it is to
your organization.
The most severe and frequent risks, your
primary risks,
are critical and would hinder your
ability to conduct business.
Risks that are severe but unlikely, that
is your "detect and monitor" risks,
are those risks that should be watched
but don't require heavy mitigation
strategies.
Risks that are highly likely but
insignificant, your monitor risks,
will not impact your ability to continue
operations.
Finally, the risks that are low in both
frequency and severity,
your low control risks, can be revisited
on a yearly basis to ensure
the risk remains low. Risk maps are a
valuable tool as they assist
organizations to:
1. Understand the risk environment.
Risk management begins with building a
list of all risks your organization
faces. Depending on your industry, this
number could range from a handful to
hundreds.
Risk mapping is beneficial because it
requires you to assess
each risk and its causes and
consequences individually.
It also allows you to look at your risk
environment as a whole and understand
how frequencies and severities compare.
Finally, a risk map is a visual that
anyone in your organization can use to
see the big picture of risks most
prominent
in your industry or workplace. 2.
Prioritize mitigation strategies.
With limited resources, it's important to
be strategic about mitigation techniques.
Risk mapping allows you to determine
what steps to take first:
implement prevention tactics for the
most frequent and severe risks before
moving onto others.
This prioritization method ensures that
you address the risk that have the most
potential to cause harm to your
organization.
3. Allocate limited resources.
Whether your organization consists of
2 employees or 2,000,
risk managers have limited resources.
Risk mapping allows you to use them to
prevent primary risks.
D&M risks should be revisited several
times a year to ensure appropriate
management.
Similarly, monitor risks typically only
need to be checked yearly to ensure
their potential impact hasn't grown.
Finally, by figuring out which risks are
low control,
you will know where not to spend time
and money.
However, keep in mind that no risk can be
completely ignored:
make sure you still consider these in
future assessments and ensure that the
low-risk status has not changed.
4. Receive better insurance premiums.
Risk maps can also help your
organization in becoming an
international standard
organization (ISO) certified,
as it shows that you have an
understanding of your risk environment
and a strategic plan for moving forward.
This can also help you receive
competitive insurance premiums.
Insurers are looking for good risk, or
companies they believe will have minimal
losses.
Key Considerations for Risk Heat Maps.
To develop an effective cybersecurity
risk heat map,
consider these critical elements:
What are your most critical systems and
information assets
(those you want to map)? How accurate is
the data and where is it coming from?
What is your organization's appetite for
risk?
What categories and levels of impact
would be considered material,
for example, monetary, brand reputation,
and other related impacts?
What is the range of acceptable variance
from your key performance and operating
metrics?
And how will you define terms to
integrate potential risk events with
your heat map?
How to Build a Risk Map. A risk map is
built by plotting the frequency of a
risk on the y-axis of the chart and the
severity on the x-axis.
Frequency is how likely the risk is or
how often you think it will occur.
Severity is how much of an impact it
would have if it did happen.
The higher risk ranks for these
qualities, the more threatening it is to
your organization.
Let us discuss tips on how to build a
risk map.
Here are four tips on how to build a
risk map:
1. Involve people from all parts of
your organization.
Risk mapping is not a process that
should be conducted by one person.
Every person in your business, from the
CEO to the intern,
will have different ideas about what
risks are most prevalent to your
industry. You cannot involve everyone, but
ask multiple people from various
departments and levels of authority to
ensure you are getting unique viewpoints.
This will also allow you to discover
risks that you may not have previously
considered and gain new perspectives on
how frequent or severe a risk really is.
2. Understand each risk.
Simply naming your risks does not allow
you to build an effective risk map.
You must assess each scenario with a
strong understanding of the business and
how the risks can impact your ability to
continue operations.
Think about what is likely to cause the
risk and the consequences it will have
if it occurs.
It is also important to be consistent in
how you rank each risk in terms of
frequency and severity so that the final
product is a clear depiction of how the
risks compare to each other.
3. Seek guidance. If consulting those
within your organization isn't providing
a sufficient understanding,
look elsewhere. You can try to determine
how likely and impactful a risk will be
based on your experience and past losses,
but what if you're a start-up company? You
can ask an expert:
many insurance providers are able to
assist with risk management tools,
and if not, they can likely suggest
someone who can.
You can also look at similar
organizations and industry statistics to
help guide your risk ranking.
4. Revisit and modify.
You've built your risk map and are now
using it to help manage and mitigate-
great! But it's important to remember
that your risk landscape is constantly
changing.
Revisit your rankings with the risk
management team at least
quarterly, to discuss if the status of
any existing risks has changed or if any
new risks should be placed on the map.
Doing so will ensure that your risk map
is a consistently helpful tool that will
help you reduce
incidents and costs. Major Ways to Use
Risk Heat Maps by Organizations.
Where charts have to be interpreted and
tables have to be understood,
heat maps are self-explanatory and
intuitive.
Because they are tailor-made for putting
massive data sets into a context that's
easy to understand,
they are increasingly valued as a
superior data visualization tool in
cybersecurity for identifying,
prioritizing, and mitigating risks.
Here are three major ways to use risk
heat maps by
organizations: 1. Risk impact heat map to
show the likelihood of a risk event
happening
vs. business impact of such that
event.
Risk is the product of breach likelihood
and breach impact.
In this type of heat map, the horizontal
axis shows the likelihood of a
cybersecurity breach.
The vertical axis shows the business
impact of a breach.
The colors are risk areas, for example,
green colored boxes indicate no
action needed and red boxes indicating
immediate action needed.
The individual risk items are then
plotted on the heat map based upon the
Business Impact and Likelihood of breach
happening.
This can be computed as follows: Risk is
equal to impact times likelihood.
2. Comparing breach likelihood across
different business
areas. Risk heat maps can be used by an
organization to comparing breach
likelihood across different business
areas.
Here is an example of a heat map that IT
can use to compare breach likelihood
across different
areas or groups. Such charts can be
created for multiple types of risk
groups-
asset types, locations, business units,
and more. 3. Mapping information
technology
(IT) asset inventory by type and risk
associated with each of those categories.
Risk heat maps can be used by an
organization for mapping IT
asset inventory based on the type of IT
asset inventory and risk associated with
each of those categories.
Here is an example of a heat map that IT
can use to map IT
asset inventory by type and risk
associated with each of those categories.
How to Create or Build a Risk Map. For
the heat map to be insightful and
comprehensive,
it should be created using accurate, and
complete information.
Identification of inherent risks is the
first step in creating a risk map.
Risks can be broadly categorized into
strategic risk,
compliance risk, operational risk,
financial risk, and reputational risk,
but organizations should aim to chart
their own lists by taking into
consideration specific factors that
might affect them financially.
Once the risks have been identified, it
is necessary to understand what kind of
internal or external events are driving
the risks.
The next step in risk mapping is
evaluating the risks: estimating the
frequency,
the potential impact and possible
control processes to offset the risks.
The risks should then be prioritized. The
most impactful risks can be managed by
applying control processes to help
lessen their potential occurrence.
As threats evolve and vulnerabilities
change, a risk map must be re-evaluated
periodically.
Organizations also must review their
risk maps regularly to ensure key risks
are being managed
effectively. For example, let us briefly
consider how a firm can build a
cyber risk heat map.
Cybersecurity heat maps involve an
extensive and disciplined assessment
process at the back end,
in order to present a simple
visualization of risks and recommended
actions at the front end.
The heat map is an essential and useful
output of your overall cybersecurity
assessment and vulnerability management
process. With a rapidly increasing attack
surface,
the first step is to accurately measure
a cyber risk attack surface.
This means getting complete visibility
into all your IT
assets (devices, apps, and users)
and then continuously monitoring them
across all 200+ attack vectors in
adversaries' arsenals.
The company, therefore, need to regularly
analyze the observations to derive risk
insights.
This is a layered calculation that
involves incorporating information about
threats, vulnerabilities, mitigating
actions,
business criticality, impact elasticity,
and time-to-repair. Conclusion.
Risk mapping in risk management has been
discussed in this video.
A risk map (or risk heat map) is a
graphical representation of cyber risk
data where the individual values
contained in a matrix are represented as
colors that connote meaning.
Risk heat maps are used to present cyber
risk assessment results in an
easy to understand,
visually attractive and concise format.
Risk maps can be used by an organization
to improve its risk management culture.
Risk maps can, therefore, assist to
enhance understanding and prioritization
of a firm's risk management system.
In short, heat maps present a very
complex set of facts in an easily
digestible way.
This helps organizations to enhance
their resilience
in the highly challenging business
environment.
Hope the video is educative and
beneficial to you?
Which aspect of the risk mapping in risk
management discussed in this video do
you consider to be more relevant in your
organization?
Please post your answer to this question
in the comment section below.
If this video has been helpful and
beneficial to you;
then, give it a thumbs up and share it
with your friends.
Thank you for watching the Risk
Management of Everything videos.
We love to hear from you. Please post
your comments and
questions in the comment section down
below. If you are new here,
please subscribe to our channel Risk
Management of Everything
and press the notification button so you
can be notified when we upload new
videos.
Thank you.