What Is Risk Management?

What Is Risk Management

Risk management in information technology identifies, analyzes, evaluates, and monitors the various IT risks. It accompanies the entire system lifecycle of IT and provides countermeasures or contingency plans for various scenarios.

What is risk management?

In many companies, IT systems form the backbone and foundation for the functioning of business models. Problems with IT systems can lead to enormous damage for the affected company. This ranges from production downtime and lost sales to an existential threat to the company. Possible risks include, for example, hardware failures, software errors, data theft, data loss, data misuse, or espionage.

Since IT systems are becoming increasingly complex and are in principle prone to errors, numerous threat scenarios with major risks arise. Risk management is used to counter and deal with these risks. It comprises all measures to identify, analyze, evaluate, monitor, and control potential risks.

Risk management is already applied during the implementation of information systems and accompanies the complete life cycle of all IT components. This ranges from conception through development and implementation to operation and decommissioning of the IT systems.

Great potential for danger arises from the Internet and possible threats from outside. Data can be stolen, manipulated, or misused through hacker attacks. These security risks must also be taken into account in IT risk management.

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The aim of all measures is to minimize the main threats to IT or, if the risks actually occur, to limit their impact. Optimally, the company is prepared for the various risks and has appropriate defensive measures and contingency plans in place.

General approach to risk management

The typical procedure of general risk management with its individual work steps is also used in IT as part of risk management. The first step is to identify and name the various risks. The risks can then be analyzed and evaluated.

The individual risks are classified in terms of probability and potential impact. For this purpose, a multi-level matrix can be used, which names the probability of occurrence and acceptance of the risks. Possible probabilities are:

  • Frequent
  • Probably
  • Occasionally
  • Unlikely
  • Inconceivable

Effects of individual risks can be:

  • Catastrophic
  • Critical
  • Acceptable
  • Insignificant

The classifications can be finer or coarser depending on the model and matrix used. When classifying risks, they are assigned to different impact classes such as organizational, legal, technical, process-related, economic, and others.

Risk monitoring and control attempt to reduce the probability of occurrence and dangers by means of concrete measures and to make any consequences easier to control. Continuous monitoring and reporting in combination with detailed documentation and emergency plans are used for this purpose.

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Risk management standards

Efficient risk management relies on proven procedures and established standards. These exclude the typical errors of self-developed procedures and ensure compliance with the current state of the art. The standards help to improve IT processes that are subject to risk and are relevant to security.

They provide methods for defining and implementing effective security and risk management. Fundamental standards of IT security and risk management are for example IT-GS (IT-Grundschutz), ISO/IEC 18028 (IT network security), ISO/IEC 27005 (information security risk management), ISO/IEC 15816 (security objects for access control), ISO/IEC 27001 (information security in organizations) and many more.

Individual aspects of IT risk management in practice

Important individual aspects of IT risk management in practice are the physical security of IT and the application of cryptographic IT security procedures. Many IT risks arise from the lack of physical security of IT. To avoid these risks, care must be taken to ensure that IT components are appropriately housed to prevent unauthorized physical access to the systems and to reduce hazards from fire or other external factors.

IT risk management assesses the risks posed by inadequate physical security and ensures compliance with essential physical security standards in the event of unacceptable consequences.