IT risk management and cybersecurity are two essential practices that define the effectiveness and security structure of modern organizations.
IT risk management is the process of managing and mitigating risks via careful planning, specialized systems, guidelines, policies, and decisions across various sectors, not just cybersecurity. With IT risk management, the IT staff is focused entirely on IT risk mitigation.
On the other hand, cybersecurity deals with the safeguarding of systems, devices, programs, and networks from cyber attacks.
Both terms, as well as information security, are buzzwords that are often thrown around in the same context.
Although the terms “cybersecurity” and “IT security” are closely linked, there are major differences between them, and they should not be used interchangeably.
For a deep dive into these definitions, read on to learn about their differences in more detail.
What is IT Risk Management?
IT risk management refers to the process of managing information technology risks through procedures, policies, and technology.
Organizations use IT risk management to mitigate and assess potential threats and information technology vulnerabilities. Its main goal is to mitigate and reduce the negative impact of information security and information technology risks by identifying, monitoring, and managing them.
An IT risk management strategy ties into an organization’s compliance requirements surrounding robust privacy policies, secure electronic transactions, and proper staff training.
Effective IT risk management practices should consider the following key aspects:
- How an organization decides to back up its data, where, and at what cost.
- Risk calculation and potential negative impacts of allowing employees to remotely connect to corporate resources.
- The management and mitigation of third-party risk brought on by vendors and business partners.
- Which systems and devices to prioritize for high-security safeguarding to reduce potential risks, such as supply chain attacks or data breaches.
- The implementation of an incident response plan to mitigate the impact of a potential IT-related incident.
What is an IT Risk?
An IT risk is the potential that an event will negatively impact an organization and its business processes while threatening data confidentiality, integrity, and availability (CIA) in the organization’s IT infrastructure.
Whether it’s inherent or residual, IT risk is a constant presence in every business. IT risks often come from human error and neglect, device failure, mismanagement, poor handling of technology-related processes and events, bad actors that may exploit an information security vulnerability, and other unfortunate events that may arise within an organization.
Organizations can manage IT risks through the following measures:
- Conducting an internal risk assessment to identify risks affecting their IT systems and data.
- Implementing robust incident response and business continuity plans in the event of an IT issue.
- Performing vendor risk assessments to mitigate and manage third-party IT risks with due diligence.
IT risks do not solely represent a negative impact on an organization — they may also reveal missed IT-related opportunities that could improve business projects and staff efficiency or cut down on financial overspending on faulty or unoptimized equipment.
Though “information technology risk” and “information security risk” are terms that refer to the risks that threaten the safeguarding of sensitive data, they shouldn’t be used interchangeably.
IT risks encompass hardware and software malfunctions, as well as failures, like power loss, data corruption, faulty devices, human error, and malware and viruses.
On the other hand, an information security risk is more narrowly defined as the damage that cyber attacks and other security incidents can cause to IT systems. Information security risks usually represent compromised data that pose financial, legal, and reputational threats to organizations.
What Are the Main Risks in IT Systems?
Information technology risks encompass a wide range of potential events:
- Data breach, data loss, and data theft;
- Hardware and software defects, bugs, and system malfunctions;
- Cyber threats, such as viruses, ransomware, and other types of malware;
- Human error, e.g., loss of physical devices, successful phishing scams);
- Financial costs;
- Reputational damage;
- Natural hazards, e.g. fires, floods.
Risk Management Disciplines
Risk management is the constant process of discovering, assessing, and responding to certain risks in an organization. According to the International Organization for Standardization (ISO), risk is defined as "the effect of uncertainty on objectives."
In order to manage a risk, organizations first perform a risk assessment to identify the likelihood and potential magnitude a risk may pose to the organization. Then, they must determine the right approach to managing the risk – by either avoiding, transferring, accepting, or mitigating the risk.
Below are other risk management disciplines that offer organizations a better overview of IT risk management.
- Enterprise Risk Management: Includes understanding, overseeing, and managing all risk types in an organization, which includes financial risks, strategic risks, cybersecurity risks, compliance risks, reputational risks (communication between vendors, competitors, and other businesses), and operational risks.
- Operational Risk Management: A subset of enterprise risk management that considers risks that threaten or hinder processes, employee efficiency, and the functionality of technological resources. Additionally, technology risk is a subset of operational risk, and it includes risks that threaten devices, systems, and networks within an organization. Examples of operational risks include faulty devices, employee misuse, floods, fire hazards.
- IT Risk Management: A subset of operational risk management that deals with risks involving all information technology within an organization.
How IT Risk Management Works
In order to prepare for cyber attacks, organizations must identify, analyze, and mitigate potential threats and vulnerabilities that may threaten sensitive data and resources within the organization’s IT network. A well-structured IT risk management program with efficient procedures can help an organizations’ decision-making processes for controlling and managing risks.
The IT risk management process (IRM process) can be broken down into five different phases: risk and vulnerability identification, risk analysis, risk prioritization, solution implementation, and risk monitoring.
1. Identifying Potential Risks and Points of Vulnerability
The first task of any IT risk management program is to identify risks that are potentially harmful to an organization.
This process begins by discovering and locating all of an organization’s assets and information with digital footprint mapping.
New data transmission and storage methods, such as customer-facing web portals, message platforms, and other SaaS services, change how organizations transmit information between stakeholders.
Since most companies today use cloud-based strategies and storage systems, it’s increasingly difficult for organizations to locate and identify all the relevant assets.
Consequently, data becomes more vulnerable to cyber threats because of the lack of visibility and data control, and the lack of transparency may result in overlooked attack vectors.
This is why IT risk management is required for better risk transparency, with the first step being the identification of valuable assets, data, and info.
A capable attack surface management solution can automatically identify an organization's external-facing assets, including cloud resources and Shadow IT.
2. Classifying Data
The second step of IT risk management is classifying an organization’s data type and information type. This form of data analysis is critical because not all data types are equally important.
Personally identifiable information (PII), like names, IP addresses, contact lists, birth dates, and Social Security numbers are valuable targets for malicious actors. Hackers steal and sell this personal data to other cybercriminals on the dark web, who abuse it to commit identity theft, insurance fraud, and other crimes.
3. Prioritizing and Evaluating the Information Risk
Once all data assets are identified, analyzed, and classified, the third step is to prioritize the information risk and evaluate the data’s risk level.
Organizations can determine the impact of a specific information risk using cyber risk quantification methods, which take into account the potential of Damage, Reproducibility, Exploitability, Affected users, and Discoverability (DREAD) of assets.
4. Setting a Risk Tolerance and Establishing IT Risk Management Processes
The fourth step is setting a risk tolerance or risk appetite for each data asset before establishing proper IT risk management processes.
Organizations must decide whether to accept, avoid, mitigate, transfer, or monitor each risk.
Determining risk appetite helps organizations set the highest acceptable levels of risk before implementing mitigation efforts.
From there, organizations can develop IT risk mitigation strategies, such as implementing firewalls, encrypting data, updating or patching software, deploying antivirus protection, and performing regular backups.
It can also include setting up multi-factor authentication (MFA), securing privileged access accounts, setting up resilient cybersecurity frameworks, and creating a strong IT risk management plan to prevent any future incidents.
5. Continuously Monitor Your Risk
The final step is to continuously monitor all IT risks.
There’s a constant danger of malicious actors using different cyberattack methodologies, like new ransomware and phishing types, that could strike an organization at any time.
Effective monitoring and well-structured holistic information risk management strategies are required for better visibility of an organization’s IT and cybersecurity posture.
A complete attack surface management solution can monitor and manage all risks that are assessed by the risk appetite program.
What is Cybersecurity?
Cybersecurity is the practice of safeguarding networks, computers, devices, and software from cyber attacks, and there are multiple fields in cybersecurity that enhance data security and prevent threats targeting network security in the form of malware, phishing, and ransomware, among others.
The fast-moving age of digital transformation, the complexity of cybersecurity, and the ever-increasing distributed attack surface changed how businesses and organizations manage and deal with cyber security risks that threaten their sensitive data.
As businesses become more reliant on computer systems, the impact of potential data breaches increases, so organizations must have a good incident response plan when data breaches and other cyber crimes occur.
Additionally, organizations must also ensure non-repudiation. This is the assurance that the validity of an action taken within an information system cannot be denied because the system has proof of the action.
To improve their security postures and secure sensitive data , many organizations create cybersecurity plans that combine and implement information risk management, network security, password management, data encryption, and data security policies.
What’s a Cyber Risk?
Cyber risk is the potential occurrence of a cybersecurity incident, such as a data breach, threatening an organization with financial loss, business disruption, and reputational damage. It also includes the use (and misuse) of technology within the organization’s technical infrastructure.
Cybersecurity risk is one of several types of risks that both IT risk management and cybersecurity deal with, posing a threat to all organizations with a cyber presence.
To reduce their cybersecurity risk and protect their digital information, organizations must implement information security strategies in combination with cybersecurity programs.
What Are the Main Cyber Risks in IT Systems?
One of the main cyber risks in IT systems include:
Difference Between Cyber Risks and Vulnerabilities
Though they’re used interchangeably, there’s a major difference between cyber risks and vulnerabilities.
In IT, a vulnerability is a weakness in a system, device, or network that’s caused by exploiting unauthorized network access, usually from cybercriminals and hackers.
On the other hand, cyber risk is the probability of a vulnerability being exploited. Usually, cyber risks occur maliciously when bad actors cause harm to an organization through cyber attacks, like ransomware and data theft.
Employee misconduct and accidental neglect can also result in the compromise of data.
In short, cybersecurity commonly deals with vulnerabilities and cyber risks, while IT risk management commonly deals with how an organization’s data, devices, networks, and assets are protected and managed.
Cybersecurity Risk Management and Cybersecurity Risk Assessment
Cyber risk management aims to identify, analyze, evaluate, prioritize, and address an organization’s cyber security threats, assets, and staff by using cybersecurity risk assessment. It takes the idea of standard risk management, but it’s applied accordingly to cyber risks.
The main goals of cyber risk assessment are to:
- Implement incident response to identified risks, and calculate their costs;
- Set the right security controls like firewalls, malware detection software, and data encryption;
- Inform stakeholders of the organization’s security management;
- Offer a better overview of an executive summary for the company’s executives in order to help them make informed decisions about their security posture.
How Does Cybersecurity Differ from IT Risk Management?
The main difference between IT risk management and cybersecurity is that cybersecurity deals with securing, assessing, and testing an organization’s IT environment against malware and cyber attackers.
Cybersecurity is a subset of information security, and it has a narrower focus on protecting systems, devices, and data from the risks of bad actors, malware, phishing, ransomware, and unauthorized access.
IT risk management encompasses much more than just the digital and cyberspace aspects of safeguarding an organization’s data. It involves and covers other types of risk, like hardware and software defects, IT-related compliance and regulatory risks, human error, and natural disasters, among others.
The decision-making aspect of cybersecurity is a crucial part of IT risk management. However, cybersecurity itself isn’t involved in implementing decisions regarding dealing with risk, which is the main aspect of IT risk management.
Information Technology and Cybersecurity Risk Management Compliance Requirements
To improve the security posture of an entity and enhance risk mitigation in the digital world, organizations may be required to implement well-documented cybersecurity risk management frameworks.
Organizations and governments worldwide have tried to stay ahead of the curve by passing crucial cybersecurity laws and regulations that protect their sensitive data. Consequently, most of these frameworks are obligatory since they’re enforced by law.
These frameworks often include risk management in their set of guidelines. They ensure organizations are properly performing the right measures in IT risk management and cybersecurity risk assessment to properly deal with potential security gaps and cybersecurity threats.
This ultimately reduces costs, enhances workflow, and improves decision-making in businesses and investment sectors.
The guidelines and regulations are commonly related to how an organization should address, identify, monitor, assess, and mitigate cybersecurity risks, but also how they handle customer data, health policies, as well as safety and privacy concerns. Cybersecurity procedures, guidance, and security controls are often a part of these regulations.
Though it’s a part of IT risk, compliance management should be treated as a stand-alone risk sector within organizations.
IT Risk Management and Cybersecurity Laws and Frameworks
Organizations and businesses need to pay close attention how their risk management strategy relates to regulatory compliance. There’s no doubt that risk management and compliance with state and federal regulations (and laws, of course) are closely intertwined.
A major part of risk management is helping organizations be compliant with rules and regulations, as well as avoiding risks that may lead organizations to be non-compliant which is a risk by itself. IT-connected companies face heavy penalties if they fail to comply with regulatory requirements.
Well-known cybersecurity regulations include:
Cyber regulations impose and/or suggest frameworks that align with most businesses’ cybersecurity goals and workflows. They’re not just obligatory requirements for achieving compliance but rather useful methodologies that strengthen cybersecurity programs.
Below are some of the most frequently-adopted risk management and cybersecurity frameworks:
- COBIT which helps organizations develop an Enterprise Risk Management (ERM) strategy
- Essential Eight (the cybersecurity framework for Australian businesses)
The Importance of Combining a Cybersecurity Strategy and IT Risk Management
According to IBM, the global average cost of a data breach in 2022 has hit $4.35 million, which is a 2.6% increase from 2021 and a 12.7% increase from 2020.
An effective combination of IT risk management and cybersecurity risk management can reduce the impact of data breaches, which translates to a significant reduction in IT-related and overall business costs.
Cyber risks are not just an IT and security concern. All employees must also follow proper IT risk management processes thoroughly, to understand how to prepare, prevent, and avoid security incidents in today’s constantly evolving risk landscape.
Besides cost savings, cybersecurity and IT risk management help achieve broader business objectives, through the following outcomes:
- Increases cyber attack resilience to prevent costly data breaches;
- Improves regulatory compliance to reduce legal liability;
- Lowers cyber insurance premiums to reduce overall business spend.