Every organization faces risk. The type of risk and how it is dealt with may differ, but all in all, every organization understands the fact that - whether financial, strategic, operational, or IT based - organizations require a contingency plan to deal with potential factors outside of the company’s control.
To mitigate risk, organizations use risk management solutions or have contingency plans to lessen any effects that may occur due to unforeseen events. This can range from having backup copies of data, additional servers and alternate networks, to secondary physical work locations in case of a natural disaster. Alternatively, organizations can utilize solutions they already have in place to track and to measure what is happening in their organization to identify potential risk before it occurs. This is where business intelligence using dashboards can be useful as organizations can use these tools to set thresholds in order to take a proactive approach to their overall risk management initiatives.
This article discusses the components of risk management and the value of business intelligence in relation to help mitigate risk.
The Components Of Risk Management
Despite the type of risk management applied within the organization, general methodologies exist to help organizations manage overall risk to lower the effects of potential risks. Even though the solution or tools used will differ depending on what type of risk is being addressed, the same type of methodology should be applied to make sure that general steps are not overlooked.
The five general steps to follow to help identify and prepare for potential risk are:
- Asset identification – this includes the identification of the assets most critical to the organization. This can differ depending on the type of organization and products and services being offered. For service-based companies, having security and IT measures in place may be more important than having a secondary physical location to move offices to. Whereas, for manufacturing or supply-chain organizations, there may be more importance placed on how to maintain adequate production or relationships with suppliers. In general, assets need not be only physical, but can also relate to the intellectual property within the organization.
- Threat assessment and vulnerability – once the assets are defined, organizations should identify what threats exist based on the critical assets. This includes characterizing potential threats and assessing these threats. For instance, geographic location may lead to higher rates of natural disaster, or planned technical infrastructure enhancements may cause server and/or network failures for long periods of time. This leads to defining the vulnerability of critical assets to specific threats.
- Risk determination – after identifying what threats exist based on the critical assets defined, organizations can identify the expected consequences of attacks on specific assets. This can include rating the importance of various types of risk based on the previous steps as well as the nature of the business.
- Risk reduction – now that areas of risk are identified and assessed, organizations can look at ways to reduce the overall risk. Although contingency plans are important, the ability to mitigate risk and identify potential risks before they occur is more important to effectively running a business than putting out fires that could have been avoided. Generally, organizations put structures in place that may not be considered risk management or reduction but that do add to the overall reduction of potential risk.
- Prioritize and strategize – the final stage in the methodology is to prioritize the identified risk and measures required based on a defined strategy.
Overlapping Risk Management And Business Intelligence
Business intelligence does not tout itself on helping organizations define and manage overall risk. Instead, BI solutions focus on analyzing the state of the business and on helping decision makers make better decisions faster through the use of analytics and interactive dashboards. Unfortunately, many organizations overlook the fact that BI is easily transferrable to help with their risk management strategies.
No comments have been posted yet.