What Is IT Risk Management? (With Benefits and Tips)

By Indeed Editorial Team

Published June 18, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

As an organization adopts its digital transformation plan, it increases its dependence on cloud services providers. This increases its exposure to potential information breaches, which usually require risk management practices. Learning the answer to, "What is IT risk management?" can help you better understand risk management practices in the IT industry. In this article, we define IT risk management, discuss why it's important, explore how to manage risk in IT, and review essential risk management skills.

What is IT risk management?

Knowing the answer to, “What is IT risk management?” can help you understand this process and why it's crucial for the company's security. IT risk management is the process that focuses on the intrinsic risks associated with IT services, such as network communications and employee online access. The overall objective of any risk management initiative is to evaluate the likelihood of each risk and reduce the chance of undesirable consequences. Companies may detect risks using a variety of methods. Some typical strategies include:

  • Performing a risk analysis for ranking and prioritizing threats

  • Listing a third party for risk analysis

  • Investing in digital platforms for risk analysis

IT risk management is a part of a more comprehensive enterprise risk management (ERM) strategy. You may use ERM techniques to detect, evaluate, and plan for threats to your operations and goals, including IT risks.

Related: Construction Risk Management Overview (With Best Practices)

Why is IT risk management important?

Risk management strategies are an important part of the project management process within the IT sector. Creating a risk management strategy may provide various advantages for your projects, including:

  • Prepares project teams: Early identification of risks prepares the team for potentially disruptive situations. A well-organized strategy helps guarantee that the team might be able to execute it quickly and overcome obstacles more effectively.

  • Helps future projects: When project managers establish risk management plans, they may preserve them for use in future project planning. They may also share them as templates with colleagues or successors who can manage the project management process.

  • Supports project management plans: By identifying potential risks, the project manager can create contingency budgets or resources that the company may require if the risk materializes. These professionals can include these events into the entire project management document for more precise planning.

  • Helps reduce the impact of risks: Developing the team's reactions to different hazards is a part of the risk management process, which aids in mitigating the effect of threats. By planning, the team can mitigate or eliminate the impact of certain risks on a project.

Related: Why Risk Management Is Important (With Strategies)

How to manage risk in IT

IT risk management is the application of risk management techniques to information technology with the purpose of mitigating the hazards. This involves examining the business risks connected with an organization's usage, ownership, operation, and adoption of IT. Follow these steps to manage risk effectively:

1. Identify potential points of vulnerability

Most businesses begin with their databases or collaboration software. As more businesses adopt cloud-first or cloud-only strategies, data becomes more widely distributed and susceptible to cyberattacks. Most companies don't store data only on servers located on-site. Many now use serverless storage places, including shared drives. In addition, many businesses gather data in novel ways, such as through online portals targeted at customers.

New data transmission methods, such as e-mail and message services, alter how organizations communicate with internal and external stakeholders. Cloud-based data collection, transmission, and storage sites provide a larger risk of theft, as organizations may lack insight into the efficacy of their systems. Server hardware on-premises may provide less risk than a cloud-based server. When conducting an information risk assessment, it's important to identify the sites and individuals that contact your data.

Related: Risk Management Framework: Definition, Components, and Tips

2. Analyze data types

Besides knowing where your data is, it's necessary to be aware of the data you acquire. Data types don't all have the same value. Personally identifiable information (PII) comprises information such as a person's name, date of birth, social insurance number (SIN), and IP address. Because malicious actors often target PII to sell it on illegal websites, the data may be a high-risk asset.

You also keep information with little risks, such as marketing content. For instance, if hackers get a copy of a blog article, they cannot sell it online. Identifying the categories of data the company saves and connecting this information with the places where you store your data serve as the foundation of your risk analysis.

3. Prioritize and evaluate the information risk

After reviewing and classifying all data assets, you can now assess the risk. Each kind of data asset sits in a certain location. You can assess how the risks overlap and influence the likelihood that a malicious actor might launch an attack. You can place a low-risk data asset, such as marketing content, in a high-risk place, such as a file-sharing program. If a malicious actor were to take the information, the financial harm to the organization might be small, so you might classify this as low risk.

Conversely, a high-risk data asset, such as a consumer medical file, stored at a site with moderate risks, such as a private cloud, might have a significant cost effect. This typically poses a considerable danger to the company.

4. Establish a risk tolerance and IT risk management practices

To determine your risk tolerance, it's vital to decide whether to accept, transfer, mitigate, or decline the risk. Purchasing cyber risk liability insurance is an example of a control that transfers risk. Installing a firewall to prohibit access to the location where the data remains can be an example of a risk-mitigation measure. For malicious actors, mitigating measures such as firewalls and encryption serve as barriers.

5. Monitor and review the risk

Malicious actors continually evolve their threat methods. You can monitor and assess the progress of risk mitigation. Use your risk assessment to track how your team is addressing the risk to help ensure that they consider all the potential threats.

Essential risk manager skills

Here are some skills necessary for risk managers:

Knowledge of regulations

A significant element of a risk manager's responsibility is to maintain the current state of any rules applicable to the organization's industry. In many sectors, ensuring that the business and its products or services conform with all industry standards is essential, as noncompliance may result in product recalls or penalties. Staying current with compliance and legislation demands a continual effort.

Related: A Guide to Risk Management Process (With Practical Examples)

Analytical skills

To predict and evaluate risk, it's necessary to possess the analytical abilities necessary to examine pertinent data. This entails not just generating findings and applying them to make strategic choices, but also being able to identify data gaps and areas requiring future study. Correctly evaluating data involves a natural ability to derive pertinent inferences from the given facts.

Strategic thinking

Besides identifying current and future risks, risk managers design mitigation measures in collaboration with firm management. These tactics often include activities that have a long-term effect on the business, requiring that risk managers give solutions that consider this. Besides identifying hazards, risk managers can also find opportunities.

Financial knowledge

Financial risk is inherent in most companies, so risk managers require dependable financial expertise to recognize and reduce such risks. They may distinguish between hazards that the company can manage and those that are beyond its control. Many companies hire risk managers who have degrees in finance.

Communication skills

Risk managers are accountable for ensuring that they effectively communicate all hazards and risk strategies within an organization. It's important for them to possess good writing and spoken communication skills to appeal to a broad spectrum of personnel, from upper management to new employees. They typically use different media tools to convey both company-wide and department-specific threats.

Problem-solving skills

When a risk manager discovers a threat, they usually attempt to mitigate its consequences. This may entail understanding the risk, developing measures to remove or minimize it, and then applying those tactics. Typically, problem-solving skill sets include attributes such as critical thinking, concentration, and a natural motivation to solve issues.

Capacity to perform in demanding situations

Errors may have substantial repercussions on a company's well-being, making risk management a typically demanding position. Regardless of external factors, risk managers perform in challenging situations. It's ideal to build numerous systems and techniques that reduce the likelihood of a risk occurring.

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