Preventing impact on the enterprise’s most critical processes and ensuring continuity of operations as quickly as possible is the prime objective of risk management. Assessing the possible hazards that can disrupt business operations allows organizations to put together a framework of policies and procedures that can mitigate the probability of their impact on production.

Using risk assessment techniques, organizations spot operational segments where the concentration of risk to activities is beyond the enterprise’s resiliency threshold.

Appropriate preventive actions are executed to reduce the frequency and intensity of such hazards. The business impact analysis provides in depth documentation on all possible disruptive incidents including types of impact and seasonal occurrences. The delivery of products, services and solutions are prioritized based on market demands, client requirements and commercial objectives. Mission critical activities are identified and arrangements are made to facilitate a seamless transition through the business disruption, thereby ensuring operational continuity.

Many corporations have a fully functional risk management module, keep a log of risk factors and incorporate risk assessment capabilities into mainstream operations so that management teams can evaluate risks as part of their day to day activities. In such cases, threat assessments are readily accessible for reference. However, it must be noted that risk management is not mandatory while deploying a business continuity management module.

In some nations and industries, the business ecosystem is such that risk assessment has been made compulsory, both from a compliance and legal perspective. Enterprises follow a formal process to evaluate the impact of possible hazardous occurrences followed by appropriate risk transfer, acceptance, reduction and avoidance.

Risk management models serve a variety of purposes. Many have a generic design that can be adapted to virtually any business scenario while others are designed specifically for an industry, sector or type of organization that caters to a specific market segment or target audience. But one feature that is common across all models is the availability of tools to identify specific hazardous incidents and the evaluation of the extent of impact they have on business based on intensity and scale of damage as well as probability of occurrence.

Simply put, risk value is the impact of a threat multiplied by that threat’s probability.

The significance of a risk factor can be calculated by building upon the organization’s existing mitigation framework or including more variables, such as the organization’s ability to curb the impact of the risk factor. The impact of a risk might be minimal, but if the organization does not have the infrastructural capabilities to control it, the disruption can spiral out of control leading to prolonged outages.

Threats can also be listed out sequentially based on the complexity of response required to mitigate them. Executives can tackle all the threats one by one, starting with the easiest to control and moving on to more complex threats. While this approach optimizes return on investment in terms of time spent and expenditure, many external and hidden hazards get overlooked in the process.

Besides, such an approach is not very effective during major crisis situations of catastrophically severe proportions for a number of reasons, some of which have been listed below:

• The enterprise can never obtain a detailed and comprehensive view of the threat landscape. Many threats get overlooked
• The probability of occurrence is forecasted based on historical data
• Forecasting the occurrence of disruptive incidents during a given time period becomes more error prone when the time period under evaluation increases
• The risk value, based on intensity of impact and frequency of occurrence, lack sufficient levels of calibration. Simplified classifications of risk factors in terms of 1, 2 and 3 or Low, Medium and High tend to lend undue importance to minor issues and underestimate the impact of major incidents. Such simplified quantification techniques don’t give a clear picture of the risk scenario. For instance,

1. Threat A has been assigned the numerical value 1 for intensity of impact and 10 for frequency of occurrence.
2. Threat B has been assigned the numerical value of 10 for intensity of impact and 1 for frequency of occurrence.

Both threats have a combined risk value of 10. Which of the two threats will have a greater impact on operations?

• Both threats have a combined risk value of 10. Which of the two threats will have a greater impact on operations?

Procedural Framework

Evaluating threats can be broadly outlined as follows:

• Enumerate all the internal and external threats that can hamper an organization’s mission critical operations. Data from the business impact analysis is the first point of reference for this task
• Design a mechanism for evaluating the intensity (amount and extent of damage) and the frequency of occurrence of various threats. Obtain approval from upper management and leadership teams for the same
• Calculate the intensity of impact each threat can have on the enterprise using the evaluation mechanism that has been designed
• Calculate the probability of each threat occurring using the evaluation mechanism
• Calculate the combined value of intensity of impact and probability of occurrence for each threat
• List out the various threats in descending order as per the calculated risk value
• Share data with the executives in charge of the existing risk management control program
• Execute recommended responses in order to mitigate business disruption

Approaches & Methodologies

Threats to business operations should be evaluated in accordance with the risk management model the organization has installed. Apart from the specific evaluating system used for assessing risks, the approaches and methodologies that can be used also encompass other factors such as:

• Risk logs
• Using relevant sources for identifying threats both within and outside the organization
• Boolean logic based assessment techniques such as event tree and fault tree analysis
• Stakeholder analysis
• Preparation based on business forecasts
• Findings discovered through the BIA exercise
• Patterns and trends based on historical data
• Connectivity requirements
• Mapping geospatial data
• Statistical techniques for determining the frequency of occurrence

Options for mitigating threats include:

• Seeking guidance from local and international physical security and IT security agencies on dos, don’ts and best practices
• Alert and warning systems that provide advance notifications on errors, outages and failures
• Sprinklers, fire suppression systems, smoke detectors and so on
• Facilitating a robust network through redundancy, seamless failover, granular control and high availability

Takeaways and Evaluation

• The organization now has a list of threats that is sorted based on the risk value – frequency of occurrence and intensity of impact
• Frameworks are in place for spotting deviations from the prescribed plan of action
• Measures to mitigate risks and workaround options in the event of errors, failures and outages have been established

A management process has been designed to keep the risk management module current through:

• Regular updates to the findings from the BIA exercise
• Incorporation of changes in internal and external business processes
• Modifications of existing plans in order to adapt to changing market trends, economic and sociopolitical developments

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