Risk Management free essay sample

What is risk management? Why is identification of risks, by listing assets and their vulnerabilities, so important to the risk management process? Risk management is the process of identifying risk, as represented by vulnerabilities, to an organization’s information assets and infrastructure, and taking steps to reduce this risk to an acceptable level. Each of the three elements in the C. I. A. triangle, introduced in Chapter 1, is an essential part of every IT organization’s ability to sustain long-term competitiveness. When an organization depends on IT-based systems to remain viable, information security and the discipline of risk management must become an integral part of the economic basis for making business decisions. These decisions are based on trade-offs between the costs of applying information systems controls and the benefits realized from the operation of secured, available systems. 2. According to Sun Tzu, what two key understandings must you achieve to be successful? Know Yourself and Know the Enemy. We will write a custom essay sample on Risk Management or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Who is responsible for risk management in an organization? Which community of interest usually takes the lead in information security risk management? The resources used when undertaking information asset risk management is usually provided by all three communities: Information Security, Information Technology and General Management. 4. In risk management strategies, why must periodic review be a part of the process? Periodic reviews must be a part of the risk management strategies because threats are constantly changing for a company. Also once any specific vulnerability is completely managed by an existing control it no longer needs to be considered for additional controls. 5. Why do networking components need more examination from an information security perspective than from a systems development perspective? Networking components need more examination from an information security perspective than from a systems development perspective because networking subsystems are often the focal point of attacks against the system. 6. What value does an automated asset inventory system have for the risk identification process? An automated asset inventory system would be valuable to the risk identification process because all hardware components are already identified – models, make and locations – thus management can review for the most critical items and assess the values. 7. What information attributes is often of great value for networking equipment when DHCP is not used? IP Address 8. Which is more important to the systems components classification scheme, that the list be comprehensive or mutually exclusive? It is more important that the list be comprehensive than mutually exclusive. It would be far better to have a component assessed in an incorrect category rather than to have it go completely unrecognized during a risk assessment. 9. What’s the difference between an asset’s ability to generate revenue and its ability to generate profit? The main difference between a revenue-generating asset and a profit-generating asset is that the revenue-generating asset produces a cash flow that is linked directly to the asset. If the asset were sold, the cash flow would stop. With a profit-generating asset, the linkage is not so direct. The asset does not produce cash directly, but influences consumer and competitor behavior with the intention of producing more revenues. 10. What are vulnerabilities and how do you identify them? A vulnerability is a weak spot in your network that might be exploited by a security threat. Risks are the potential consequences and impacts of unaddressed vulnerabilities. Vulnerability assessment tools or scanners are used to identify vulnerabilities within the network. The vulnerabilities identified by most of these tools extend beyond software defects (which are fixed by patching) to include other easily exploitable vulnerabilities, such as unsecured accounts, misconfigurations and even back doors. There are several types of assessment tools available. Although these tools have general similarities, they can vary in the methods and processes they employ to identify vulnerabilities. As a best practice, you shouldnt rely on a single assessment tool but should use different tools to gain a broader perspective of their exposure to vulnerabilities. Open-source or shareware assessment tools are available online and can be used to supplement commercial scanners 11. What is competitive disadvantage? Why has it emerged as a factor? Competitive disadvantage is the state of falling behind the competition. It has emerged as a factor because business which do not stay on the cutting edge of IT can quickly fall behind the competition, given the current fast pace of technological advances. 12. What are the strategies from controlling risk as described in this chapter? The four risk control strategies are avoidance, transference, mitigation and acceptance. 13. Describe the â€Å"defend† strategy. List and describe the three common methods. The strategy of avoidance involves applying controls that eliminate or reduce the remaining uncontrolled risks. Application of policy, Training and education, and Applying technology 14. Describe the â€Å"transfer† strategy. Describe how outsourcing can be used for this purpose. The strategy of transference involves shifting risks to other areas or outside entities. Outsourcing can be used for risk transference by outsourcing security-sensitive areas which are not central to the organizations purpose and letting the outsourcing firm accept the risk. ($$$). 15. Describe the â€Å"mitigate† strategy. What three planning approaches are discussed in the text as opportunities to mitigate risk? The strategy of mitigation involves reducing the impact should an attacker successfully exploit the vulnerability. Incident response plan (IRP), Disaster recovery plan (DRP), Business continuity plan (BCP) ?. 16. How is an incident response plan different from a disaster recovery plan? Incident response plan (IRP) focuses on immediate response to an incident. Disaster recovery plan (DRP) focuses on restoring operations at the primary site after disasters occur. 17. What is risk appetite? Explain why risk appetite varies from organization to organization? 18. What is a Cost Benefit Analysis? Cost–benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of a project, decision or government policy. What is the definition of single loss expectancy? What is annual loss expectancy? Single Loss Expectancy (SLE) is the amount of loss expected for any single successful threat attack on any given asset. This is a monetary value that describes how much the incident will cost in terms of lost asset value. Annual Loss Expectancy (ALE) estimates the annual loss resulting from an incident. 20. What is residual risk? Residual risk: risk that has not been completely removed, shifted, or planned for. Exercise: If an organization has three information assets to evaluate for risk management as shown in the accompanying data, which vulnerability should be evaluated for additional controls first? Which one should be evaluated last? An evaluation of the provided asset vulnerabilities results in: Asset A: This is a switch that has two vulnerabilities. The first involves a hardware failure likelihood of 0. 2 and the second involves a buffer attack likelihood of 0. 1. The switch has an impact rating of 90. Assumptions made on this asset have a 75% certainty. Asset B: This is a web server that deals with e-commerce transactions. It has one vulnerability with a likelihood of 0. 1. However it has an impact rating of 100. Assumptions made on this asset have an 80% certainty. Asset C: This is a control console with no password protection with a likelihood of attack of 0. 1. It has no controls and an impact rating of 5. Assumptions made on this asset have a 90% certainty. ANSWER: Even though the switch has the highest risk I would evaluate the web server for additional controls first. The company Web site is hosted by this server and performs valuable e-commerce transactions which can be compromised if the Server is not protected. If an attack on this Server occurs much of the company’s private data could be compromised which could harm the organization in many ways. Protecting the server could also keep the organization safe from other threats and attacks. I would evaluate the control console that monitors operations in the server room last because the likelihood of misuse is low and it has the lowest impact value and poses the least amount of risk to the organization. Risk Management free essay sample The company generates its electricity at the Niagara Falls and distributes it to various Canadian provinces and the United States. Founded in 1906 as the Hydro-Electric Power Commission, the corporation was later renamed to Ontario Hydro in 1974. In 1998, the provincial government passed the â€Å"Energy Competition Act†. Ontario Hydro was restructured into two separate organizations: a power generation utility and a combined transmission/delivery business to be called Hydro one. 2. Hydro One’s Strategy and risks Hydro Ones strategy has changed a lot during the last years. First of all, the company thought they knew what was best for their customers. Eventually their focus changed into a more customer-based strategy. With the change in their focus in addressing the needs of their customers, customer satisfaction has, in some areas, doubled. Although results have been positive, problems for the electricity supply in the future might decrease the satisfaction of the customers. In the corporate risk profile trends, the electricity supply has become one of the biggest risks with a rating of ‘virtually certain’. We will write a custom essay sample on Risk Management or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Only â€Å"government policy uncertainty† and â€Å"getting the work done† have the same level of risk. In the impact-probability risk map of the firm, it is clear that problems with the electricity supply are quite probable and that the magnitude is considerably large. There’s always a risk of new outages, which can affect over 100. 000 customers for more than seven days in the worst-case scenario. Worst case expectations about the service quality indices predict that only 25% of the overall expected performance will be achieved when the best case scenario predicts 95%: it is already quite certain that the 100% achievement will be impossible. Another big issue in Hydro One’s strategy is cost efficiency. Due to its aging assets, the company had to focus on cutting costs. This initiative resulted in Rating Agencies improving Hydros rating on its long term debt to A, A2 and A (high), respectively. On the other hand, employees protested heavily against these measures by a major 18 weeks strike. Unfortunately, reducing unit costs to its desired level might fail in the end. Only in the minor case scenario the unit costs are not reduced, other scenarios predict an increase of 5 to more than 25%. Cheap electricity encouraged Canadian consumers to increase their purchases of energy-intensive consumer devices. Hydro One had to cope with this increased demand on its aging assets, so it launched an active conservation and demand management program. In this way, Hydro One is undertaking conservation initiatives, despite their adverse impact on the companys revenues and earnings. Electricity supply is one of the biggest risks; the former Pikangihum chief even mentioned the problem to turn on Christmas lights. The vision that CEO Formusa endorsed in a strategic plan is to make Hydro One the best transmission and distribution business in North America. This vision would be achieved by having the best safety record in the world, top quartile transmission and distribution reliability, 90% customer satisfaction across all segments, top quartile employee productivity, operating efficiency and an A credit rating. The CEO also intended to reach out and negotiate a long-term deal with the unions. The risks concerning safety were big from 2002 till 2004 but are under more under control since 2005. 3. Major drivers to get started with ERM at Hydro One As part of the firm’s spinoff from the previous Ontario Hydro and in preparation of an IPO, the management and board of Hydro One set high goals for being a best-practices organization with superior corporate governance and business conduct. In preparation of the IPO, they responded to the requirement of the Toronto Stock Exchange for listed companies to implement strategic risk management. Despite this IPO was forced to a halt in the Ontario Superior Court, Hydro One continued to follow their value creation strategy including the implementation of ERM and a risk-based investment planning system. At the same time, the government of Ontario posed a new challenge that had to be addressed with a scheduled deregulation of the electricity markets involving conservation initiatives. Other new policies in the energy industry like carbon legislation, the adoption of renewable technologies and climate change posed new threats and opportunities. In brief, the increased scrutiny on corporate governance called for a comprehensive risk management program. 4. Different stages of Hydro One’s ERM process Hydro One introduced a three-phase risk management program: In phase one, a risk management team organizes a series of interactive risk workshops in order to make the employees of the firm familiar with the companies’ key strategic objectives and the principal risks faced by the organization. Prior to these workshops, the risk team made a list of 60-70 potential risks or threats to the business. This list was e-mailed to the participating management. Based on their feedback, the risk team shortens the list to 8-10 risks. These shortlisted risks then are discussed during the workshops. In phase two, the risk team prepares a corporate risk profile report for the executive team twice a year, in January and July. In this report, the principal risks facing the organization are summarized. The chief risk officer conducts a series of one-to-one interviews with the top 30 to 40 top executives to review the corporate risk profile. This half-yearly monitoring and review of risk is very important within the ERM process, because risks do not remain static. In phase 3, during the annual planning process, the investment planning department and the risk management team jointly develop an approach for allocating resources to prioritized investment project proposals based on the risks identified. The chief financial officer argues that looking at investment proposals from a risk management point of view gives high visibility to capital expenditure planning in order to let the top management make the right investment decisions. 5. Up- and downsides of the ERM process Hydro One developed enterprise risk management in response to a new corporate governance requirement. A positive thing about Hydro One’s ERM process is that it includes all layers of the organization. Employees need to participate in a series of workshops to learn more about the company’s objectives and their risks. The method that Hydro One applies is structured, systematic and on a timely basis which are all key principles of risk management. It provides a foundation for all risk data across the organization and delivers visibility to this data. This has improved accountability and control within the company. An enormous benefit of the ERM process for Hydro One was that the company achieved a lower cost of debt. However, if the company decides to change its client-based strategy, it might be wise to review the ERM process and make some necessary changes. The corporation also uses the Delphi-method, which is a valuable communication technique when properly used. One needs to keep in mind, when applying the Delphi method, that the role of the supervisor may not be underestimated. It is he who needs to rearrange the data. Subjectivity might play a role, so it might be wise for Hydro One to find somebody else than Fraser to handle the risk management activities. In the end, ERM is more a state of mind than a technique or process. When all layers of the company have a mutual understanding about the company’s objectives and risks, one can say the ERM process has been successful. Hydro One’s ERM process will surely pass this test. 6. Framework There are a lot of different frameworks available these times. But the ISO 31000 Framework is the best practice framework because it is relatively easy to implement in an organization’s structure and still gives some good outcomes for the company. The Frameworks are used to facilitate the implementation of the ERM process into an organization. The core of the ISO 31000 Framework is the Risk Management Process (RMP). RMP consists of five important tasks. Further, the ISO 31000 Framework adds Management Information System (MIS). Risk management activities should be recorded. In this way, it is easier to know which actions are taken to counter the risk threats. The company will be able to react in a faster way to important changes in factors that could affect the organisation. Another important feature of the Framework can be found in Commit and Mandate. It is important to fully intergrate the ERM process in the organization. Every agent or stakeholder should be involved in the ERM process. Communication and consultation are key elements in every organization. But to implement the ERM process, communication becomes even more important. Communicating with all your stakeholders is crucial. Everyone needs to be aware of the possible risk the company is facing and the actions that are taken to mitigate these risks. The next important process of the ISO 31000 Framework is Accountability. For every identified risks, the company will have to assign a manager as risk-owner. They need to make clear who is responsible for which risk. Obviously, every agent or stakeholder has to participate in the process of countering risks. It is clear that the ERM process should be monitored and reviewed continuously. Because of a fast changing economic world, the ERM process should be adapted to these conditions. 6. 1 Establishing the context Hydro One is trying to be able to meet the high demand in hot weather springs and summers. Due to the aging infrastructure, Hydro One is facing high maintenance and growing costs. While they were planning to introduce cost-cutting initiatives they have to take into account these costs. Their main goal is to be able to report optimal financial results. This can be done in two ways. On the one hand, they have to make sure there are sufficient revenues. On the other hand, costs and expenses have to be kept under control. The problem of the 18-week during strike has caused an environment in the company where not everyone is heading in the same direction. So Hydro One is challenged to make sure there is a common culture in the company. 6. 2 Risk assessment Risk identification Identifying the likelihood and consequences of the different risks is done by organizing workshops wherein employees can participate. They are asked to express their feelings about the risks that might threaten the organization. Risk analysis Employees need to identify which business activities are affected by those different types of risks and in which degree on a 5-point scale. By doing this, every risk is looked at from another point of view. Each person identifies a different impact based on his or her area of expertise. Risks that are rated higher than 3, are more investigated in detail. They identify the worst-case scenario for each of those risks if something goes wrong within the company. After this process the company will have a clear view in the magnitude of a given risk, the probability of occurrence of a certain risk in a 2-3 year time period and the strength of the key controls in the company. If some of these key controls fail, it could cause a lot of damage to the company. Risk evaluation One had to be aware of the fact that risk is not a static concept. The level of risk a company is facing can depend on the whole environment of the company and the actions taken to mitigate the risk. So twice a year Hydro One made up a Corporate Risk Profile report to understand the changes in risk threats. 6. 3 Risk treatment options To reduce the risk threats to a tolerable level, action had to be taken. Everyone had to participate in these actions plans, but each manager was assigned as a risk-owner and had the full responsibility for taking actions to mitigate the risks. . 4 Communication and consultation It is really important to have a good and stable communication when implementing the ERM framework. Everyone has to know what their responsibilities are and what is going on in the company and its environment. If everyone is getting involved in the ERM process, each person will be able to look for solutions and thinks about different alternatives to handle different situations. Even the employees on the work floor should be consulted in the ERM process. They could have another view on the risks that threaten the company. They can discover some needs of the company the management could never be aware of. In conclusion, all stakeholders should be involved in the ERM process of the organization. 6. 5 Monitoring and reviewing To make sure the ERM Framework is implemented in the right way and has a positive effect for the company, it is important to monitoring and control the implementation of the Framework. And if needed some adjustments should be done to make the ERM process optimal. As mentioned earlier, the environment of the company and the risks threatening the company are not stable concepts. As a consequence, the ERM process is not stable even. 7. Conclusion One may never underestimate the importance of a well-balanced ERM process. By weighing up the implications of key decisions, appropriate actions can be agreed and delivered to support the chosen strategy. We can conclude that Hydro One’s ERM process is a valid one. ERM adds value for the company and supported the corporation’s managers in making good decisions about risk-based issues. [ 1 ]. ISO 31000, clause 4 Risk Management free essay sample With the diagnostic project metric when an issue does arise a contingency plan can be created if there is a trend toward a major risk as well. Diagnostic project metrics use current project statistics to gage where the project stands throughout the work of the project. This allows the project manager the ability to make better decisions along the route of the project to mitigate risk. Metrics that help improve the decision making, help aid to lower the risk of any project. Diagnostic metrics are comparative measures. The metrics compare a baseline (usually set at time of planning the project) to current project actuals. The actuals are compared to an earned value figure that is determined by where the project should be at that exact moment in time according to the project schedule. These diagnostic metrics will use the actual cost, earned value, and planned value to evaluate schedule variance, schedule performance, cost performance, and cost variance. We will write a custom essay sample on Risk Management or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Schedule performance and schedule variance will evaluate the earned value against the planned value. This will help show if the project is currently on schedule, or if not is it over or under schedule and by how much. Cost variance and cost schedule will reveal how the project is performing compared to the current cost and planned budget. These values will help the project manager assess if the project is on task, and if it is on budget. This will also help identify if changes need to be presented to upper management as to avoid going over budget, or over schedule. With better decision making and having the ability to minimize risk to the stakeholders the diagnostic metrics is the logical reason choice for this project. . These metrics would be appropriate to use for this project because project diagnostic metrics provide current data on project plan execution. These metrics are based on status collection and are used for plan variance analysis, and performance reporting. The key to using this metrics is the use of measurements of earned value management. This will give Xemba Transl ations the opportunity to define a set of measures that can give accurate picture of where the project stands according to the data received from the projects processes. This also marries nicely with the critical path methodology that Xemba Translations has used during its planning and work breakdown structure process. By using these forms of metrics it not only gives Xemba Translations more flexibility to view how the project is currently being assessed, it also takes the most advantage of the numbers Xemba Translations is currently producing in their status reports. These numbers assessed currently will be compared against the planned value to create the comparative metrics. The schedule variance, schedule performance, cost variance, and cost performance will be assessed to address where the project currently stands according to schedule and cost. The most important reason why these metrics will work best for this project is the ability to make better informed decisions because of the comparative data thus minimizing risk to the project. 2. The comparative data (analyzed below in the data section) reveals the important information that project managers need to make the informed decisions about the project. The Xemba Translations project’s current status based on these metrics are as follows: -The project is currently over budget -The project is currently over hours -The project is slightly ahead of schedule by two days By analyzing the cost variance by taking the earned value minus the actual value, the project can be evaluated as a negative number means the actual is greater than the earned value. This analysis has noted that the cost and the hours has returned negative numbers indicating that these two items have exceeded the earned value.