Risk Mapping and Risk Mapping in Risk Management (Risk, Risk Heat Map, and Risk Management)

Risk Mapping in Risk Management. Welcome

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Thank you. Risk mapping in risk

management is discussed in this video.

In this video, we'll discuss how a risk

map can be used by an organization to

manage its risks in an

easy-to-understand

way. Now, let us start.

Meaning of a Risk. Risk is the

uncertainty of a financial loss.

A risk exists where there is an

opportunity for a profit or a loss.

In terms of losses, we commonly refer to

the risks as exposures to loss,

or simply exposures. Fire is an exposure.

Defective products or defamation are

liability exposures.

The loss of business that results from a

damaged building or tarnished reputation

is also an exposure. Risks can come from

various sources including uncertainty in

international markets,

threats from project failures (at any

phase in design

development, production, or sustaining of

life-cycles),

legal liabilities, credit risk, accidents,

natural causes and disasters, deliberate

attack from an

adversary, or events of uncertain or

unpredictable root-cause.

There are two types of events which are:

(1)

negative events which can be classified

as risks or threats;

and (2) positive events that may be

classified as opportunities.

What is Risk Management? Risk management

is the process of identification,

analysis, and acceptance or mitigation of

uncertainty in investment decisions.

Organizations face many risks and they

must decide where to focus their

mitigation resources.

To handle or manage risks, organizations

usually have the options to avoid,

control, accept, or transfer risk. The

adverse effects of risk can be objective

or quantifiable like insurance premiums

and claims costs,

or subjective and difficult to quantify

such as damage to reputation or

decreased productivity.

By focusing attention on risk and

committing the necessary resources to

control and mitigate risk,

a business will protect itself from

uncertainty,

reduce costs, and increase the likelihood

of business continuity and success.

Meanwhile, a risk map can be used as a

tool to improve the risk management

system of an organization.

What is a Risk Map? A risk map, also known

as a risk heat map,

is a data visualization tool for

communicating specific risks an

organization faces.

A risk map is a graphical depiction of a

select number of a company's risks

designed to illustrate the impact or

significance of risks on one axis and

the likelihood or frequency on the other.

Risk mapping is used to assist in

identifying,

prioritizing, and quantifying (at a macro

level)

risks to an organization. This

representation often takes the form of a

two-dimensional grid with frequency

(or likelihood of occurrence) on one axis

and severity

(or degree of financial impact) on the

other axis;

the risks that fall in the

high-frequency/high-severity quadrant are

given priority risk management

attention. A risk map helps companies

identify and prioritize the risks

associated with their business.

The goal of a risk map is to improve an

organization's understanding of its risk

profile and appetite,

clarify thinking on the nature and

impact of risks,

and improve the organization's risk

assessment model.

In the enterprise, a risk map is often

presented as a two-dimensional matrix.

For example, the likelihood a risk will

occur may be plotted on the x-axis,

while the impact of the same risk is

plotted on the y-axis.

A risk map is considered a critical

component of enterprise risk management

because it helps identify risks that

need more attention.

Identified risks that fall in the high-frequency

and high-severity section can

then be made a priority by organizations.

If the organization is disbursed

geographically and certain risks are

associated with certain geographical

areas,

risks might be illustrated with a heat

map, using color to illustrate the levels

of risk to which individual branch

offices are exposed.

Why it's Important to Create a Risk Map?

A risk map offers a visualized,

comprehensive view of the likelihood and

impact of an organization's risks.

This helps the organization improve risk

management and risk governance by

prioritizing risk management efforts.

This risk prioritization enables them to

focus time and money on the most

potentially damaging risks identified in

a heat map

chart. A risk map also facilitates

interdepartmental dialogues about an

organization's inherent risks and

promotes communication about

risks throughout the organization. It

helps organizations visualize risks in

relation to each other,

and it guides the development of a

control assessment of how to deal with

the risks and the consequence of those

risks.

Benefits of Using Risk Heat Maps.

Risk heat maps can offer significant

benefits to organizations.

Here are some of the benefits of using

risk heat maps by an organization:

A visual, big picture, holistic view that

can be shared to make strategic

decisions;

Improved management of risks and

governance of the risk management

process;

Increased focus on risk appetite and the

risk tolerance of the company;

More precision in the risk assessment

and mitigation process;

and Greater integration of risk

management actions across the enterprise.

The Importance of Risk Mapping Business

Organizations.

Why should your organization be using

risk maps?

Building a risk map brings valuable

benefits.

You will have a thorough understanding

of your risk environment

and how individual risks compare to one

another.

You can use this to strategically

prioritize your risks and determine

where to use your limited resources.

The map can help the company visualize

how risks in one part of the

organization can affect operations of

another business unit within the

organization.

A risk map also adds precision to an

organization's risk assessment strategy

and

identifies gaps in an organization's

risk management processes.

A risk map is built by plotting the

frequency of a risk on the y-axis of the

chart and the severity on the x-axis.

Frequency is how likely the risk is or

how often you think it will occur;

severity is how much of an impact it

would have if it did occur.

The higher risk ranks for these

qualities, the more threatening it is to

your organization.

The most severe and frequent risks, your

primary risks,

are critical and would hinder your

ability to conduct business.

Risks that are severe but unlikely, that

is your "detect and monitor" risks,

are those risks that should be watched

but don't require heavy mitigation

strategies.

Risks that are highly likely but

insignificant, your monitor risks,

will not impact your ability to continue

operations.

Finally, the risks that are low in both

frequency and severity,

your low control risks, can be revisited

on a yearly basis to ensure

the risk remains low. Risk maps are a

valuable tool as they assist

organizations to:

1. Understand the risk environment.

Risk management begins with building a

list of all risks your organization

faces. Depending on your industry, this

number could range from a handful to

hundreds.

Risk mapping is beneficial because it

requires you to assess

each risk and its causes and

consequences individually.

It also allows you to look at your risk

environment as a whole and understand

how frequencies and severities compare.

Finally, a risk map is a visual that

anyone in your organization can use to

see the big picture of risks most

prominent

in your industry or workplace. 2.

Prioritize mitigation strategies.

With limited resources, it's important to

be strategic about mitigation techniques.

Risk mapping allows you to determine

what steps to take first:

implement prevention tactics for the

most frequent and severe risks before

moving onto others.

This prioritization method ensures that

you address the risk that have the most

potential to cause harm to your

organization.

3. Allocate limited resources.

Whether your organization consists of

2 employees or 2,000,

risk managers have limited resources.

Risk mapping allows you to use them to

prevent primary risks.

D&M risks should be revisited several

times a year to ensure appropriate

management.

Similarly, monitor risks typically only

need to be checked yearly to ensure

their potential impact hasn't grown.

Finally, by figuring out which risks are

low control,

you will know where not to spend time

and money.

However, keep in mind that no risk can be

completely ignored:

make sure you still consider these in

future assessments and ensure that the

low-risk status has not changed.

4. Receive better insurance premiums.

Risk maps can also help your

organization in becoming an

international standard

organization (ISO) certified,

as it shows that you have an

understanding of your risk environment

and a strategic plan for moving forward.

This can also help you receive

competitive insurance premiums.

Insurers are looking for good risk, or

companies they believe will have minimal

losses.

Key Considerations for Risk Heat Maps.

To develop an effective cybersecurity

risk heat map,

consider these critical elements:

What are your most critical systems and

information assets

(those you want to map)? How accurate is

the data and where is it coming from?

What is your organization's appetite for

risk?

What categories and levels of impact

would be considered material,

for example, monetary, brand reputation,

and other related impacts?

What is the range of acceptable variance

from your key performance and operating

metrics?

And how will you define terms to

integrate potential risk events with

your heat map?

How to Build a Risk Map. A risk map is

built by plotting the frequency of a

risk on the y-axis of the chart and the

severity on the x-axis.

Frequency is how likely the risk is or

how often you think it will occur.

Severity is how much of an impact it

would have if it did happen.

The higher risk ranks for these

qualities, the more threatening it is to

your organization.

Let us discuss tips on how to build a

risk map.

Here are four tips on how to build a

risk map:

1. Involve people from all parts of

your organization.

Risk mapping is not a process that

should be conducted by one person.

Every person in your business, from the

CEO to the intern,

will have different ideas about what

risks are most prevalent to your

industry. You cannot involve everyone, but

ask multiple people from various

departments and levels of authority to

ensure you are getting unique viewpoints.

This will also allow you to discover

risks that you may not have previously

considered and gain new perspectives on

how frequent or severe a risk really is.

2. Understand each risk.

Simply naming your risks does not allow

you to build an effective risk map.

You must assess each scenario with a

strong understanding of the business and

how the risks can impact your ability to

continue operations.

Think about what is likely to cause the

risk and the consequences it will have

if it occurs.

It is also important to be consistent in

how you rank each risk in terms of

frequency and severity so that the final

product is a clear depiction of how the

risks compare to each other.

3. Seek guidance. If consulting those

within your organization isn't providing

a sufficient understanding,

look elsewhere. You can try to determine

how likely and impactful a risk will be

based on your experience and past losses,

but what if you're a start-up company? You

can ask an expert:

many insurance providers are able to

assist with risk management tools,

and if not, they can likely suggest

someone who can.

You can also look at similar

organizations and industry statistics to

help guide your risk ranking.

4. Revisit and modify.

You've built your risk map and are now

using it to help manage and mitigate-

great! But it's important to remember

that your risk landscape is constantly

changing.

Revisit your rankings with the risk

management team at least

quarterly, to discuss if the status of

any existing risks has changed or if any

new risks should be placed on the map.

Doing so will ensure that your risk map

is a consistently helpful tool that will

help you reduce

incidents and costs. Major Ways to Use

Risk Heat Maps by Organizations.

Where charts have to be interpreted and

tables have to be understood,

heat maps are self-explanatory and

intuitive.

Because they are tailor-made for putting

massive data sets into a context that's

easy to understand,

they are increasingly valued as a

superior data visualization tool in

cybersecurity for identifying,

prioritizing, and mitigating risks.

Here are three major ways to use risk

heat maps by

organizations: 1. Risk impact heat map to

show the likelihood of a risk event

happening

vs. business impact of such that

event.

Risk is the product of breach likelihood

and breach impact.

In this type of heat map, the horizontal

axis shows the likelihood of a

cybersecurity breach.

The vertical axis shows the business

impact of a breach.

The colors are risk areas, for example,

green colored boxes indicate no

action needed and red boxes indicating

immediate action needed.

The individual risk items are then

plotted on the heat map based upon the

Business Impact and Likelihood of breach

happening.

This can be computed as follows: Risk is

equal to impact times likelihood.

2. Comparing breach likelihood across

different business

areas. Risk heat maps can be used by an

organization to comparing breach

likelihood across different business

areas.

Here is an example of a heat map that IT

can use to compare breach likelihood

across different

areas or groups. Such charts can be

created for multiple types of risk

groups-

asset types, locations, business units,

and more. 3. Mapping information

technology

(IT) asset inventory by type and risk

associated with each of those categories.

Risk heat maps can be used by an

organization for mapping IT

asset inventory based on the type of IT

asset inventory and risk associated with

each of those categories.

Here is an example of a heat map that IT

can use to map IT

asset inventory by type and risk

associated with each of those categories.

How to Create or Build a Risk Map. For

the heat map to be insightful and

comprehensive,

it should be created using accurate, and

complete information.

Identification of inherent risks is the

first step in creating a risk map.

Risks can be broadly categorized into

strategic risk,

compliance risk, operational risk,

financial risk, and reputational risk,

but organizations should aim to chart

their own lists by taking into

consideration specific factors that

might affect them financially.

Once the risks have been identified, it

is necessary to understand what kind of

internal or external events are driving

the risks.

The next step in risk mapping is

evaluating the risks: estimating the

frequency,

the potential impact and possible

control processes to offset the risks.

The risks should then be prioritized. The

most impactful risks can be managed by

applying control processes to help

lessen their potential occurrence.

As threats evolve and vulnerabilities

change, a risk map must be re-evaluated

periodically.

Organizations also must review their

risk maps regularly to ensure key risks

are being managed

effectively. For example, let us briefly

consider how a firm can build a

cyber risk heat map.

Cybersecurity heat maps involve an

extensive and disciplined assessment

process at the back end,

in order to present a simple

visualization of risks and recommended

actions at the front end.

The heat map is an essential and useful

output of your overall cybersecurity

assessment and vulnerability management

process. With a rapidly increasing attack

surface,

the first step is to accurately measure

a cyber risk attack surface.

This means getting complete visibility

into all your IT

assets (devices, apps, and users)

and then continuously monitoring them

across all 200+ attack vectors in

adversaries' arsenals.

The company, therefore, need to regularly

analyze the observations to derive risk

insights.

This is a layered calculation that

involves incorporating information about

threats, vulnerabilities, mitigating

actions,

business criticality, impact elasticity,

and time-to-repair. Conclusion.

Risk mapping in risk management has been

discussed in this video.

A risk map (or risk heat map) is a

graphical representation of cyber risk

data where the individual values

contained in a matrix are represented as

colors that connote meaning.

Risk heat maps are used to present cyber

risk assessment results in an

easy to understand,

visually attractive and concise format.

Risk maps can be used by an organization

to improve its risk management culture.

Risk maps can, therefore, assist to

enhance understanding and prioritization

of a firm's risk management system.

In short, heat maps present a very

complex set of facts in an easily

digestible way.

This helps organizations to enhance

their resilience

in the highly challenging business

environment.

Hope the video is educative and

beneficial to you?

Which aspect of the risk mapping in risk

management discussed in this video do

you consider to be more relevant in your

organization?

Please post your answer to this question

in the comment section below.

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