Risk Management

Developing software while preserving its embedded security can feel like an impossible task. As you update your product, you’re potentially adding new vulnerabilities. So as part of the risk management process in software engineering, you need to work with cybersecurity professionals throughout the software development life cycle (SDLC) to create a mature security profile.

What Is Risk Management in Software Engineering?

Traditional risk management refers to identifying and preventing any risks faced by a company that could cause financial losses. In software engineering, risk management refers to any threats that could cause a project to fail before its completion.

A risk management plan, therefore, looks at the process of software development and the wide variety of risks that can occur before the software project is ready for its intended function. The details of the application will change frequently throughout the development process, and any issues that could threaten the outcome of the project should be cataloged as risks.

What Is the Purpose of Risk Management in Software Engineering?

New programs are untested and uncharted, which means they’re vulnerable to risk throughout the development process. At any given point hackers could access your work in progress, perhaps to steal your intellectual property or collect information for future attacks; or the project itself may suffer from insufficient funding or a lack of staff.

So it’s not enough to examine risks for the finished product. You must look carefully at what risks exist for the entire development period, start to finish.

What Are the Five Risk Management Processes? How Can They Be Applied to Software Engineering?

1. Identify. A new software project can move in so many directions before completion that identifying every type of risk may seem daunting. It’s still crucial that you probe for all possible risks, and that you continue to look for new risk factors as the project moves forward.
2. Analyze. Examine the likelihood of the identified risks, as well as the source of the risk and the level of loss that would be inflicted if the threat should occur. Be prepared for your initial analysis to change over time, as the development process will eliminate some threats while creating others.
3. Evaluate. Here you determine what tactics can best minimize or eliminate each risk based on your previous analysis. This process will allow you to create a risk management strategy that can be adapted as your software development project moves forward.
4. Treat. Once you’ve decided what preventative measures will work best for your project, put them into action. Like all of the steps in this process, the treatment step will shift and change as your project changes and encounters new risks.
5. Monitor. A key part of software risk management is to monitor the potential risk throughout the lifecycle of the project. Your project manager should be involved in every step of the decision-making process and should be kept apprised of any new potential risks that may arise.

What’s the Difference Between Risk Management and Risk Mitigation in SDLC?

Risk mitigation is a part of risk management, and is one of several strategies you can use to prevent damage from risk. Mitigation specifically refers to reducing the effects of a risk once it has occurred. Mitigation recognizes that some risk is inevitable and seeks to prepare rather than prevent.

Risk mitigation in software development parallels the process used by traditional businesses. As outlined by the Open Web Application Security Project (OWASP), the Software Assurance Maturity Model (SAMM) focuses on assessing, formulating, and implements a software security strategy that integrates into the SDLC. Regardless of development methodology, you can follow a risk management process that allows you to protect your software throughout each stage of development.

How Does SAMM Approach Risk Mitigation?

OWASP embeds risk mitigation and response throughout the development cycle. Functionally, each group within the organization retains responsibility at different points in time. OWASP does this by breaking down software development into four basic business functions, each of which divides into three practices:

1. The Governance Function

   Governance, as defined by OWASP, focuses on business outcomes and deliverables such as strategy, metrics, policy, compliance, education, and guidance.

   The Strategy & Metrics (SM) Practice

   The SM Practice creates measurable security goals to mitigate the business risks inherent in data events.

   The Policy and Compliance (PC) Practice

   The PC Practice establishes written standards that meet legal and regulatory requirements, including audits that provide the necessary assurance.

   The Education & Guidance (EG) Practice

   The EG Practice increases workforce access to information so that they can identify and mitigate security risks more effectively.

2. The Construction Function

   Construction focuses on defining goals and creating software within projects. As such, you need to include the project management team as part of these steps.

   The Threat Assessment (TA) Practice

   As part of the TA Practice, you focus on risk identification and risk analysis. Not only will you look at the impact an attack may have, but you also look at the probability of occurrence.

   The Security Requirements (SR) Practice

   Initially, the SR Practice analyzes high-level security requirements based on how an organization intends to use the software. From here, it reviews new risks and how to mitigate them as the software matures. So you need to consider interactions with suppliers and adhere to audit standards as required in Service Level Agreements (SLAs).

   The Security Architecture (SA) Practice

   Rather than waiting to secure your software upon completion, the SA Practice builds in security by default. You want project teams to focus on explicitly designing software with security functionality in mind.

3. The Verification Function

   Verification relates to continuously testing, reviewing, and evaluating software for new risks.

   The Design Review (DR) Practice

   The DR Practice assesses design and architecture to detect and address issues early in the process. The goal of DR is to locate security issues before they become costly.

   The Implementation Review (IR) Practice

   During the IR Practice, you review source code and configurations for security vulnerabilities. While in the early stages of development, an organization can use simple checklists. Mature software development companies often use automation to provide greater coverage.

   The Security Testing (ST) Practice

   The ST Practice focuses on reviewing security in the runtime environment, functionally looking at it as it will work after deployment. As such, this can include traditional penetration testing for high-level test cases or review for other misconfigurations.

4. The Operations Function

   The Operations function relates to all activities that are part of the software’s release, such as shipping, deployment, hosting, and operation in the runtime environment.

   The Issue Management (IM) Practice

   The IM Practice creates processes for handling issues reports and operational incidents by assigning roles, organizing a formal incident response process, and tracking issues. Additionally, it requires communication between all stakeholders.

   The Environment Hardening (EH) Practice

   To protect the application, the HR Practice focuses on assuring that the underlying infrastructure maintains the software’s security posture rather than undermining it. To assure manageable deployment of security patches, you need to keep the development team’s information and find ways to review the operating environment.

   The Operations Enablement (OE) Practice

   The OE practice focuses on risk monitoring to assure that your project teams communicate risks to users and operators. As part of OE, you need to create documentation with details that users and operators need, and share those with each release.

   
   

Why Embedding Security Within Software Development Matters

As more companies seek to use Software-as-a-Service platforms to enable their businesses, they also recognize that vendors are one of the most significant data breach risks. Moreover, with the glut of SaaS platforms on the market, a SaaS vendor can stand above the competition if it makes security a primary differentiator.

Most SaaS platforms recognize this, and many may say they’re secure — but the vendor data environments remain murky. So you need a project manager who focuses on project risk management and mitigation to assure that you’re genuinely securing your product.

How ZenGRC Enables Risk Management During SDLC

The OWASP SAMM requires documentation from myriad stakeholders throughout the development cycle. This amount of data can’t be held on a shared drive or tracked in a spreadsheet. If you want scalability, you need an automated process for tracking and documenting your security reviews.

ZenGRC allows you to prioritize tasks so that everyone knows what to do and when to do it. With our workflow tagging, you can assign tasks to the individuals in your organization responsible for the activities involved in risk assessment, risk analysis, and risk mitigation. Finally, with our audit trail capabilities, you can document remediation activities to prove that you maintained data confidentiality, integrity, and availability as required by law.

For more information about how ZenGRC can streamline your GRC process, contact us for a demo today.

Love them or hate them, passwords have become part of everyday life – from logging into email accounts to signing up for classes, accessing corporate accounts for work, and much more. We all know strong passwords are an important part of cybersecurity, and that we should use passwords that are auto-generated or complex.

Many of us, however, fail at the task. CSO online generated a Password Hall of Shame for 2020, and (yet again) the most common passwords were “12345”, “password”, and “11111”. Not exactly difficult for cybercriminals to crack.

Phishing attacks, ransomware holdups, and brute force attacks on corporate IT systems are on the rise, so now may be a good time to review how you manage employee passwords and whether it’s time to switch to Single Sign-On (SSO). Let’s take a look at how you can help protect your sensitive information and proprietary data with a better password management policy.

Password Risk Management Comes in a Variety of Forms.

When you sign on to a computer system, the first line of cybersecurity defense is to authenticate that you are a user who has access to the system. There are three main means of identification or what computer people call authentication:

• Login information: referred to as “something you know,” like your mother’s maiden name or the name of your high school.
• A login object: also called “something you have,” such as a cellphone that can receive a text code.
• Something of your own being: also called “something you are,” like a fingerprint or a retina scan.

Different ways of making authentication more difficult to crack include:

• Two-factor authentication, which uses two of the above mentioned combined.
• Multi-factor authentication, which uses all three ways of authentication; such as your user name and password, combined with a text code sent to your cell phone and your fingerprint.
• Single sign-on (SSO) coordinates login to multiple applications with a single, strong authentication.
• Centralized authentication, which is a lot like SSO, but requires a user who has logged into the first application to re-enter the password even though the credentials are the same.

When trying to determine the best option for your organization, consider the password management risk combined with the level of security you think you need to protect your assets from malware.

Why Password Management Risk Mitigation Starts With You

As your company matures, you will likely need to use more interconnected applications to continue to be competitive. From email to cloud storage to Software as a Service (SaaS) providers, your organization is linking and using a lot of different applications just to accomplish daily work. On a normal workday, employees are accessing many applications to get their jobs done. Each application is a potential risk to your business’ cybersecurity, especially if employees are using weak passwords or overly common passwords.

Develop a Strong Password Policy

It’s important to make sure employees understand why they need a strong password, and can’t just use their phone number or another simple password.
Employees may falsely assume that since the company’s IT systems are protected by cybersecurity software and a vigilant IT department, their own personal password isn’t important. Therefore, most likely, the first step in mitigating password security risks is to develop a strong password policy.

• Establish clear password requirements, such as the use of uppercase and lowercase letters combined with numbers or special characters.
• Crack down on password sharing and the sharing of user accounts. Let employees know what can happen if your organization falls victim to password cracking and sensitive user information is leaked onto the web.
• Require unique passwords and passphrases for each user.
• Share examples of poor passwords and encourage employees to devise strong, secure passwords.

You Don’t Have to Change the Passwords All the Time

It was previously assumed that frequent password changing increased password security and was an important security measure. As information technology has advanced, however, research has determined that frequent changing of passwords doesn’t increase security by much. So yes, corporate logins and email passwords should be changed periodically, but that period can be longer in duration than previously thought.

Make it Easy for Employees to Remember or Retrieve Passwords

If you require frequently changed complex passwords, it’s very likely employees will write them down and leave them in places that are not safe, such as a note on the bottom of the keyboard. (Or maybe they will share their own passwords with co-workers.) For the sake of everyone’s sanity, it’s best to incorporate a strong password manager software solution and be as patient and supportive as possible while employees are adopting this extra step in mitigating password security risks.

How SSO Helps Mitigate Password Security Risk

Single Sign-On creates a single set of login credentials that are used across multiple applications and platforms. Basically, your employees come up with one password and use that to access every application they need to do their jobs.

When an employee enters a password for the dominant application, the SSO protocol shares a web token, a piece of data created by your server that combines a key with your identification. That allows access to every application the employee needs to do his or her job. It’s sort of like a bunch of code that combines your house key with your driver’s license, and you need both to get into your house.

SSO makes your organization more secure by creating a single point of entry into your systems, a single place where password authentication takes place.

Think of your IT systems as a medieval castle with gates and doors and windows where the enemy (the cybercriminal) can enter. SSO is the digital equivalent of creating a moat around your castle, where the only access point is the protected drawbridge.

SSO helps control password security risks because it makes it more likely that employees will use strong passwords: they only have to remember one. By streamlining employee access and lowering their number of passwords, you are automatically making it easier for them to use a strong password.

How Centralized Authentication Mitigates Password Management Risk

Centralized authentication is often confused with SSO because both perform a similar function. Centralized authentication mitigates password management risk by consolidating login information shared across multiple applications. Unlike SSO, centralized authentication requires constant repetition of credentials.

With centralized authentication, employees have a single username and password that works across multiple applications. This means that, similar to SSO, they need to remember only a single password. With centralized authentication, however, they need to enter those credentials every time they open a new application.

What Security Risks Come with SSO

As evidenced by the OneLogin breach back in June, SSO comes with some risk: having just one entry point means that if that is compromised, a single hacker can overwhelm your system and cause widespread damage for instance by installing ransomware.

Centralized authentication comes with a similar risk. If someone gains access to the set of credentials, the attacker can access all applications linked to that set of identification.

How Two-Factor Authentication Mitigates Password Security Risks

Biometric authentication is getting more and more common. Even theme parks like Disney and Six Flags now incorporate a fingerprint with the use of multi-day passes. This fingerprint requirement is an example of multi-factor authentication, or “something you are.”

Two-factor authentication is rapidly becoming a necessary and common safety protocol. It requires a username and password, and a piece of additional information tied to either an object or their person.

Biometric authentication takes password management risk mitigation to the next level by requiring the use of information specific to the individual person, not just to something he or she owns. This can involve facial, fingerprint, or voice recognition.

Since you are requiring your employees to provide data that is genetically unique to each individual, this is the highest level of security you can provide your systems.

Despite the sci-fi concept, the reality is that current technology makes this more accessible. Apple’s iPhone and MacBook Pro editions use fingerprints to gain access to the data on the devices. As this kind of technology becomes more prevalent, the cost will go down.

Microsoft, for instance, is phasing out all password use and switching completely to biometric authentication within the next five years. Biometric authentication may not be cost-effective for businesses at present, but it’s likely to become a predominant security technology in the future.

Two-factor authentication aids in mitigating risk by recognizing when an employee’s login credentials are being used in a location or from a computer not normally associated with that employee.

This offers two layers of security:

1. There is an additional obstacle your malicious intruder needs to overcome to access your systems.
2. Your employee will be aware of an attempt at unauthorized login and can change his or her password prior to the completion of the intrusion.

For most organizations, this is the most efficient and cost effective way to protect your corporate access.

Why Multi-Factor Authentication May be the Future of Password Management Risk

Multi-factor authentication is the highest level of security an organization can invoke. In multi-factor authentication, an employee needs to have a password, object, and biometric code to login to your systems.

Protecting your systems from intrusion means creating a program that combines employee awareness with tools to protect yourselves. Determining the best way to mitigate password management risk means looking at the technologies available and understanding the ways in which they can be used within your organization.

The more complex your organizational structure, the more complex your access management needs to be.

To see how you can move beyond password management in protecting your organization from security risks, read our ebook, “Cut Through Compliance Complexity With Consolidated Objectives.”

Cybersecurity and Compliance Management Tools

As you secure a competitive spot for your business in our highly interdependent world, many tools can help keep your business stay competitive while keeping cybersecurity and compliance top priorities.

ZenGRC’s compliance, risk, and workflow management software is an intuitive, easy-to-understand platform that not only keeps track of your workflow, but also lets you find areas of high risk before those risks manifest as real threats.

Worry-free compliance management is the Zen way. For more information on how ZenGRC can enable your CMS, contact us for a demo.

Integrated risk management (IRM) is “a set of practices and processes, supported by a risk-aware culture and enabling technologies, that improve decision-making and performance through an integrated view of how well an organization manages its unique set of risks,” as defined by research firm Gartner.

Put simply, integrated risk management is an approach to risk management that integrates risk activities across every level of your company to drive better decision-making by your decision-makers.

Integrated Risk Management Systems vs. Enterprise Risk Management Systems

It’s important to understand that integrated risk management is not the same as enterprise risk management (ERM). Enterprise risk management focuses on planning, organizing, leading, and controlling your risk activities. Enterprise risk management allows you to review your strategic business objectives as well as the information technology risks associated with those objectives. 

Integrated risk management is more about analyzing the risks inherent in your company’s technologies. Although integrated risk management includes many elements of enterprise risk management, it’s typically more comprehensive. 

For most companies, building an integrated risk management system means replacing risk areas that have traditionally existed in silos with a single, holistic view of enterprise risk.

This integrated risk management strategy requires that all the key functions in your company — personnel, financial services and accounting, manufacturing, procurement, information technology, legal, internal audit, strategic development, marketing, and so forth — take part in the risk management process.

An integrated risk management framework establishes a structured approach to governing risk. Applying an integrated risk management strategy lets you evaluate potential risks by providing a link between your business objectives, the functional departments of your company, and the components of a risk assessment (that is, the extent of the potential loss and the probability that the loss will occur).

Elements of an Integrated Risk Management System:

Every integrated risk management system will have these common components, which are discussed in detail below: 

• Risk Identification
• Risk Assessment
• Risk Response
• Risk Communication
• Risk Monitoring

Risk Identification

During risk identification, your organization identifies and develops a solid understanding of its risks. You should include any types of risks that could keep employees from achieving your business objectives at various levels of the company.

You should also provide your staff members with clear direction regarding your expectations about identifying risks, and provide the necessary tools to help them do this. There are a number of risk management tools and methods you can use to identify risks, including workshops and checklists. Enterprise risk management software is also available, and can be hugely beneficial in identifying areas of operational risk. 

You can identify risks using a structured integrated risk management plan as part of a formal risk assessment, or on an ongoing basis as part of regular meetings. When defining risk identification activities within the risk management process, you can offer direction regarding:

• Who should be involved in identifying risks;
• How much rigor is needed for particular risk identification activities;
• The type of data you have to collect and the level of detail that you need;
• How you should document the risks you identify for risk assessment purposes.

Risk Assessment

During the risk assessment, you have to analyze and prioritize your identified risks. Typically, analyzing risks during this phase involves assessing how likely it is that a particular risk will occur, and how much it will affect your business if it does occur.

Risk assessment generally focuses on “residual risk” — that is, the level of risk after you account for existing controls and any existing risk responses. Risk assessment can, however, also include assessing inherent risk: the level of risk before you consider existing controls and any existing risk responses.

Risk analysis helps you to prioritize which risks should be addressed first. This usually involves ranking risks that need responses promptly, so you can focus on the right risks. During this prioritization process, be sure to consider your risk tolerance. 

You should perform a risk assessment at the organizational level (“which risks could disrupt our whole enterprise?”) as well as at activity level (“which risks could prevent us from doing this specific thing, like protecting customer data?”). It should also include identifying and analyzing risks that may affect your company’s ability to achieve business objectives. In general, risk assessment involves determining how important the risk is, assessing the probability that the risk will occur, and figuring out how to handle it.

When you define your risk assessment activities within the risk management process, you may want to indicate:

• Who should be involved in the risk assessment;
• How much rigor is needed for a specific risk assessment activity;
• What type of information you need to collect and what level of detail is required;
• How you should document assessed risks for risk response purposes.

Risk Response

Risk response is the process of selecting and implementing strategies to respond to a specific risk. Usually, you select a general response strategy. For example, you might decide to accept, monitor, transfer, avoid, or reduce the likelihood or impact of a risk. Your tolerance for a specific risk should determine your risk response.

If you decide that you’ll take some action (say, not to accept the risk), you have to put a plan in place outlining the specific actions, responsibilities, and timelines of the action. Your risk response strategy should include all of the activities to accompany the risk response, such as communications and outreach. 

When you define your risk response activities within the risk management process, you might want to offer direction in terms of:

• Considering the wider context of the risk, including the business objectives you’ve defined and the outcomes that you expect;
• How stakeholders inside and outside your company will tolerate the risks;
• Your priorities in terms of allocating resources. 

Risk Communication

Risk communication, a key part of the decision-making process, refers to how you communicate and report information about risks to the appropriate levels of your organization at the right times, to support your decision-makers in their decision-making. 

This includes communicating risk information internally to your employees across different operational areas, as well as externally to clients and stakeholders. An important aspect of effective risk management communication is giving your decision-makers enough information so they can contribute to the decision-making process in an informed way.

Risk communication also lets you reuse risk information for other processes, which means you won’t have to conduct multiple risk assessments in the same area for different purposes (say, for auditing, planning, and resource allocation).

As with risk identification and risk assessment, you can use a number of tools and techniques to communicate risk information. You should, however, consider implementing a standardized method to communicate risks.

In defining risk communication activities within the risk management process, you should consider offering information about: 

• What type of metrics you need to communicate at various stages;  that is, what type of information do stakeholders need and want;
• Who the audience is for this information:, your employees, your management, external stakeholders;
• How you will communicate the information to the right people.

Risk Monitoring

Monitoring your risks is critical to ensure that the information you have about them continues to be relevant. Risk monitoring involves reviewing and monitoring whether your risk profile changes after you implement internal controls. 

That means you have to review your risk information regularly so that you can account for the effect that changing circumstances have on your existing risk controls. It also means that you must review your risk responses to assure that you’ve implemented your risk responses effectively and that you are achieving your business objectives. Monitoring risks also enables you to identify improvements that you could make to the risk management process.

In defining risk monitoring activities within the risk management process, you might want to offer information about:

• Who should be involved in monitoring new risks;
• How you should monitor the changes and the level of risks and how you should monitor each risk’s continuing relevance through its life cycle; 
• How you should monitor the progress on implementing risk responses;
• How you should monitor the effectiveness of risk responses as it pertains to moving risks toward levels your company can tolerate;
• How often you should review risk factors;
• Who is responsible for making changes or taking any corrective actions.

Implementing Your Integrated Risk Management System

Every company is different, and it’s important to design risk management practices that meet your organization’s specific needs. While creating your system, be sure to:

• Consult with internal and external stakeholders;
• Communicate senior management’s commitment to and vision of risk management throughout your company;
• Communicate the components of your risk management approach and any modifications to that risk management approach in a timely manner;
• Report the effectiveness and outcomes of your risk management solutions.

Once you’ve established these foundational elements, you can integrate them so they become an inherent part of your company:

• Risk management strategy. Establish and activate a risk-aware culture, executive sponsorship of the risk management program, plans, and roadmaps, including development of an integrated risk management framework.
• People. Empower all your employees and give them the resources they need to do their jobs. Communication and reporting are critical. You have to take the steps necessary to implement the best methods to track and inform all your stakeholders about your company’s risk response.
• Processes. Establish risk management processes that deliver risk and compliance outcomes, and make certain everyone can follow them. 
• Technology. Implement technologies that accelerate your risk management strategy. Establish processes, enable collaboration, drive engagement, support your integrated risk management strategies, and keep stakeholders informed and involved. 

Developing communications and reporting methods allows you to keep stakeholders informed about organizational risk management processes, practices, and risk responses. At any time, you should be able to provide stakeholders with a snapshot of your company’s key risks and what you’re doing to manage them. 

ZenGRC Has a Solution for Integrated Risk Management

Transparency is crucial for a successful integrated risk management program, and it’s imperative that your team is up-to-date on all of your risk reduction efforts. ZenGRC provides your company with an integrated central location for your risk and compliance management which streamlines your workflows and makes it easy to keep everyone on the same page. 

Our platform allows you to track security threats in real-time and give your customers the security they need. Schedule a demo today to learn more about how ZenGRC can simplify your risk mitigation plans.

The era of Big Data is here. Information now exceeds fantastic proportions, globally measured in zettabytes (a zettabyte is 1 billion terabytes), and growing at an exponential rate that defies human comprehension. 

According to research firm IDC, global data is expected to grow from 23 zettabytes (ZB) in 2017 to 175 ZB by 2025. And depending on your industry and specific organization, you likely have plentiful external and internal data sources readily available for mining, applying predictive analytics, and creating viable projections.

Leveraging data for better insight into operations allows a company to improve income streams, direct operations more effectively, and enhance the customer experience. Overall, your organizational health improves dramatically when data is accurately assessed.

But big data is also a powerful, and vital, tool for risk management, too. Before we get into big data’s role in financial risk management, let’s briefly define what it is.

Defining Big Data

The term “big data” refers to the structured and unstructured datasets that an organization collects as part of its day-to-day operations. These different datasets can include information gathered indirectly from a public source or directly from the organization’s customers. 

Big data can be classified by its volume (the amount of data incoming), the rate at which it’s accumulated, or the kind of data it is (structured, unstructured, or semi-structured).

Due to big data’s complexity and size, it requires specialized tools that incorporate machine learning and artificial intelligence to analyze and extract insight. 

With the ability to analyze big data properly, businesses can significantly improve strategic decision-making within the organization.

But where does all this data come from? To understand that, we need to understand big data’s relationship to the Internet of Things (IoT).

Big Data & the Internet of Things (IoT)

The term “IoT” was initially coined by Kevin Ashton in 1999 while working at Procter & Gamble in supply chain optimization. 

Today, however, “IoT” refers to the enormous amount of interconnected computing devices, sensors, and other “things” that also connect to the internet. All told, they represent about 7 billion devices worldwide. Together, these devices are what feed the massive amounts of information we now refer to as big data.

Think about all those human interactions that produce data: social media posts, app experiences, web page views, emails, financial interactions, and vendor transactions, as well as streaming data from the Internet of Things. All of these affect your company.

The tools created for big data and analytics are useful to corral and govern the data streaming in from IoT devices. IoT-focused developers are creating platforms, software, and applications that enterprises and organizations can use to manage their IoT devices and the data generated. 

Now that we’ve covered what big data is and how IoT creates it, let’s talk about the specific effect that big data can have on the banking system and financial market risk.

Using Big Data in Financial Risk Management

As it relates to financial risks, big data helps to identify and forecast risks that can harm your business. With the proliferation of cybercrime, big data analysis can help to detect patterns that indicate a potential cybersecurity threat to your business.

Using data science technology that incorporates predictive algorithms to analyze big data in conjunction with risk assessment, financial institutions can obtain real-time insight into their risks and use that to drive their risk management strategy.

By leveraging the different sources of big data, organizations derive a wealth of insight into organizational risk, which allows for assessing and minimizing threats. 

When your company applies big data to risk management, a detailed picture emerges that helps structure financial revenue streams and apply predictive indicators to increase organizational growth.

In short — if you aren’t using big data in risk management, you’re not optimizing all that information for the greatest good of your company. To demonstrate this point, let’s take a look at the variety of applications for big data in financial risk.

Specific Risk Management Applications of Big Data

Here are several risk management applications of big data.

Vendor Risk Management (VRM)

Third-party relationships can produce regulatory, reputational, and operational risk nightmares. VRM allows you to select vendors, assess the severity of risks, establish internal controls to mitigate the risk, such as firewalls or multifactor authorizations, and then monitor the vendors’ ongoing activity.

Fraud and Money Laundering Prevention

Predictive analytics supply an accurate and detailed method to prevent and minimize fraudulent or suspicious activity. That’s vital in an era when money laundering traffickers have become more sophisticated in their techniques. 

An arsenal of big data risk management and mitigation techniques is applied by governments and international lending institutions. This includes web, text, unit price, and unit weight analytics, as well as relationship profiles of trade partners. This data can help identify shell companies.

Identifying Churn

A significant risk to organizations is churn. The loss of customers deeply affects the bottom line. In the white paper Prescription for Cutting Costs, by Bain & Co., author Fred Reichheld, states: “Customers generate increasing profits each year they stay with a company. In financial services, for example, a 5 percent increase in customer retention produces more than a 25 percent increase in profit.” 

Customer loyalty can be identified using big data as a risk management tool. Based on the data, companies can expedite measures to decrease churn and prevent customer defections.  

Credit Management

Risk in credit management can be mitigated by analyzing data pertaining to recent and historical spending, as well as repayment patterns. 

Novel big data sources, such as social media behavior, mobile airtime purchases (considered a possible indicator of creditworthiness) and customer interactions with financial institutions increase the ability to assess credit risks.

Operational Risk in Manufacturing Sectors

Big data can supply metrics that assess supplier quality levels and dependability. Internally, costly defects in production can be detected early using sensor technology data analytics. 

How to Improve Risk Management With Big Data

To understand how big data can be used in managing financial risk, it’s helpful to review essential principles of risk management.

Risk is an aspect of nearly every business decision. It’s impossible to avoid risk, especially when a company seeks growth, diversifies products, or attempts to achieve a new objective. 

Yet decision-making often involves uncertain outcomes — a point ISO recognized when defining risk. According to ISO 31000, risk is the “effect of uncertainty on objectives.”

What to do about all that uncertainty? The answer is a robust risk management solution. The fundamental elements of risk management are:

• Identification;
• Evaluation;
• Prioritization of risks; and
• Steps taken to manage risk.

Each of the elements in risk management correlates to the application of big data.

The vast stores of historical data, as well as real-time big data analytics, provide a significant system to extract valuable information. When coupled with robust predictive analytics that assesses possible risks, organizations can decrease uncertain objectives and increase clarity in decision-making.

And big data in risk management is applicable to all industries, not just the financial industry, which has long used data systems for evaluation of opportunities and weighing risks.

In addition to financial markets, big data risk management has a place in healthcare, retail, manufacturing, and e-commerce organizations and can be applied to a substantial variety of corporate threats, such as regulatory risk.

ZenGRC Is Your Risk Management Solution

ZenGRC is a governance, risk management, and compliance tool that can help you to implement a risk management plan. 

It can help to automate and facilitate the documentation and workflows involved in risk assessment, mitigation, and documentation of cybersecurity incident response efforts. ZenGRC can also trace your compliance stance across multiple frameworks such as GDPR, PCI DSS, HIPAA, FedRAMP, and more. 

That view is provided in real time, showing you where your gaps are and what’s needed to fill them, improving your overall security stance in the process.

Not only does this provide one of the most effective methods for risk management; it also makes organizations more efficient at the ongoing tasks of cybersecurity and risk management, and can improve customer satisfaction when clients are confident that their data is protected.

To see how ZenGRC can improve your risk management strategies, schedule a demo today.