What's the Difference: Risk Management, Risk Assessment, Risk Analysis? (2024)

What Is Risk?

Risk is the chance that the outcome differs fromwhat isexpected. Usually, when we talk about business risk, we are referring to possible negative impact and consequences of an event ordecision.

In business, there will always be a certain degree of risk that any organization must face to achieve its goals. At the essence, risk is a fundamental requirement for growth, development,profitand prosperity. In a broad range of every business industry, including healthcare, finance, accounting, technology and supply chain, effectively managed risksprovidepathways to success. But like any path, you need to know all the divots,detours,and dangers along the way.

Even though risks are a part of doing business, wemustfind ways toidentifyand manage those risks swiftly and effectively since they can often develop out of nowhere, creating the possibility for greater risks and damages.It is crucial to find ways to manage risks with the goal of minimizing their threats and maximizing their potential.

Risks come from a variety of sources, which include the following:

• Uncertainties in financial marketsand the economy.
• Threats associated with project failures at any phase, which includes design, development, production,ormaintenanceof life cycles.
• Legal liabilities.
• Credit risk.
• Threat ofnatural orman-madedisasters.
• Security andcybersecurity risk.
• Impact ofuncertain or unpredictableevents, such as apandemic.
• Competitiverisk.
• Fallout from a company’s damaged reputation.
• Compliance risk.
• Third-party riskthat comes with relying on external suppliers andvendors.

To help you better understand various risks, there is a set of international standards for information security that can help. Together, the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) create and publish theISO 270000 standardscooperatively for better guidance.

What Is the Difference Between Risk Assessment, Risk Management and Risk Analysis?

It can become confusing trying to sift through the different termsdealing withrisk,includingrisk assessment,riskmanagement, andriskanalysis.The main difference isbreadth.

1. Risk managementis themacro-levelprocessof assessing, analyzing,prioritizing,andmaking a strategy for mitigatingthreats and managing risk to an organization’s assets and earnings.
2. Risk assessment is ameso-level processwithin risk management. It aims tobreaksdownthreats into identifiable categoriesand define all the potential impact of each risk.
3. Risk analysis is themicro-level processof measuring risks and their associated impact.

Let’stake a closer look at what differentiates these terms.

Risk Management

“The purpose of risk management is not to change the future, not to explain the past.” –Dr.DanBorge,a financial expert and formeraeronautical engineer who designed theRAROC risk-management systemandwroteThe Book of Risk.

Instead, cybersecurity risk managementis theoverarchingumbrella when it comes risk.It includes both risk assessment and risk analysis.

Managementinvolves the identification, analysis, evaluation, and prioritization ofcurrentand potentialrisks. This allows you toaddressloss exposures,monitorrisk control and financial resourcesin order tominimize possible adverse effects of potential loss. Further, solid risk management strategies within your business model give you the ability to maximize the realization of available opportunities to avoid risk.

Risk Assessment

Risk assessment helps youidentifyand categorizerisks.Plus, itprovidesanoutlineforpotentialconsequences.

Risk assessment definition: an analysis involving processes and technologies that help identify,evaluateand report on any risk-related concern. According toNIST800-30, risk assessment is a “key component” of the risk management process and is primarily focused on the identification and analysis phases of risk management.

If we take the example of a security risk assessment, it involves the following steps:

• Identifythe critical assets and sensitive data,
• Builda risk profile for each asset,
• Determinecybersecurityrisks foreachasset,
• Mappinghowcritical assetsare linked,
• Prioritizewhich assets to addressin case of asecuritythreat,
• Createamitigationplan withsecurity controlstoeliminate or mitigate the impact ofeach risk,
• Continuallymonitorrisks, threats, andvulnerabilities.

Risk Analysis

Risk analysis is the crucial evaluationcomponentwithin the broader riskmanagement andassessment processes. A preliminary factor analysis of information risk determines the significance of identified risk factors identifiedin the risk assessment process and provides. Plus,it qualifies risk,measuring the likelihood of hazards occurring and tolerances for certain events. One example is whenan auditor calculates the probability andmagnitudeofa potentialloss.

Scoring the risksidentifiedtakes into accountthe likelihoodof occurrence and theestimated extent ofpossible impact.Together, this makes it possible to prioritize risks and set a strategy formitigatingthem.

Related article: Business Leaders’ Top Concerns as Enterprise Risk Rises this Year.

Do You Feel Confident About Your Organization’s Risk Management Strategy?

Is your team discussing risk management? Do you worry that there are risk factors that you are missing during the risk assessment and risk analysis phases of risk management? Our team at I.S. Partners, LLC. can help you get up to speed on any lurking risks to help you find ways to prevent and mitigate them for both cloud computing systems and on-site infrastructures.

Send us a message or call us at 215-675-1400 today to find out how we can help with your risk management strategy.