Entity management and cybersecurity have long been viewed as having separate and distinct roles in relation to risk management. As the global economic climate progresses, the two roles are increasingly finding ways to complement each other to intensify risk-management strategies. What does the interplay between entity management and cybersecurity in risk management look like?
Corporations define risk as “the chance of loss.” Risk management is the process of identifying potential threats to profitability and managing them within the scope of the enterprise’s risk appetite.
For businesses to grow and profit, they must be aware of threats and vulnerabilities, many of which come in the form of cyber risk. Where there is cyber risk, there is a need for entities to protect and secure their information from those who might use it to harm their stakeholders or shareholders.
The complexities of today’s climate form a challenging environment to identify known or potential threats to security. More importantly, as technology continues to advance, new threats continue to evolve, forcing entities to be hypervigilant about new and unforeseen sources of threats and risks.
Enterprises need to take a proactive approach toward engaging IT teams to take a broader scope to help them manage all types of risks, including risks of entity management.
A New Approach: Board Directors and Managers Partner with IT to Manage Risks
In recent decades, board directors and business owners have held the belief that cybersecurity is too complex and foreign for them to understand. This concept has caused business leaders to turn a blind eye to their IT teams, preferring to rely on their cyber risk teams’ technical expertise to protect the enterprise’s risks. This approach has given leadership a false sense of security regarding cyber risk issues that affect entity management, like compliance issues and organizational liability.
To successfully and efficiently protect the enterprise from legal, financial, business and reputational threats, management and directors need to invite their IT teams into the boardroom and collaborate with them about how to implement cybersecurity measures that place controls over many different aspects of the enterprise.
Role of Cyber Risk Teams in Entity Management for Managing Risks
Think of cybersecurity as covering all people, processes and operations from the ground up. The cybersecurity department not only needs access to risk management, but every other business department, including human resources, finance, research and development, and IT. The cyber risk team needs to have a visible presence throughout the enterprise so that it can bring the full scope of cyber risk issues into the boardroom.
It’s unrealistic to expect that cyber risk teams can do it all on their own. In aligning the enterprise’s risk management framework with cybersecurity, managers and cyber risk teams need to partner in placing responsibility and accountability for cyber risks on the front lines of each business unit. At the same time, they need to keep responsibility for cyber risk management separate from operations.
To be effective, management and cybersecurity teams will need to educate frontline employees on their roles and responsibilities surrounding cybersecurity initiatives. Management and cybersecurity teams will also need to monitor each business unit to make sure they are continually satisfying regulatory requirements, including reporting measures.
Role of Risk Managers with Oversight of Managers, Employees and Cyber Risk Teams
As managers of the enterprise’s risk portfolio, risk managers play a central role in reporting potential risks across all departments in a consistent and unified way. A unified approach promotes the accuracy of entity management. Overseeing cybersecurity risks across the scope of the organization creates an environment in which cyber risk teams can compare all risks equally. This angle also increases the potential for aligning cyber risks with the appropriate risk owner and assigns appropriate priorities to cyber risks.
Risk managers have responsibility for making sure that cyber risks are being managed according to the enterprise’s risk management portfolio, just as they would for any other type of risk. Some companies choose to do this as a dedicated category and others do it as a subset of operational risks.
Where Do Audits Fall in Relation to Entity Management and Cybersecurity?
A business entity’s internal and external auditors, along with a U.S. Sarbanes-Oxley Act compliance team (when indicated), is a line of defense that reports to a senior risk management committee. The results of audits will provide management and board directors with genuine insight about cybersecurity risks.
Internal audits are inherently independent, which makes them viable tools for complementing cybersecurity issues. Audit teams may base their audits on cyber risk management team’s assessments. Alternatively, they may use a risk-based approach to define how and what to audit independently.
Internal and external audit teams will need to focus on high residual risks — known risks that the organization hasn’t yet addressed. Audits should also focus on low residual risks, which may highlight risks that have ineffective controls in place. Such results may raise lower-level risks to more appropriately designated medium- or high-risk levels, which provide better value to the enterprise.
Final Thoughts on Using Entity Management and Cybersecurity as Complementing Units
ISACA, which was previously called the Information Systems Audit and Control Association, is an international professional association that lists three risk-management defenses focusing on IT governance. They include:
- Making sure frontline employees understand their roles and follow a systematic risk process.
- Implementing compliance and risk duties that provide independent oversight of risk- management activities of the employee’s role.
- Utilizing internal and external auditing processes to report risk issues for prioritization.
It’s clear how interfacing entity management with cybersecurity efforts creates a risk environment where the hallmarks of security, vigilance and resiliency take center stage. Entities that take this approach may find that it has a huge, positive impact on some of the most important aspects of the entity, including financials, compliance, safety and reputation.
It makes sense for this approach to take its place as an up-and-comer of new best practices because no entity operates in a risk-free zone.