The Key to Risk Management Success in 2019

2018 was quite the year. Between regulatory regimes, global competition and cyber threats, the cautionary tales of what can happen dominated headlines. The Equifax investigation findings were disturbing, Google had multiple cascading incidents and the Marriott breach effects continue to unfold.

Maintaining, growing and evolving the ecosystem of digital equipment, services and data is central to the modern enterprise; however, digital business moves fast and creates risk in its wake. The ability to remain viable in today’s business depends greatly on the effectiveness of risk management and compliance programs, as well as digital systems and processes, data governance and security practices.

Trends to Watch

1. Understanding the Risk Ecosystem

Our digital ecosystem is evolving and expanding. Third-party systems, devices, applications, services, people and more increase the risk of redundancies, gaps and dependencies that can lead to unknown vulnerabilities and incidents. The lesson played out in headlines, from the fitness app Strava’s accidental disclosure of secret U.S. military bases via user activity heat maps to Facebook’s negligent oversight of Cambridge Analytica.

In 2019, companies need to invest the time and effort in understanding how all the pieces interact in the ecosystem. As we better understand digital threats, we must develop a more nuanced picture of risk. Companies large and small should start thinking more holistically about risk: how it affects different parts of the business, as well as the business overall. Investing time and effort in understanding how different people, processes and technology interact allows for more effective risk management and mitigation strategies.

2. Compliance Adopts Personal Accountability

The severity of recent data breaches has kept regulators and industry associations busy drafting and updating regulations and standards – the European Unions’ GDPR is now enforceable, California’s Consumer Privacy Act became the first U.S. state-sanctioned privacy regulation and updates to the NIST 800-37 and ISACA COBIT frameworks are just a few. Additionally, the U.K. took compliance governance a step further with the 2018 enactment of the Senior Managers and Certification Regime (SM&CR), a regulation for U.K. financial services that holds a firm’s senior individuals personally responsible for preventable negative events.

This shift toward governance accountability at the individual level makes governance of cybersecurity, consumer privacy protection and digital risk management programs much more personal for senior staff and executives. Companies will need to mature their risk management processes and activity documentation so they can prove due diligence in the event they come under the microscope.

3. Boards Increase Focus on Cyber Threats

The rapid evolution and increasing severity of cyberattacks and data breaches and the shift toward governance accountability at the individual level is putting more pressure on boards to take a more active role in data protection. In fact, both the annual Protiviti risk survey and the National Association of Corporate Directors survey show that cyber threats are in the top five risk trends boards will focus on in the next 12 months.

With this increased oversight, companies will need to prove to their boards that they are implementing and maintaining the proper data protections. That means looking at risk in terms of how it impacts business objectives and goals and how much it will cost the company if an event occurs. Quantifying risk and aligning risk with business goals will help boards to better understand the seriousness of risks and CISOs to obtain executive support for additional information security initiatives.

Risk Management Evolves with an Integrated Approach

It’s safe to say the year ahead will be a busy one for anyone with risk-related responsibilities. We’ll see significant focus and progress around securing the digital ecosystem; boards and executives will press for more precise, real-time understanding of threats, risk factors and exposures and for more individuals taking ownership of risk. We expect to see companies optimizing their data governance and security capabilities in the year ahead, which is imperative for organizations undertaking and continuing digital transformation.

To accomplish all this, compliance, risk and information security teams must take a systematic and integrated approach to risk management, streamlining and automating as many processes as possible. Business units must work together to obtain a broader view of risk and develop stronger protections against emerging risks. Their primary focus should be integrating risk management efforts and risk data sources from across the business to obtain a single-pane-of-glass view of risk. From there, they are able to quantify their risks and better prioritize remediation efforts based on business objectives.

Additionally, companies will need to invest in new tools for governing their digital ecosystem, encompassing everything from data servers to third parties. They need technology that supports the integrated nature of today’s risks but are intuitive to learn and use even if you aren’t tech savvy. Companies will need better reporting capabilities with broader visibility into related threats across the enterprise, as well as the external risk ecosystem, that enables risk quantification, predictive analytics and KPI/KRI monitoring. Solutions purpose-built for integrated risk management with these capabilities allow for various levels of stakeholders to extract, analyze and communicate data according to their needs for better insights and decision-making.

Most importantly, businesses of all sizes should take the time this year to coordinate and improve their enterprise-wide approach to integrating risk management, maturing GRC programs and capabilities and communicating with all stakeholders to enhance visibility and accountability.