In our world of Managed IT Services, we have significant risk that we must mitigate and reduce. We have cybersecurity risks, as we are a high value target for hackers (why attack targets one at a time when you can target a Managed IT Provider and gain access to all of their clients?). We have business continuity risks. We have people risks. We have process risks.
So that makes risk management an important aspect of our business management. We need to make sure we protect against potential threats and ensure that our business can continue to operate.
One of the most common frameworks for understanding risk is the trusty formula RISK=LIKELIHOOD x IMPACT. This formula is one that we use often and is the basis for performing a basic risk assessment for your business. Performing a risk assessment can help you identify, prioritize, and manage your risks effectively.
First, let’s define the terms “likelihood” and “impact.” Likelihood refers to the probability or chance that a particular risk will occur. For SMBs, this could be anything from a cyberattack to a natural disaster such as a tornado or hurricane. Impact, on the other hand, refers to the severity of the consequences if that risk were to materialize. For example, if an SMB were to experience a major security breach, the impact could include financial losses, reputational damage, and legal liabilities.
So how do SMBs use the RISK=LIKELIHOOD x IMPACT formula to manage their risks? The first step is to identify potential risks and assess their likelihood and impact. This involves conducting a basis risk assessment, which should include identifying discrete IT systems and business processes, reviewing historical data, analyzing industry trends, and identifying risk in the universal language of money. Once the risks have been identified and assessed, SMBs can prioritize them based on their likelihood and impact.
For risks that are both likely to occur and have a high impact, SMBs will need to take proactive measures to mitigate them. This might include implementing cybersecurity measures such as firewalls, antivirus software, and intrusion detection systems, or investing in disaster recovery and business continuity planning. Additional protection from cyber insurance is also recommended.
For risks that are less likely to occur or have a lower impact, SMBs may choose to accept the risk or transfer it to a third party, such as an insurance provider. However, it is important to remember that even low-risk events can still have a significant impact, and SMBs should not ignore them entirely.
It is also important for SMBs to continually monitor their risks and reassess them as their business and the threat landscape evolves. This might involve conducting regular risk assessments, staying up to date with industry trends, and investing in ongoing cybersecurity and process training and education for staff.
The RISK=LIKELIHOOD x IMPACT formula is a powerful tool for SMBs to manage their risks effectively. By identifying potential risks, assessing their likelihood and impact, and taking proactive measures to mitigate them, SMBs can protect their business, their clients, and their reputation. However, risk management is an ongoing process that requires regular attention to stay ahead of emerging threats.
Reach out to us here at The Fulcrum Group if you’d like to learn more about the Risk Management process.