Technology risk refers to the potential for technology failures to disrupt your business. These failures can come from internal systems (software and hardware) and external threats (like cyber-attacks). Technology risk can lead to financial loss, damage to reputation, loss of customers, and even legal penalties in some cases.
Examples of technology risks:
- Cybersecurity Risk: This is the risk of unauthorized access, use, disclosure, disruption, modification, or destruction of information. It can lead to data breaches, identity theft, and financial loss.
- IT Infrastructure Risk: This involves the risk associated with the infrastructure that supports information systems in an organization. It includes hardware, software, networks, and data centres. Failures or disruptions in these areas can lead to significant operational and business interruptions.
- Software Risk refers to the risks associated with using software in business operations. It can include bugs, compatibility issues, and software that doesn’t meet business needs.
- Data Risk: This involves risks associated with the management and use of data. It includes data loss, corruption, and data privacy and compliance issues.
- Third-Party Technology Risk: This refers to relying on third-party technology providers. If these providers experience issues, it can impact your business.
- Emerging Technology Risk: This involves the risk associated with adopting new technologies. While these technologies can offer significant benefits, they can also introduce new risks if not properly managed.
Managing technology risk is a critical part of risk management and involves identifying, assessing, and mitigating risks associated with using technology in business operations.
Technology risk is an essential issue as organizations face various potential threats and challenges posed by the rise of mobile, social media, and digital/online transformation.
This article will explore the concept of technology risk, including the different types of risk, preventive methods, response approaches, and services offered by KPMG.
Organizations must understand and manage technology risk to meet IT compliance and governance obligations while furthering their business objectives.
What is IT Risk?
IT risk is the risk of potential losses associated with using information technologies. It can arise from various sources, including hardware and software failure, human error, spam, viruses, malicious attacks, and natural disasters.
To mitigate IT risk, organizations should develop policies and procedures to identify and manage IT risk. These policies and procedures should include a risk management plan, incident response and recovery plans, staff training, data backups, two-factor authentication, and website SSL.
Organizations should ensure compliance with relevant legal and legislative requirements, such as the Privacy Act 1988, the Spam Act 2003, and the Electronic Transactions (Queensland) Act 2001.
Organizations should also consider establishing a strong cyber security culture among staff, providing free training resources, and sharing examples of fraud to identify them better.
Furthermore, businesses should develop recovery plans to quickly return to operations after an incident and manage risk with business insurance.
When starting up, businesses should assess and manage the risks associated with the venture. Case studies of various technologies, such as point-of-sale systems, VOIP phone service, and payment fraud, can be used to understand better the risks associated with different technologies.
Lastly, consulting firms such as EY can provide assessment and attestation services to manage technology-related business risks. These firms can provide IT audits, attestation services, certification, third-party risk management, contract risk management, and software asset management.
Additionally, KPMG’s Technology Risk group can offer advisory and management consulting services to help clients manage technology, cyber, and information risks. With such firms’ help, organisations can better understand technology risks, assess related controls, and manage risk in a way that furthers their business objectives.
Types of Risk
Organizations must be aware of the various risks posed by digital complexity to make informed decisions and protect their business performance. The following are some of the most common IT risks:
- General risks: These risks are related to the use of technology in business operations, such as hardware and software failure, human error, spam, viruses, malicious attacks, and natural disasters.
- Criminal risks involve using technology by criminals to commit crimes, such as theft, fraud, and identity theft.
- Worst-case scenarios: These risks involve potential catastrophes, such as terrorist attacks, cyber-attacks, and data breaches.
Managing these IT risks requires policies and procedures that are regularly updated to ensure that they are up-to-date with the latest threats and risks.
Businesses should also consider implementing two-factor authentication, training staff in IT policies and procedures, and using SSL on websites to improve security.
Businesses should create an incident response and recovery plans, record policies and procedures in risk management plans, insure the business against IT risk and create a strong cyber security culture among staff.
Preventing IT Risks
Businesses must take proactive measures to prevent IT risks and protect their operations from potential threats. As the cyber landscape evolves, businesses must stay updated on the latest security solutions and strategies. Several steps can be taken to reduce IT risks and protect business operations, such as:
| Strategy | Benefits |
|---|---|
| Can help to restore operations after an IT incident quickly | Helps to minimize risks associated with operating a business |
| Create incident response and recovery plans | It can reduce the potential for human error and malicious attacks |
| Train staff in IT policies and procedures | Ensuring business against IT risk |
| Insuring business against IT risk | Can provide business continuity in the event of an IT disaster |
| Staff training as a preventative measure | Can help to identify and respond to threats quickly |
| Cyber security training for new staff | Improves the security of the business by educating new staff |
| Updating staff and training manuals for new risks and threats | Ensures staff are aware of the latest threats and how to respond |
| Creating a strong cyber security culture among staff | Increases the security of the business and encourages staff to take IT security seriously |
An effective risk management plan is the best way to reduce IT risks. This should include policies and procedures for identifying and responding to threats and a comprehensive incident response and recovery plan.
Additionally, businesses should continually review their security policies and procedures and provide staff with regular training and updates to ensure they are aware of new threats and how to respond. With these measures, businesses can effectively reduce IT risks and protect their operations.
Responding to Incidents
A comprehensive incident response and recovery plan is essential to ensure a swift and successful return to operations following an IT incident. Such plans should include strategies for the quickest possible return to operations, a list of critical resources and equipment required for recovery, and an assessment of the risks associated with the incident.
In addition, organizations should create a culture of cyber security awareness among their staff to prevent incidents from occurring in the first place. This can be done by conducting regular staff training sessions and sharing examples of fraud to identify them better.
Organizations should also ensure their recovery plan includes measures to protect against future risks. This can be done by updating staff and training manuals for new risks and threats, creating a robust cyber security culture, and utilizing free staff training resources from the Australian Cyber Security Centre.
Additionally, having business insurance to manage risk is important as it can provide a financial backstop in the event of an incident.
Finally, organizations should ensure that all staff members know the importance of following the incident response and recovery plan and that they have the necessary resources to do so.
This includes ensuring that staff are adequately trained in the plan and have access to the necessary tools and equipment. Having an incident response and recovery plan in place and regularly testing it is key to minimizing the impact of any incident and getting the organization back on track as quickly as possible.
KPMG Services
KPMG’s Technology Risk Group offers various services to help clients manage technology, cyber, and information risks. Their services include project risk management support, identifying and managing cyber security and other technology and information risks, and enhancing business resilience.
They also offer Cyber Security, Customer Intelligence, and Security Transformation services.
| Service | Description |
|---|---|
| Project Risk Management Support | Identifying and managing cyber security and other technology and information risks |
| Cyber Security | Enhancing business resilience |
| Customer Intelligence | Assessing threats and vulnerabilities, developing and implementing cyber strategies, and optimizing cyber security investments |
| Security Transformation | Enhancing governance, risk, and compliance processes |
KPMG can help clients manage risks while furthering their business objectives. They have deep experience and skills in securing the cloud and can help organizations understand and manage risk in technology through adequate controls over technology assets.
Furthermore, they can assist clients in meeting IT compliance and governance obligations and help manage contract terms to achieve desired outcomes and improve supplier relationships.
Frequently Asked Questions
What are the implications of IT risk for my business?
IT risks have the potential to impact business operations and profitability significantly. Companies must manage these risks by implementing policies and procedures, training staff, and investing in cybersecurity solutions.
Effective risk management can help mitigate damage, protect data, and reduce the financial impact of IT incidents.
How can I ensure that my data is secure?
Companies should implement two-factor authentication, SSL on websites, and secure computers, servers, and wireless networks to ensure data security.
Anti-virus, anti-spyware, firewalls, and data backups with off-site storage should also be used.
What steps can I take to mitigate IT risks?
To reduce IT risks, companies should implement security measures such as data encryption, two-factor authentication, anti-virus software, and firewalls.
They should also train staff on IT policies and procedures, create incident response and recovery plans, and provide cyber security training to new staff.
What are the legal requirements for online businesses?
Online businesses must comply with legal requirements such as the Privacy Act 1988, Spam Act 2003, and Electronic Transactions (Queensland) Act 2001. Two-factor authentication and SSL must also be implemented. Training staff in IT policies and procedures is essential.
What are the best practices for cyber security training?
Best practices for cyber security training include developing a strong culture among staff, providing training resources, sharing examples of fraud, and providing cyber security training for new staff.
Conclusion
IT risk is a major issue for organizations in the current digital age. Various potential threats and challenges arise from the use of technology, ranging from cyber security to business resilience.
Organizations must understand and manage these risks to remain compliant and secure. KPMG provides specialized services to help clients identify and manage these risks while also helping them achieve their business objectives.
Through project risk management support, cyber security, and enhanced business resilience, KPMG can assist organizations in effectively managing technology risks.
Chris Ekai is a Risk Management expert with over 10 years of experience in the field. He has a Master’s(MSc) degree in Risk Management from University of Portsmouth and is a CPA and Finance professional. He currently works as a Content Manager at Risk Publishing, writing about Enterprise Risk Management, Business Continuity Management and Project Management.