What is Risk Monitoring? Definition and Best Practices
Risk monitoring is the ongoing process of identifying, understanding, assessing, monitoring, managing, and mitigating risks that could adversely affect an organization's operations, value, assets, and reputation. The primary goal of risk monitoring is to ensure that the risk environment is recognized, new risks are identified and included in risk planning, identified risks remain within acceptable limits, and risk events are dealt with effectively.
Key Activities Involved in Risk Monitoring
Risk monitoring involves several key activities. For instance, hacking and malicious network-based attacks pose varied risks to businesses. Cybersecurity is the principal risk management mechanism intended to identify, monitor, and mitigate those risks to the business and its data.
Threats can be diverse and far-reaching, including strategic risk analysis initiatives that help identify risks and assess their probabilities. Once understood, identified risks can be mitigated through proper planning and strategic preparation. Risk monitoring provides ongoing evaluation of risks and registers changes in their probability, so organizations can proactively shift resources to maintain a suitable risk mitigation posture or adjust strategies to minimize the impacts of potential risks.
Potential Benefits of Risk Monitoring
Ultimately, risk monitoring prevents an organization from being blindsided by risk events, helping to ensure normal operation, meet financial goals (or at least minimize financial losses), optimize resources, and maintain trust with regulators and stakeholders.
Dealing with Business Risks: Four Fundamental Elements
Dealing with business risks requires four fundamental elements: changes to each risk profile can intensify or mitigate a given risk. Regular monitoring of changes to risk profiles gives businesses opportunities to allocate resources, update plans, and change strategies to ensure a proper response.
This gives businesses a strategic means of handling risks. In simpler terms, the risk monitoring process enables organizations to stay ahead of threats and mitigate risks cost-effectively.
Methods for Accomplishing Risk Monitoring
Risk monitoring can be accomplished through various manual and software-driven methods, including:
- Regular reviews of risk profiles and plans
- Identification of changes in risk profiles
- Proactive allocation of resources to mitigate risks
- Implementation of strategies to minimize potential impacts of risks
- The use of risk management tools and software
Regulations that Require Risk Monitoring
Most modern businesses are subject to regulations that require some form of risk monitoring and response planning. These regulations are intended to ensure that organizations operating within a regulatory jurisdiction can adequately identify, assess, manage, and mitigate critical risks.
Such risks are often related to environmental management, financial management, and data protection. Organizations that operate with hazardous chemicals, waste materials, dangerous byproducts -- such as smoke discharge -- or other substances may be governed by several environmental regulations, including:
- Environmental regulations
- Financial regulations
- Data protection regulations
Best Practices for Effective Risk Monitoring
Risk monitoring is a dynamic activity – once implemented, the process of identifying, assessing, and mitigating risks requires continuous attention and effort across the organization.
Some best practices for ensuring effective risk monitoring include:
- The use of risk management tools and software
- Narrowing potential candidates for a tool before adopting it
- Performing detailed proof-of-concept projects with promising alternatives
- Considering factors such as future business needs, vendor support, integrations, product roadmap, and costs when selecting a tool
The Importance of Continuous Monitoring
Risk monitoring is a continuous process that requires ongoing attention and effort. It enables organizations to stay ahead of threats and mitigate risks cost-effectively.