Risk Management Framework: Components, Benefits, Types

Risk Management helps you identify potential risks and plan for contingencies in the software development lifecycle. They help you inculcate procedures and policies that govern your risk management lifecycle that runs in parallel with your software development lifecycle.

The risk management framework deals with studying and developing a sustainable support structure and set of processes to effectively identify and manage risks within the project or the organization.  Management Framework was originally developed by the National Institute of Standards and Technology (NIST) with the intention to provide a structured process that can identify and implement security, privacy, and other significant risk management activities into the software system development lifecycle. A risk Management Framework helps in integrated risk management across the organization when it is implemented as an enterprise risk management framework. Understanding the risk management framework is a part of the project management plan, and KnowledgeHut's best project management courses online provide a one-stop source for everyone intending to become a certified Program Manager. the National Institute of Standards and Technology (NIST) with the intention to provide a structured process that can identify and implement security, privacy, and other significant risk management activities into the software system development lifecycle. Risk Management Framework helps in integrated risk management across the organization when it is implemented as an enterprise risk management framework. Understanding risk management framework is a part of the project management plan and KnowledgeHut's best Project Management courses online provides one-stop source for everyone intending to become a certified Program Manager.  

What is Risk Management Framework (RMF)?

In general terms, Risk Management Framework can be defined as a set of rules, procedures, and guidelines that govern the process lifecycle to identify, assess, quantify, and manage the risks during the software development lifecycle. The risk management framework mostly works as a template to design and implement data security protocols to implement privacy and right to information access that is usually part of contracts in developing software for security applications.  

Although the risk management framework was originally supposed to be used by the Department of Defence and Federal agencies, similar guidelines could be applied to the present-day software industry, where data is the new power to run businesses effectively.  

ISO 31000, Risk management – Guidelines, provides principles, a framework and a process for managing risk. It can be used by any organization regardless of its size, activity or sector. The best Project Management courses online get you a step ahead in obtaining professional training and up-skill your profile with a certification in Project Management. 

Components of RMF

A risk management framework includes multiple core components that are designed to help organizations manage their risk profile and monitor the efficiency of their program to implement data security and privacy to acceptable standards. These components generally include the following: 

1. Identification 

To effectively manage risks – it is important to be able to identify and understand the risks in the first place. As a first step, it is advisable to create a comprehensive list of all possible threats to the organization's systems and data, regardless of where those threats arise. This should focus on and include everything and everywhere that the organization could possibly run into a breach of data and information security. everywhere that the organization could possibly run into a breach of data and information security. 

2. Risk Assessment 

Once the risks have been identified in the process above, it is necessary to create a comprehensive risk profile and allocate scores to each risk based on their potential impact on the project, organization, or client. It is advisable to conduct periodic risk assessments at regular intervals and go through multiple iterations to ensure close to accurate risk assessment. The accuracy of the risk assessment will determine the way forward in mitigation. go through multiple iterations to ensure close to accurate risk assessment. The accuracy of the risk assessment will determine the way forward in mitigation. 

3. Mitigation

After a comprehensive risk assessment, one should work on laying out a plan to mitigate each of these risks based on their risk profile. The established mitigation plan for each of the risks can be prioritized based on the severity and risk score that are obtained during risk assessment. This way, every component relies on the accuracy of the preceding step and has an impact on what comes after in establishing a reliable Risk Management Framework 

4. Reporting and Monitoring 

All organizations must go through multiple iterations and periodically review their risk identification, assessment, and mitigation strategies to ensure that they are relevant and effective and produce the necessary reports that highlight any areas that need improvement. This way, the whole process can be monitored and updated on a regular basis. 

5. Governance 

The Risk governance component controls and gives directives to each of the steps mentioned above and implements them in the right order to ensure effectiveness and coherence to the organizational policies. 

Steps of Risk Management Framework

There are defined and well-documented steps in the ERM framework or Enterprise resource management framework that can help implement an effective risk management strategy across organizations. Some of these steps work as a template and are explained below.  

1. Prepare: This step talks about preparation to implement a formalized strategy to effectively manage the organization’s risk profile. Organizations should take the necessary measures to effectively prepare for any threats to the security of their systems and data integrity. The step should include the identification of risks, risk management roles, and principal strategy to manage the risk profile.  
2. Categorize: Organizations usually have systems of varying complexity and importance which could necessitate varying levels of security protocols. We, therefore, assess and categorize each of the risks based on their probability and potential impact on overall system security in an organization. 
3. Select: In this step, organizations will choose the security control that will use to protect affected systems in a way that minimizes or mitigates the identified risks based on the risk assessment in previous steps. . 
4. Implement: After the organizations have selected the security control, the solution will be implemented in this step to effectively incorporate the risk management strategy. 
5. Assess: Once the chosen security controls have been implemented, the organizations assess the effectiveness of the implemented solution for the identified risk profile and ensure that the implementation is in line with the risk management strategy. In simpler terms, this step ensures to assess that the implemented system control solution is delivering the intended result.  the intended result.
6. Authorize: This step is to formally authorize or approve the overall risk management mechanism that has been chosen and implemented in the above steps. It, therefore comes after a thorough assessment of the implemented solution in the above step. 
7. Monitor: This step is to continuously and periodically monitor the effectiveness of the security controls in place and make changes wherever necessary. This step also ensures that all relevant changes are well documented and that any important changes are notified to the relevant audience in a way that can be scrutinized to ensure they are carried out by an authorized member of staff. 

Types of Risk Management Framework

1. Operational Risk Management Framework

Operational Risk Management Framework is a set of guidelines to manage operational risk. This operational risk can be attributed to the risk of loss that could arise from a lack of internal processes, failed procedures without a backup plan, or mishaps that could involve people or systems that could be caused either by internal or external events.  

2. IT Risk Management Framework 

IT Risk Management Framework is an RMF for IT systems that majorly aims at implementing effective security controls to mitigate IT risks. It involves a set of procedures and processes to identify and manage the IT risks in an organization. The course for PMP certification available on Knowledge Hut is an excellent source to understand the importance of a Risk Management Plan in the overall project management plan. 

Benefits of RMF

Irrespective of whether it is an IT risk or an operational risk, or any other security threat that an organization might encounter, it is important to manage the risk by implementing and running an effective security control program. The main benefits of the risk management framework can be listed as follows - 

• Identify, assess, and prepare for risks across the varying businesses in the organization. 
• Implement an effective risk mitigation strategy. 
• Evaluate impactful risk that needs to be actioned upon and eliminated.  
• Adapt quickly to changes in security controls or threats. 
• Safeguard sensitive and personal data, etc. 

The RMF approach works for new information systems, legacy systems, and any type of organization across industries. PRINCE2 Course provides a valuable foundation and practitioner program on Project Management Plan and is an invaluable course to jump-start your career in project management. 

Conclusion

As explained in the sections above, the need to implement an effective Risk Management Framework compliance is not just a legal requirement for organizations. When organizations implement a risk assessment and governance strategy effectively, it will provide numerous operational benefits along with safeguarding your proprietary information, data and business models. 

Specifically for IT Risk Management Framework, the primary focus of your RMF processes should be on data integrity because threats to data are likely to be the most critical that an organization can face in the present-day business world. Establishing a strongly founded risk management framework in an organization will help in devising a sound risk management plan for individual projects.