QuickStudy: Risk Management
Computerworld - In 1654, when people hand-wrote letters instead of subscribing to e-mail list services, Blaise Pascal and Pierre de Fermat exchanged missives that established the basic principles of probability and ushered in the notion of risk management. Pascal's motive was to gain an edge in gambling, but he unwittingly helped improve a CIO's odds at venturing into new operations, such as e-commerce, as much as lending a hand to a chief financial officer's investments.
Risk management is a venerable tool in finance. Bankers have long used risk-management techniques to determine whether you're creditworthy of a home or business loan. One of the most basic tenets in taking risk for a bank is to assure that the officers who sell loans aren't the same ones who approve credit. And they're rewarded accordingly: loan officers for loans approved, credit officers for sound loans.
"Historically, when financial institutions thought about risk, they focused on credit risk," says Bob Kafafian, chief advisory officer at Lancaster, Pa.-based Hopper, Soliday, an investment banking and brokerage division of Tucker Anthony Inc. in Boston. But that has changed dramatically, he says. Risk is understood to be everywhere in business, finance, information technology and just getting out of bed in the morning.
"We live with an uncertain future," says Randy Payant, vice president and director of research at the IPS-Sendero Institute in Scottsdale, Ariz. "The difference between uncertainty and risk is that you can quantify the impact of risk but not uncertainty."
Complexity of Risk
The complexity and pervasiveness of risk make it critical for executives to be aware of it and to have ways to identify and control it. For example, Kafafian says, banks need risk-conscious executives managing more than a loan portfolio. He says most good banks apply risk-management techniques throughout an enterprise, evaluating everything from complying with regulators to Y2K conversion work. He says even human resources and marketing departments must be prepared to handle risk, from choosing marginal employees in difficult hiring times to launching controversial advertising campaigns.
Misjudging risk in any area can be crippling, he says. For example, when Victoria's Secret was planning to air a commercial during last year's Super Bowl, the company's IT team didn't conduct a risk-management analysis of what effects advertising to the world's largest audience of men would have on its Web servers. As a result, systems were overloaded and the company suffered a loss of orders and a public relations disaster.
| Steps to Managing Risk
Randy Payant, vice president and research director at the IPS-Sendero Institute, a risk-management education and training group in Scottsdale, Ariz., says risk management is a fourfold process: Identify risk-prone areas. For example, in a supply-chain network accessed by your vendors, you'll need to locate every point of entry, servers, available applications and numerous other vulnerabilities. Once they are identified, you can determine the levels of risk your organization is willing to take at each point, such as whether you want to allow all employees at a given vendor in your supply-chain network access or only a select few. Measure or quantify your exposure. How many ports can be accessed remotely? How many external users will there be? What levels of access will be permitted? Limit the factors that contribute to risk. Reduce the number of people with access rights. Restrict hours of availability for systems. Control your realm. Create and monitor IT procedures. |



- Excel 2010 Cheat Sheet
- Register for this Computerworld Insider Cheat Sheet and gain access to hundreds of premium content articles, guides, product reviews and more.
- Overcome Top 7 Admin Challenges of Active Directory
- As Active Directory's role in the enterprise has drastically increased, so has the need to secure the data. Gain insight on creating repeatable,...
- Insiders Can Ruin Your Company. Take Action.
- Did you know that 80 percent of threats to an organization come from the inside? The threat from insiders is often overlooked in...
- Top Solutions and Tools to Prevent Devastating Malware
- Custom malware frequently goes undetected. According to Forrester Research, the best way to reduce risk of breach is to deploy file integrity monitoring...
- Streamline Compliance and Increase ROI
- Streamline, simplify, and automate compliance related activities; especially those that impact multiple business units. This white paper from NetIQ, outlines solutions that will...
- X-Ray of the PCI Process-4 Proactive Steps
- This white paper from Forrester Research Inc., helps break PCI into understandable components. Security and risk professionals will gain knowledge and insight into... All Topic Center White Papers
- Live Webcast
North Pole to South Seas: Overcoming the Pitfalls of remote Performance - In today's always-on world, connectivity is a business requirement. You need the tools that allow you to operate as if you were on...
- Live Webcast
Playing Defense: Staying on Top of Your Disaster Recovery Game - When it comes to disaster recovery, rapidly growing data volumes, distributed computing models, and new technologies all combine to present an ever-changing playing...
- Live Webcast
Banish Poor Application Performance: Eliminate Business Disruptions, Increase End User Productivity - End User Experience, 30-Min Webinar
Wed. Feb. 22nd ~ 11 AM ET
Are you ready to gain the proactive ability to rapidly respond... - Optimizing Networks for the Cloud
- Join guest speaker, Rohit Mehra, IDC Director of Enterprise Communications Infrastructure, to explore current trends, discuss best practices for optimizing Data Center and...
- Apps QuickStart Series Part 2: Designing and Deploying SQL Server on VMware vSphere
- Download this webcast to learn about the design considerations for virtualizing SQL workloads, performance and scalability information and high-availability options, as well as...
- Apps QuickStart Series Part 1: Designing and Deploying Exchange 2010 on VMware vSphere
- Download this webcast to learn the virtual hardware design considerations for Exchange 2010, deployment using the building block approach, options for high-availability and...
- Customer Spotlight: How IPC The Hospitalist Company Implemented Oracle on VMware
- Have you been looking to hear about customer's experiences with the new VMware vCenter Site Recovery Manager product? View this webcast to learn...
- Virtualize Business-Critical Applications with Confidence
- Virtualizing business-critical applications has become a key focus for organizations as they move along their virtualization journey. With the launch of VMware vSphere®... All Topic Center Webcasts