Creating a Continuous Risk Management Framework
How often do you run an internal audit assessment? What does your risk management schedule look like? And are you assessing risk often enough?
Here’s a hint: if you only assess risk sporadically, you’re letting key details fall through the cracks.
Many businesses struggle to implement continuous risk management, but they need continuous risk management in order to stay one step ahead of risk. Otherwise, you may well find that you’re months behind the curve. Here’s a quick look at why you need continuous risk management and how you can create a continuous risk management framework.
What is Continuous Risk Management?
Risk management is a continuous process of identifying, analyzing, and responding to risks throughout your business life cycle. It’s also one of the most difficult forms of management since it involves accounting for unknown factors and planning for unknown outcomes.
What’s interesting is that while risk management is routinely identified as an ongoing process, many businesses approach it sporadically.
Continuous risk management reconceptualizes the risk management paradigm. It recognizes an accepted truth about risk management (that it’s an ongoing process) but it also enables stakeholders to collaborate on and contribute to risk management throughout the process. It relies on automation and technology to remove many recurring manual tasks so that risk management cannot fall behind.
Why You Need Continuous Risk Monitoring in Third Party Risk Management
Let’s say you already have a robust risk management framework. Why would you need to make the switch to continuous risk management?
For one thing, it offers risk assurance.
As any risk manager knows, the risk environment is dynamic. It’s always evolving, and new challenges constantly crop up on the horizon. The problem is that you don’t have unlimited manpower or hours in the day to dedicate to those challenges. This is where continuous monitoring can help you.
Rather than relying on your own limited hours, a continuous monitoring infrastructure lays the groundwork for ongoing risk assessment over time. That way, when a new challenge appears, it immediately pings your radar–rather than percolating in the background until your next routine assessment. In doing so, it provides a level of assurance. If you’re always on the lookout for potential new threats, you won’t be surprised by one, and you’ll already be poised to act.
How Continuous Risk Management Fits Into Your Larger Framework
Of course, if you already have a robust risk management framework, this does not mean you need to discard it in favor of continuous risk management. Quite the opposite. In fact, continuous risk management should be part of your larger framework.
For example, let’s say you’re adding a new third-party vendor. Continous risk management won’t come into your risk management workflow right at the beginning. That wouldn’t make any sense. You have to assess the vendor, rank their risk level, and negotiate contracts and best practices first.
Continuous risk management comes into the picture once the vendor becomes part of your everyday business. At that point, you’ve integrated them and you’ve done the initial workup and your risk work transitions to ongoing assurance.
Elements of Continuous Risk Management
Because continuous risk management occurs later in the process, it has a different set of concerns than your early risk assessments. It’s concerned with maintaining compliance over time and ensuring best practices, not sussing out what those practices are.
Because of this, continuous risk management has two parts: continuous auditing and continuous risk monitoring. Both are internal to your organization.
Continuous auditing is the part you’re already familiar with–regularly checking the same performance metrics to ensure that the party in question is compliant with best practices. Continuous monitoring is slightly different but related–it monitors the controls themselves to make sure the controls are accurately identifying potential problems. Auditing may be performed by your risk team, but control monitoring is usually a management function.
Crafting Your Continuous Risk Management Framework
The good news is that because your continuous risk management framework fits into the larger risk management framework, you can build out your continuous risk management framework while you refine your larger framework.
Basically, continuous risk management is what happens after you’ve cleared the initial benchmarks. Its goal is to make sure compliance is still present and best practices are being met.
For this reason, a good way to start building your framework is to look at the benchmarks you use in your initial risk management assessment, including your best practices. From there, you can build benchmarks for success based on how a vendor, for example, meets certain performance and best practice criteria over time.
It’s also a good idea to include automated practices for assessment. For example, if a vendor is supposed to dispose of data after a certain period and submit a report within a set time limit afterward, you can set alerts in your system if the vendor does not comply.
Challenges in Continuous Risk Management
The overarching question, of course, is why businesses often struggle with continuous risk management if the process is a natural outgrowth of your original risk management process.
For many businesses, the challenge is not figuring out what to assess, but rather how to build the infrastructure and schedule for assessment. For example, you have to figure out how often you assess certain metrics, what you collect, what your standards are and the time limits attached, how often you update your standards, and how to make sure that your practices remain aligned with the most recent regulatory language.
Your Partner in Continuous Risk Management
Here’s the thing: continuous risk management doesn’t need to be a headache. Many businesses struggle to implement continuous risk management not because it’s impossible, but because they’re taking the hardest route to do it (doing everything manually).
That’s why we offer continuous risk monitoring solutions that integrate with best-in-class partners for a complete risk profile you can always count on when you need it most. So if you’re ready to take a smarter approach to risk management, get in touch today to learn how our solutions can help you get there.