Understanding Risk Assessment Methodologies and their types

Types of Risk Assessment Methodologies

A business can take multiple approaches when tackling a consistent threat. Each methodology can determine a business risk stance, but there are certainly some prerequisites for finding that out, so let’s discuss these methodologies:

Asset-Based

Usually, organizations tend to rely on an asset-based risk assessment methodology when dealing with an IT risk. This is because assets are mainly composed of software, hardware, and networks that are responsible for an organization’s online presence. There are four steps involved in an asset-based risk assessment:

• Listing all the assets
• Assess the efficiency of present controls
• Find Out the risks and weaknesses of every individual asset.
• Determine the estimated impact of persisting risk.

An asset-based risk assessment approach is better suited to work for an IT company because it aligns with its operations, structure, and functioning.

It is important to note that an asset-based approach cannot provide a comprehensive risk assessment. This is because some risks are not included in a asset-based appraisal. Things like protocols, policies and several other communication factors aren’t a part of an asset-based approach.

Quantitative

Quantitative risk assessment approach brings systematic preciseness to the risk assessment process. This risk-assessment approach is more effective when combined with another risk assessment methodology.

In a quantitative risk assessment assets and risks receive dollar values. The emerging risk assessment is then portrayed in financial terms that is easier for people in executive positions to understand. A cost-benefit inspection allows managing directors to emphasize on easing their options.

A quantitative methodology is not the ideal risk assessment methodology because some assets or risks are not easy to quantify.

Qualitative

Qualitative methods take a more report-based approach rather than a scientific approach to quantitative risk assessment methodology. In this method, the risk assessors communicate with people throughout the organization. They discuss how the operations will be performed in case a system is not functional. The assessors utilize this collected information to scale the risk into categories like low, medium or high. In this approach, an illustration depicts the impact a risk can have on an organization’s operations.

In this approach, if there is no financial backing for cost-benefit analysis, reducing the severity of the threat can become difficult.

Semi-Quantitative

Many businesses can mix up the previously discussed risk assessment methodologies to form a semi-quantitative risk assessment. This approach uses a numerical scale like 1-100 or 1-10.  This assigns a numerical value on the risk involved. This numerical scale is used to categorize the severity of the risk involved.

Using a combined approach of quantitative and qualitative risk assessment methodologies is used to simplify the increased likelihood and asset-value calculations of the quantitative method and reach a more logical risk assessment than the qualitative approach. Semi-quantitative approach is more efficient and provides an impactful approach for categorizing the risk elements.

Vulnerability-Based

Vulnerability-based methodologies enlarge the extent of risk assessments beyond a business’s assets. This risk assessment process is initiated by inspecting the pre-existing weaknesses in an organization’s system or the infrastructure within which those systems function.

A Vulnerability-based approach is efficient in finding out more risks as compared to an asset based assessment. However, it operates on the basis of known or pre-existing vulnerabilities and might not be effective in finding out all the threats that an organization is suffering from.

Threat-Based

Threat-based risk assessment methodology can provide a broader assessment of the current risk stance of an organization’s infrastructure. Threat-based risk assessment provides an overview of the practices that end up developing a risk.

In this assessment method, an asset audit is included in the assessment process as the assets and their functionalities are an essential aspect of this process.

The threat-based risk assessment method has a vision beyond the physical infrastructure of a business.

Selecting the Right Risk Assessment Methodology

You must note that all of these risk assessment methodologies are flawed. They all have their pros and cons. However, not all of these methodologies are mutually exclusive. This means that the organizations that utilize these risk assessment methodologies use the methods in a combined way.

Selecting the correct risk assessment methodology depends upon the specific needs and risks of your organization.

For instance, if the people in executive positions are the most important benchmark of your risk assessment, then quantitative methods might be more suitable.

Qualitative risk assessment approach is more suitable when you require the assistance and feedback of the employees and other important people in an organization.

An asset-based risk assessment is more functional with an IT organization, while a threat based assessment is ideal for a cyber-security threat.