What is Digital Risk Management? Steps and Functions

Last Updated : 26 Mar, 2024

Digital Risk Management (DRM) is a comprehensive approach for identifying, assessing, and addressing risks associated with digital assets and operations in an organization. It’s aimed at protecting against digital threats like cyberattacks, data breaches, and system vulnerabilities, while also ensuring compliance with relevant regulations and standards.

The first step in DRM is to identify all digital assets within an organization, such as websites, data, applications, and systems. Once assets and threats are identified, the next step is to assess the potential risks these threats pose to the digital assets. Based on the risk assessment, organizations then develop and implement strategies to mitigate identified risks. This can involve a range of actions, including strengthening cybersecurity measures, implementing access controls, encrypting sensitive data, and developing incident response plans. DRM also involves ensuring that digital operations comply with relevant laws, regulations, and industry standards

Types of Digital Risk

Digital risks are crucial for effective digital risk management. Here are the 7 primary types of digital risks:

1. Cybersecurity Risks

These are risks from cyberattacks and breaches that can lead to the loss, theft, or exposure of sensitive data. Examples include:

Malware: Malicious software designed to disrupt, damage, or gain unauthorized access to computer systems.
Phishing: Fraudulent attempts, typically via email, to obtain sensitive information by pretending to be a trustworthy entity.
Ransomware: Malware that encrypts files on a victim’s system, demanding a ransom for their release.
Denial of Service (DoS) and Distributed Denial of Service (DDoS) Attacks: Attacks intended to shut down a machine or network, making it inaccessible to its intended users.

2. Technical Risks

These involve risks related to the failure or malfunctioning of technology, including:

Software Vulnerabilities: Flaws or weaknesses in software that can be exploited to compromise system security.
Hardware Failures: Physical failures of servers, hard drives, and other components that can lead to data loss or system outages.
Outdated Technology: Using outdated technology that may not be supported or secured, making it vulnerable to attacks.

3. Legal and Compliance Risks

Risks related to the failure to comply with laws, regulations, and standards governing digital data and privacy, such as:

Data Protection Regulations: Non-compliance with regulations like GDPR (General Data Protection Regulation) or CCPA (California Consumer Privacy Act).
Intellectual Property Infringement: Unauthorized use or theft of intellectual property.

4. Operational Risks

These are risks associated with the failure of internal processes, people, and systems, such as:

Data Management Failures: Poor management of data that leads to loss or misuse.
Human Error: Mistakes made by employees that compromise security or data integrity.
Supply Chain Risks: Risks arising from third-party vendors or suppliers who may have inadequate security practices.

5. Data Leaks

Data leaks are accidental exposures of private data that could develop into data breaches. As the digital landscape expands, the data lifecycle spins faster, creating more instances of data-in-use, data-in-transit, and data-in-rest. Data security is difficult to maintain under such dynamic conditions, making data leakage unavoidable during digital transformation.

6. Strategic Risks

These involve risks related to decisions made by an organization’s management that affect its strategic objectives, such as:

Investment in Risky Technologies: Investing in new but untested technologies that may not yield the expected return or may introduce new vulnerabilities.
Digital Transformation Risks: Risks associated with the process of digitizing operations and services, which might expose the organization to new threats.

7. Third-Party Risk

All risks associated with third-party vendors. These could include ecosystem vulnerabilities, non-compliance, third-party breaches, and intellectual property theft.

Digital Risk Protection (DRP)

Digital Risk Protection (DRP) refers to the strategies and solutions aimed at identifying, monitoring, and mitigating digital risks that organizations face in the online environment.

DRP focuses on protecting against external threats that originate outside the traditional network perimeter, encompassing a wide array of digital channels such as the web, social media, mobile platforms, and the dark web. It’s a proactive approach to security, seeking not only to defend against attacks but also to anticipate and neutralize threats before they can impact the organization.

Threat Intelligence Gathering: Collecting and analyzing information about emerging threats and vulnerabilities, allowing organizations to understand the risks they face and how to counteract them.
Brand Protection: Monitoring the internet, including social media and online marketplaces, for unauthorized use of the organization’s brand, counterfeit products, and impersonation attempts.
Data Leak Detection: Scanning the web and dark web for exposed sensitive data, such as customer information, intellectual property, or confidential business data, to mitigate the risk of data breaches.
Social Media Monitoring: Keeping an eye on social media platforms for malicious activities, such as phishing attempts, fake profiles, and scams that could harm the organization’s reputation or security.
Digital Footprint Mapping: Identifying and cataloging an organization’s digital assets across the internet to understand potential vulnerabilities and areas of risk exposure.
Cyber Threat Mitigation: Implementing measures to counteract identified threats, which can include takedown services for malicious content, legal actions against counterfeiters, or technical measures to block phishing attempts.

How to Manage Digital Risk

The following steps outline a digital risk management framework with a specific focus on mitigating cybersecurity and data leak risks:

Step 1: Identify All Exposed Assets

Map your digital footprint: Identify every asset that could be accessed without authorization, including social media channels and places where sensitive data is stored. Use attack surface monitoring solutions to pinpoint your critical assets at risk, such as customer and employee data, health and financial information, Shadow IT, and cloud platforms.

Step 2: Monitor for Data Leaks

Implement a data leak detection solution to spot any leaks linked to your organization. This will offer insights into potential vulnerabilities. Addressing data leaks promptly protects against cybercriminals targeting your organization for data breach campaigns.

Step 3: Keep Risk and Threat Models Updated

With a clear digital footprint, gather threat intelligence data to model your specific threat landscape. Regularly review and update your incident response, business continuity, and disaster recovery plans to enhance cyber resiliency. Refresh your threat model and review security policies annually at a minimum.

Step 4: Secure Access to All Exposed Resources

Protect privileged accounts and digital assets to avoid reputational damage. Broaden detection parameters beyond traditional defenses to block unauthorized access. Implement Zero Trust Architecture (ZTA), use honeytokens to detect unauthorized attempts, and enhance Privileged Access Management (PAM) for internal access control, reducing insider threat risks.

Step 5: Keep Vendors Compliant

Mitigate the financial and cybersecurity risks of non-compliance, which can lead to regulatory fines between $14 million and $40 million. Extend monitoring to your vendor network to identify and fix security vulnerabilities. Ensure all vendors undergo thorough security evaluations with a third-party risk management solution to maintain compliance through specific risk assessments.

Following these steps, focusing on proactive monitoring, updating risk models, securing access controls, and ensuring vendor compliance, will strengthen your organization’s defense against digital risks.

Conclusion

Digital Risk Management is essential in today’s fast-paced digital world. It helps organizations protect against a wide range of cyber threats, data leaks, and compliance risks. By identifying digital assets, monitoring for vulnerabilities, keeping risk models updated, securing access to sensitive data, and ensuring vendor compliance, businesses can safeguard their operations and reputation.

Adopting a comprehensive strategy that includes cybersecurity best practices, incident response planning, and regular policy reviews is key to managing digital risks effectively. Remember, in the digital age, being proactive about risk management is not just wise—it’s necessary for survival and success.