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What is a Risk Management Framework? Why is structured risk management important? What are the types of risk? What are some common risk management frameworks? What are the core components of effective risk management frameworks? What are the steps for implementing a risk management framework on AWS? How can AWS help you get started with building your risk management framework?

What is a Risk Management Framework?

A risk management framework is a sequentially structured, rules-based, documented approach to help examine, reduce, and monitor risk within an organization. Organizations choose standardized frameworks or create their own, rather than approaching risk with ad-hoc processes. By using a framework, you can be more confident in achieving better outcomes and faster responses in the event of an unexpected occurrence.

Why is structured risk management important?

Risk management is a function of the governance, risk, and compliance (GRC) business area, often residing within the cybersecurity or compliance department. The way your organization handles risks can be critical to business continuity, operations, regulatory compliance, and reputation. Risk management frameworks help you to identify, assess, mitigate, and track risks across the organization. 

What are the types of risk?

Risks can affect the organization, business lines, and business assets. This includes operational, business, compliance, cybersecurity, legal, merger and acquisition, privacy, hardware, software and contractual risks. While companies often focus on cyber risk, it is also important not to overlook other types of risks. This document will mainly cover operational, business, and compliance risk, as it applies to the cloud.

Operational risk is related to the availability, reliability, performance, and security of infrastructure. This risk category is most important to daily operations.

Business risk is related to reputation, competitiveness, and market conditions. This type of risk has a broader scope than operational risk and can have a more significant overall impact on the business.

Compliance risk refers to the likelihood that business operations will fail to meet a required regulatory compliance standard. This type of risk can result in fines, sanctions, legal implications, or increased levels of auditing and reporting. Compliance objectives come from industry standards, federal agencies, and other regulatory bodies.

What are some common risk management frameworks?

Common risk management frameworks include:

  • The National Institute of Standards and Technology (NIST) Risk Management Framework (RMF) for Information Systems and Organizations
  • COBIT
  • ISO/IEC 31000 Risk management - Guidelines
  • ISO/IEC 27005:2022 Information security, cybersecurity and privacy protection — Guidance on managing information security risks
  • Factor Analysis of Information Risk

Using a known and regularly updated risk management framework is advisable to stay current with best practices for managing risk.

What are the core components of effective risk management frameworks?

A solid risk management framework helps manage risks of all types across the organization.

Risk identification

Identify all assets, threats, and vulnerabilities across the organizational architecture. A risk is a threat to an asset that arises from a vulnerability. Identifying potential risks can be a lengthy process that spans multiple organizational vectors and business objectives.

You can categorize risks into areas such as technical, people, process, financial, or third-party. You can also subdivide each of these broader categories; for instance, in the 'people' category, breaking it down further into skill, manual error, and knowledge silos.

Impact analysis

By analyzing your assets, threats, and vulnerabilities, you can determine the likelihood and size of the impact of a potential risk occurring. Analysis and risk assessment includes qualitative and quantitive measures. For example, you can gather all the details about a specific type of risk, or develop risk scoring matrices to categorize risks, which will determine the consequences and mitigation strategies. These categories can include low, medium, high, and very high risk scores, depending on the likelihood of of an event and its expected impact.

Mitigation strategies

The following are the four risk mitigation strategies to approach each specific risk:

  • Mitigate: Implement controls to eliminate or reduce the risk
  • Accept: Accept the risk as-is, while monitoring carefully for changes to the likelihood or severity of risk
  • Avoid: Remove the risk and reconfigure systems
  • Transfer: Outsource the risk-related function, create contractual mitigations, or insure against the event

In addition to criticality and likelihood of risk, organizational risk appetite can also help determine the appropriate strategy.

Solution implementation

Depending on the chosen mitigation strategy, you can apply the controls, make system changes, introduce monitoring solutions, and outsource the risk. Controls may be administrative, physical, or technical. This stage may involve multiple systems, business units, stakeholders, and steps to produce the desired outcome.

A risk mitigation solution can include risk escalation processes, risk owners, and collaboration with incident response teams to develop post-incident plans.

After implementing the solution, you calculate the residual risk. Most solutions can’t completely eradicate the risk, so a residual risk exists. This residual risk can fluctuate as conditions change.

Governance and continuous monitoring

After risk mitigation solution implementation, you must monitor, track, analyze, and audit the risks where necessary. You must build reporting into the risk tracking process for risk owners, GRC teams, and leadership.

Within the governance framework, there should be an on-demand and regularly scheduled process to identify new and escalating risks to the business. You should establish policies surrounding risk management and the frequency of re-evaluating the current process and provide training to the appropriate team members. Implement guardrails to help automatically prevent the same types of risk from recurring.

What are the steps for implementing a risk management framework on AWS?

This guide shows you how to implement an AWS pipeline that is aligned with the phases of a typical risk management framework.

Three key AWS services are used throughout each phase of the risk management process for support:

  • AWS Audit Manager to continually audit your AWS usage to simplify risk and compliance assessment
  • AWS Config to assess, audit, and evaluate configurations of your resources
  • AWS Security Hub to prioritize your critical security issues through automated correlation and enhanced risk context, plus security posture reporting, and more

1. Planning

The planning phase ensures the organization has a solid foundation for building best-practice risk management processes.

Plan to perform best-practice risk management activities with the following services:

2. Discovery

The discovery phase discovers and tags your assets, resources, and services.

To discover and categorize your assets, use the following AWS services:

3. Selection of controls and rules

The selection phase introduces controls and rules to protect against the identified risks.

Select controls from predefined best-practice rules in the following AWS services:

  • AWS Config managed rules for predefined, customizable rules that AWS Config uses to evaluate whether your AWS resources comply with common best practices
  • AWS Control Tower and AWS Security Hub for security control, and AWS Audit Manager for policy compliance controls.
  • AWS Systems Manager Compliance is a tool in AWS Systems Manager where you can create your own compliance types and definitions based on your IT or business requirements

4. Implemention

Implementation ensures that controls are applied consistently across all desired assets and environments.

You can use the following control implementation tools across AWS services:

  • AWS CloudFormation for embedded controls deployments combined with AWS Service Catalog to create, share, organize, and govern your curated IaC templates
  • AWS Config, for control rules and next steps
  • AWS Security Hub for security rules implementation
  • AWS Systems Manager for policy adherence across resources and services

5. Assessment

Assessment gauges how well the applied controls perform in practice.

You can assess how well your organization is managing risks with the following combination of AWS services:

  • AWS Audit Manager for traceable assessments
  • AWS Config to check against compliance rules
  • Amazon Detective to analyze and visualize security data to investigate potential security issues
  • Amazon GuardDuty to perform continuous threat monitoring on AWS accounts, workloads, and data
  • AWS Inspector to perform automated vulnerability risk assessments
  • AWS Security Hub for always-on security risk assessments

AWS Trusted Advisor is another option for organizations setting up their risk management framework. The AWS Trusted Advisor service provides checks on cost optimization, performance, security, fault tolerance, service limits, and operational excellence. You can view alerts, recommended actions, and additional resources via the dashboard. AWS customers can access the tool at ​​https://console.aws.amazon.com/trustedadvisor/home.

6. Authorization

The authorization function formalizes the approach, previous steps, and acceptance of residual risk and monitoring.

Authorize with confidence by using the following AWS services:

  • AWS Artifact produces AWS and ISV security and compliance reports
  • AWS Audit Manager provides reporting for decision makers
  • AWS Config details compliance reports and tracking
  • AWS Security Hub offers a real-time view of the state of system security and reporting

7. Monitoring

Continuous monitoring ensures the risk management process remains up-to-date and incorporates new and changing risks.

Gain continuous monitoring with the following AWS services:

  • AWS CloudWatch to monitor applications, alert on anomalies, and provide insights into operational health for compliance
  • AWS Config for continuous compliance monitoring
  • Amazon EventBridge to create automatic responses based on triggers in other AWS services
  •  AWS Security Hub for continuous security monitoring
  • AWS Systems Manager for patch and configuration monitoring

How can AWS help you get started with building your risk management framework?

Organizations seeking to improve their organizational resilience and performance should implement a risk management framework. Risk management frameworks help to decrease and understand risks to the enterprise, making these unknowns far more manageable.

Choosing a standardized framework and building on it is a good way to get started, and AWS offers services that facilitate framework implementations. In combination with the AWS Well-Architected Framework, you can create a solid foundation for governance, risk, and compliance on AWS.

Get started with building your risk management processes on AWS by creating a free account today.