Risk transference involves shifting the impact of a risk to a third party, such as outsourcing services to an external provider who is insured against certain risks. Installing firewalls and encrypting data are examples of risk mitigation, and security training is a preventative measure, not risk transference.
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The risk management process includes identifying potential risks (risk identification), reducing or minimizing the impact of those risks (risk mitigation), and continuously tracking those risks (risk monitoring). Risk elimination is rarely possible, and incident response is related to managing incidents but isn't part of the risk management process itself.
The primary goal of risk management is to identify potential risks and reduce them to an acceptable level based on their likelihood and impact on the organization. Eliminating all risks is impractical, and while cost reduction and compliance are important, they are secondary goals within a comprehensive risk management strategy.
A Risk Scoring Matrix is a qualitative tool used in risk assessment to prioritize risks based on their likelihood and potential impact, typically assigning categories like "High", "Medium", or "Low". Asset valuation and ALE are quantitative methods, and cost-benefit analysis is a financial assessment tool used to weigh risk treatment options.
The first step in the risk management process is identifying the risks. Without knowing what the risks are, the organization cannot effectively assess, treat, or monitor them. Risk assessment follows identification, where risks are evaluated based on their likelihood and impact.
