What Is Cyber Risk Management: Frameworks, Policies, and Best Practices

Twenty years ago, businesses could install a firewall and consider their cybersecurity handled. Today’s organizations face a different reality. Cybercriminals have become more sophisticated, persistent, and better equipped. The average cost of a cyber attack now exceeds $1.1 million, with data breaches averaging over $4 million globally.

Beyond financial impact, organizations experience devastating secondary effects. Research shows that 54% of companies suffer productivity losses following an attack, 43% report negative customer experiences, and 37% face damage to their brand reputation. Perhaps most concerning is that 66% of businesses would terminate relationships with partners who fall victim to fraud and lose their payment, making cyber risk a supply chain issue as well.

The Four Pillars of Cyber Risk Management

Successful cyber risk management follows a structured process that enables organizations to move from reactive responses to proactive defense.

1. Identification

The first step involves cataloging your assets and understanding where vulnerabilities exist. This includes:

• Hardware and software inventories
• Cloud-hosted and on-premise systems
• IoT devices and network endpoints
• Third-party vendor connections
• Data storage locations and access points

Organizations must also identify the threats specific to their asset types. Physical devices face theft risks, while cloud-deployed data remains vulnerable to remote attacks. Understanding these threat-asset relationships provides the foundation for everything that follows.

2. Assessment

Once risks are identified, organizations must evaluate them based on two critical factors: likelihood and potential impact. Not all risks deserve equal attention. A vulnerability that’s unlikely to be exploited and would cause minimal damage differs significantly from a high-probability threat that could shut down operations.

This assessment phase should include:

• Asset valuation and prioritization
• Threat probability analysis
• Impact severity evaluation
• Dependency mapping to understand cascading effects
• Vulnerability identification across systems

The key is developing a clear understanding of your risk profile—which threats could realistically affect your organization and what the consequences would be.

3. Control and Mitigation

After assessing risks, organizations must decide how to address them. Four primary strategies exist:

Avoid: Eliminate the risk entirely by discontinuing risky activities or removing vulnerable assets.

Transfer: Shift the risk to another party through insurance or outsourcing.

Accept: Acknowledge certain risks as acceptable given their low likelihood or impact.

Mitigate: Implement controls to reduce the probability or impact of threats.

Most organizations use a combination of these approaches. Mitigation typically involves multiple layers of defense:

• Technical controls (firewalls, encryption, multi-factor authentication)
• Administrative controls (policies, procedures, training programs)
• Physical controls (access restrictions, surveillance systems)
• Regular penetration testing and vulnerability scanning

Complyan provides centralized tools for tracking these controls, assigning ownership, and monitoring their effectiveness over time.

4. Monitoring and Iteration

Cyber risk management isn’t a one-time project, it’s an ongoing process. New threats emerge constantly, business operations change, and previously acceptable risks may become unacceptable.

Continuous monitoring involves:

• Regular security audits and assessments
• Real-time threat detection systems
• Performance tracking of existing controls
• Compliance monitoring for regulatory requirements
• Incident response capabilities

Organizations should establish key risk indicators (KRIs) that signal when risks are increasing beyond acceptable thresholds. These metrics enable proactive responses rather than reactive damage control.

The Third-Party Risk Challenge

Your cybersecurity is only as strong as your weakest vendor. This reality became painfully clear when malware at one of Target’s vendors exposed 110 million credit card numbers. Third-party risk management has become a critical component of overall cyber risk strategy.

Organizations should:

• Conduct security assessments before onboarding new vendors
• Require vendors to demonstrate compliance with relevant standards
• Monitor vendor security postures throughout the relationship
• Establish clear contractual obligations regarding data protection
• Maintain up-to-date documentation of vendor risks

The interconnected nature of modern business means that vendor compromises can directly impact your organization, making supplier fraud a growing concern according to industry experts.

Framework Selection and Implementation

Several established frameworks can guide your cyber risk management program:

NIST Cybersecurity Framework: Provides five core functions (Identify, Protect, Detect, Respond, Recover) that offer a comprehensive approach to managing cybersecurity risk.

ISO/IEC 27001: An international standard focused on information security management systems, emphasizing systematic approaches to managing sensitive data.

SOC 2: Particularly relevant for service providers, this framework ensures controls around security, availability, processing integrity, confidentiality, and privacy.

PCI-DSS: Required for organizations handling payment card data, with specific requirements for risk assessment and vulnerability management.

The choice of framework often depends on industry requirements, regulatory obligations, and organizational maturity. Many organizations adopt multiple frameworks to address different aspects of their operations.