What Is Data Risk Management? Top Risks & Best Practices

Data risk management is how an organization identifies, assesses, and mitigates data-associated risks. This includes potential threats related to data privacy, data security, compliance risks, and business risks associated with improper data handling. 

Data risk management aims to maintain data accuracy, integrity, and accessibility while preventing unauthorized access, ensuring compliance with various regulations, and preventing data breaches that can lead to financial losses or damage to an organization's reputation. 

This process might involve strategies like developing comprehensive data policies, performing regular risk assessments, implementing data and code security technology, training staff on data handling practices, and creating a disaster recovery plan.

Why Is Data Risk Management Important?

A comprehensive data risk management plan ensures regulatory compliance and enhances reputation, boosts customer confidence, and, ultimately, bolsters the bottom line. That's why data risk management is a critical component of modern business that should support your overall business strategy underpinned by secure and reliable data. 

Here are some other reasons why data risk management is crucial:

• Data Protection: With much of today's business conducted digitally, protecting sensitive information from cyber threats, such as data breaches or hacking attempts, is essential. 
• Regulatory Compliance: Many industries have specific regulations regarding the handling, storing, and sharing of data. Proper data risk management can ensure compliance with these laws, avoiding hefty fines or legal complications.
• Financial Security: Data breaches can result in significant financial losses due to remediation costs, diminished customer trust, legal fees, and regulatory fines.
• Reputation Management: Breaches can damage a company’s reputation, leading to the loss of customer trust and business opportunities. By properly managing data risks, companies can safeguard their reputation.
• Business Continuity: Certain data breaches can disrupt business operations. A robust data risk management strategy ensures the organization is prepared to counteract and recover from such disruptions swiftly. 
• Competitive Advantage: Demonstrating robust data protection can provide a competitive edge as customers become increasingly aware of and concerned about their data safety.
• Decision Making: Accurate data and sound management are imperative for strategic decision-making. If the integrity of an organization's data is compromised, it can lead to faulty decision-making that can negatively impact the business. 
• Privacy Assurance: Data risk management strategies can help ensure the privacy of sensitive information for both customers and employees.

What Are the Risks of Improper Data Management?

• Data Breaches: Unauthorized access or malicious attacks to secure data can expose confidential information, leading to loss of trust and possible legal action taken against the company.
• Data Quality Issues: Incorrect or incomplete data can lead to poor decision-making, operational inefficiencies, and customer dissatisfaction.
• Data Loss: This could be due to hardware failure, human error, malicious attacks, or natural disasters, resulting in businesses losing crucial data.
• Security Risks: Poorly managed data can lead to vulnerabilities, making it easier for cybercriminals to infiltrate your systems.
• Poor Data Integration: Difficulty in merging data residing in different sources or formats can lead to data silos negatively affecting business intelligence and decision-making.
• Insider Threats: Employees or partners could either intentionally or unintentionally cause a breach in data.
• Technological Changes: With technology constantly changing, data management must evolve accordingly to maintain effective storage, analytics, and security.
• Data Privacy: Failure to protect the privacy of customer or employee data can result in breaches of trust and potential legal issues.
• Reputational Risks: Any of the above risks can damage a company's reputation, leading to loss of business and decreased customer trust.
• Vendor Risks: If a third-party service provider does not effectively manage data, it can expose the organization to risk. 

What Is the Role of Data Risk Management?

Data Risk Management plays a crucial role in an organization by protecting it against potential data breaches. It involves using data discovery methods to identify sensitive data and ensure compliance with data privacy laws. 

Here is a deeper look into its key roles:

• Safeguarding Data: One of the primary roles is to protect the organization's data from various threats like cyber-attacks, insider threats, data leakage, and accidental deletion. It involves creating and implementing security protocols and controls.
• Compliance with Regulations: Regulations like GDPR, HIPPA, and CCPA mandate specific data privacy and protection standards. Data Risk Management ensures that the organization complies with these regulations to avoid penalties and to maintain trust with customers and partners.
• Risk Identification and Mitigation: This involves identifying potential vulnerabilities and risks in the organization's data infrastructure. Once these risks are identified, strategies are developed and implemented to mitigate these risks.
• Business Decision Support: Reliable and secure data is fundamental to informed decision-making. By ensuring data integrity, Data Risk Management supports business decisions and strategies.
• Training and Education: An integral role of Data Risk Management is to educate and train staff regarding best practices for handling data securely to prevent accidental breaches or leaks.
• Disaster Recovery: In case of a data breach or loss, Data Risk Management is responsible for activating the disaster recovery plan to restore lost data, minimize downtime, and reduce impact on business operations.
• Continuous Monitoring: Data risk management involves constantly monitoring an organization's data systems to detect anomalies and potential threats. This is geared to ensure all protective measures are functioning correctly.

Data Risk Management Best Practices

Data risk management involves implementing strong security measures, keeping up-to-date with the latest regulatory changes, and investing in skilled personnel and technology.

Here are some of the data risk management best practices you should include:

• Risk Assessment: Conduct regular data risk assessments to identify potential threats and vulnerabilities to your data. This includes reviewing IT systems, business processes, personnel, and physical environments. Risk assessments should ideally cover all areas where your data is stored, processed, or transmitted, including third-party systems and services.
• Risk Taxonomy: Providing a comprehensive hierarchical categorization of an organization's common risks.
• Categorize Data: Not all data needs the same level of security. Categorize your data based on sensitivity and business impact. The more sensitive the data, the higher the level of protection it should have.
• Implement Strong Access Controls: Limit access to sensitive data to only those who need it to perform their jobs. Use strong, complex passwords, and enforce multi-factor authentication wherever possible.
• Regularly Update and Patch Systems: Ensure your systems, applications, and security tools are regularly updated and patched to close any potential security vulnerabilities. Cyber attackers often exploit unpatched systems.
• Encrypt Sensitive Data: Consider encrypting sensitive data, both at rest (stored data) and in transit (data being transferred). Encryption can protect your sensitive information even if a data breach occurs.
• Educate Employees: Many data breaches result from employee negligence or ignorance. Provide regular education and training to employees on data security best practices and your company's data protection policies and procedures.
• Develop Incident Response Plans: Establish clear procedures for responding to a data breach or other security incident. This should include steps to contain the breach, assess and limit damage, notify affected individuals and stakeholders, and restore systems.
• Regular Monitoring and Auditing: Implement continuous monitoring of your systems to detect suspicious activities or anomalies and conduct regular audits of your security controls and data risk management practices.
• Vendor Management: If you share data with third-party vendors, they must also follow best data risk management practices. Perform due diligence on their security practices and include data protection clauses in your contracts.
• Regulatory Compliance: Ensure you understand and comply with all relevant data protection laws, regulations, and standards that apply to your industry and jurisdiction.
• Data Backups: Regular data backups can help recover in the event of data loss due to breaches, system failures, or natural disasters. Use multiple backup methods and test them regularly.
• Get Cyber Insurance: Given the rising cyber threats, it may be beneficial to consider cyber insurance as part of your risk management strategy. It can help mitigate financial losses from various cyber incidents, including data breaches, business interruption, and network damage.

Learn How Digital Guardian Improves Your Data Risk Management

Digital Guardian understands that addressing the challenges of data risk management requires a holistic approach. Our expertise includes fostering a culture of data protection across the organization through data classification, data loss prevention, and maintaining privileged accounts.

Schedule a demo with us to learn how we can boost your data risk management.