In this lesson,
we will discuss risk identification.
Risk identification is a crucial first step
in a risk management process.
It involves recognizing potential risks
that could negatively impact an organization's ability
to operate or achieve its objectives.
Regardless of how likely or unlikely these risks may be,
identifying them is essential for the organization
to prepare and plan for potential disruption.
Once risk identification is conducted,
we will often follow this up
by conducting a business impact analysis
and determining some key metrics
like recovery time objectives, recovery point objective,
mean time to repair, and mean time between failures.
So we will cover each of these terms in this lesson as well.
Now, risk identification is a proactive process
that involves identifying potential threats
and vulnerabilities that could affect
an organization's operations or objective.
This can involve a wide range of potential risks,
from financial and operational risks
to strategic and reputational risk.
Techniques used in risk identification
can include brainstorming, checklists, interviews,
or scenario analysis.
The goal is to create a comprehensive list of risks
based on those events that might prevent the organization
from achieving its objectives.
Now, the organization should consider a wide range of risks,
including operational, financial,
strategic, and reputational.
Even risks that seem unlikely should be included,
as these could still have a significant impact
if they were to occur.
Once all potential risks have been identified,
they should be documented and analyzed
in terms of their potential impact and likelihood.
This will help the company prioritize
its risk management efforts
and develop effective strategies to address these risks.
Next, we'll conduct our business impact analysis.
The business impact analysis, or BIA, is a process
that involves evaluating the potential effects of disruption
to an organization's business functions and processes.
A business impact analysis helps to identify
and prioritize critical business functions and processes,
assess the potential impact or risk
on these functions and processes,
and determines how quickly these functions and processes
need to be recovered after a disruption.
Now, in order to understand the concept
of business impact analysis,
there are a few terms that you should be familiar with,
and these are, again:
recovery time objective, or RTO;
recovery point objective, or RPO;
mean time to repair, or MTTR;
and mean time between failures, also known as MTBF.
First, we have recovery time objective, or RTO.
The recovery time objective is a critical metric
in disaster recovery and business continuity planning.
It represents the maximum acceptable length of time
that can elapse before the lack of business function
severely impacts the organization.
In other words, it's the target time
within which a business process must be restored
after a disruption to avoid unacceptable consequences.
Suppose a company operates an e-commerce website.
If the website goes down due to a server failure,
the company determines
that it can tolerate a maximum of two hours of downtime
before the impact on sales
and customer satisfaction becomes severe.
In this case,
the recovery time objective for the website is two hours.
Secondly, we have recovery point objective, or RPO.
The recovery point objective is another crucial metric
in disaster recovery.
It represents the maximum acceptable amount
of data loss measured in time.
It's the point in time
which data must be restored to resume business operations.
Another example,
if an organization has an RPO of four hours
this means the business can tolerate data loss
of up to four hours.
For instance, if a financial institution
that performs transactions continuously
determined that they can afford to lose a maximum
of 15 minutes of transactional data
in the event of a system failure.
Now, this means that the recovery point objective
is 15 minutes and their systems need to be backed up
at least every 15 minutes to meet this objective.
Third, we have mean time to repair, or MTTR.
The mean time to repair is a basic measure
of the maintainability of repairable items.
It represents the average time required
to repair a failed component or system.
A lower mean time to repair is an indicator of a system
that can be repaired quickly,
minimizing downtime and disruption.
For example, let's use a manufacturing company
that has a critical piece of machinery.
Now, over the past year,
the machine has broken down five times,
and each time it took an average of four hours to repair.
In this case,
the mean time to repair for the machine is four hours.
Fourth, we have mean time between failures, or MTBF.
The mean time between failures is a measure
of the reliability of a system or component.
It represents the average time between failures.
A higher mean time between failures
indicates a system that fails less frequently,
which can be a sign of a reliable
and well-maintained system.
Now, going back to the manufacturing company example,
over the past year, the machine has broken down five times.
Considering it broke down over a consistent period of time,
so, five times a year,
means that it has a mean time between failures
of 2.4 months, or roughly every 72 days.
Now remember, risk identification is a critical first step
in the risk management process.
It involves identifying potential risk,
and conducting a business impact analysis
to assess the potential effects of these risks.
Key metrics such as RTO, RPO,
MTTR, and MTBF are then determined
to guide the organization's disaster recovery
and business continuity planning.
By understanding and implementing these processes
and metrics, organizations can better prepare for
and manage potential disruptions.