What Is Data Risk Assessment? Why & How to Do an Assessment

A data risk assessment is a systematic process where an organization identifies and assesses potential vulnerabilities and threats to its data.

This involves determining what data the organization holds, where it is stored, who has access to it, how it is protected, and the potential risks if it were to be lost, stolen, or compromised. This process helps an organization anticipate and mitigate the risks, ensuring that the necessary measures, policies, and procedures are in place to protect data effectively. 

Why Is Data Risk Assessment Important?

Proper data risk management protects business, reputation, and financial stability. It's an important part of an overall data governance strategy and is often required for regulatory compliance, such as GDPR or HIPAA.

Here are some other reasons why data risk assessment is essential:

• Protecting Confidential Information: Confidential data, including financial information, customer data, and intellectual property, could be damaging if they fall into the wrong hands. Implementing strict data risk management protects these valuable data assets.
• Regulatory Compliance: Many industries have strict regulations and standards for data security (HIPAA, GDPR, CCPA, etc.). Proper data risk management ensures these regulations are met, avoiding potential fines and legal issues.
• Maintaining Trust: Customers and partners trust organizations to keep their data safe. A strong data risk management strategy helps maintain that trust and prevents reputational damage from potential data breaches.
• Financial Cost: Data breaches can cost organizations millions of dollars in damages, legal fees, and lost business. Regular risk assessment and management reduce these financial risks.
• Enhancing Decision Making: The process of data risk assessment and management provides crucial insight into security weaknesses, enabling organizations to make informed decisions on where to deploy resources.
• Business Resilience: Strong data risk management ensures businesses can quickly respond to and recover from potential cyberattacks or data breaches.

The Components of a Data Risk Assessment

A data risk assessment contains several crucial components:

• Defining and Understanding the Data: This involves identifying different types of data (financial, personal, administrative, etc), data locations, data usage, and whether there are sufficient role data access controls to safeguard them.
• Risk Identification: Identifying risks includes determining possible threats (both internal and external), data vulnerabilities, technology weaknesses, and anything that could damage the data's integrity, confidentiality, or availability.
• Risk Analysis: Determine the likelihood of each risk and assess the potential impact on the business. This assessment often includes a quantitative or qualitative risk rating.
• Risk Evaluation: Compare the analyzed risk levels against predefined risk criteria. This will determine whether the risk is acceptable or if it requires treatment. Risks are often categorized as low, medium, or high.
• Establishing Controls: After analyzing and evaluating the risks, controls should be implemented to mitigate the impact of these risks and protect the data. This could include improvements to encryption or access controls or staff training on data protection.
• Documentation: All steps should be documented throughout and at the end of this process. This includes the assessment process, findings, decisions, and actions taken. This ensures transparency and accountability in case of data audits.
• Review and Updates: Data risk assessments shouldn’t be one-time events. Regular reviews and updates are needed to ensure the effectiveness of the controls in place and to identify new potential risks.
• Communication: The results and findings of the risk assessment should be clearly communicated to all relevant stakeholders so they know the risks and understand their responsibilities in mitigating them.

How to Perform a Data Risk Assessment?

A data risk assessment involves several steps to identify potential risks associated with an organization's data.

• Identify Sensitive Data: This involves inventorying all data across various systems and platforms to discover where sensitive data is stored. This data could include customer details, company financials, intellectual property, etc.
• Classify the Data: Once you've identified sensitive data, classify it according to sensitivity levels. This could range from public information to strictly confidential data.
• Discover Data Processing Activities: This involves mapping the data flow - how it is collected, stored, used, and disposed of.
• Identify & Evaluate Potential Risks: Risks could range from data breaches, unauthorized access, data loss, etc. Evaluate these risks for probability and impact on the business. Consider both internal and external threats.
• Prioritize Risks: Prioritize risks based on their potential impact and likelihood. High-priority risks will require immediate attention and robust control measures.
• Develop a Risk Mitigation Plan: For every risk identified, develop strategies to either avoid, reduce, share, or accept the risk. This can include implementing secure data access controls, encryption techniques, data anonymization, regular audits, etc.
• Implement Mitigation Strategies: This can involve changes in business processes, IT systems, employee training, etc. Implementation should be monitored to ensure that these strategies are effectively executed.
• Document the Assessment Findings: Record your findings and recommendations in a risk assessment report. 
• Regularly Review and Update the Risk Assessment: As the business environment, technology, and laws change, new risks may emerge, and existing ones may evolve. Regularly review and update the risk assessments to ensure they remain current and comprehensive. 

What Are the Benefits of a Data Risk Assessment?

• Improved Data Protection: A data risk assessment helps identify areas of vulnerability in data security, allowing organizations to take proactive measures to strengthen these areas, thus protecting the information from breaches and cyber attacks.
• Compliance with Regulations: The assessment helps ensure that organizations comply with legal regulations, such as GDPR or HIPAA. Organizations can fix these issues by identifying compliance gaps and avoiding hefty fines or legal actions.
• Prioritization of Security Resources: The results of a data risk assessment can help prioritize where to invest in security resources by focusing on the high-risk areas identified during the review process.
• Enhanced Business Reputation: By effectively managing and protecting data, organizations can build trust with stakeholders, customers, and partners, improving overall business reputation. 
• Better Decision Making: With a clear understanding of the risks associated with data, organizations can make more informed decisions regarding data management and security.
• Cost Reduction: Preventing data breaches can drastically reduce the costs associated with data recovery, legal consequences, and reputation damage that can arise from a breach.
• Improved Disaster Recovery: A data risk assessment can also lead to more robust disaster recovery and business continuity plans, minimizing the impact of potential data loss on business operations.
• Increased Awareness: Undertaking regular risk assessments raises awareness among employees about the importance of data security, leading to better practices in managing and handling data.
• Continuous Improvement: Performing regular risk assessments encourages a cycle of constant improvement in data security and risk management, as it will highlight new vulnerabilities as they arise and ensure they are promptly addressed.

Data Risk Assessment Best Practices

Some of the best practices of data risk assessment include the following:

• Regularly Conduct Assessments: Data risk assessments should be conducted regularly, not just as a one-off task. The frequency of these assessments would depend on the organization's size, data complexity, and threats' changing nature.
• Create a Data Inventory: Understand your data, where it is stored, how it is used, and who has access to it. Categorize data based on its nature and sensitivity.
• Prioritize Sensitive Data: Not all data carry the same level of risk. Prioritize data based on its sensitivity and the impact its compromise would have on the organization.
• Identify and Analyze Risks: Identifying possible threats and vulnerabilities is essential to the assessment. Also, analyze the potential impact if these risks materialize and the probability of their occurrence.
• Implement Risk Mitigation Strategies: Once you have identified the risks, create strategies to mitigate them effectively. This could include technical solutions such as encryption or policy changes around data access.
• Continuous Monitoring: Threat landscapes evolve constantly. Therefore, continually monitoring your data and risk management systems is important.
• Involve Everyone: Data risk is not only an IT issue. Everyone in your organization must be aware of data risks and have a role in mitigating them.
• Document the Process: Record each step of the process, including the risk inventory, consequences of risks, implemented controls, and ongoing monitoring. Documentation can help demonstrate compliance with regulatory requirements.
• Review and Update: Technology and business need to evolve; therefore, periodically reviewing and adjusting the risk assessment strategy is important.
• Consult with an Expert: Especially for organizations that deal with significant volumes of sensitive data or complex systems, having a consultant or dedicated data security officer can be very beneficial. They can provide expert advice and identify and properly address all potential risks.

Learn How Digital Guardian Can Improve Your Data Risk Assessment

Performing a Data Risk Assessment is an ongoing process that should be part of your organization's overall risk management and data governance framework. It also requires a deep understanding of the vulnerable threats to your data. 

Fortra's Digital Guardian understands data risk assessment can’t be achieved without a panoramic view of your data.

Schedule a demo today to see how we can provide high visibility to your review process with data discovery, data classification, and other data risk assessment tools.