How an IT Risk Assessment Helps LA Distributors

Risk comes in two kinds – good and bad. A limited view of IT risk assessment as being centered solely on potential problems is effectively shutting out half of what Los Angeles distributors need to know.

The fact is that risk in IT can go both ways. It can be negative: examples are system crashes, software failures and data security breaches.

But it can also be positive, such as in the implementation of new systems for business advantage, business process automation for higher efficiency, or a move to cloud-based IT operations. Risk assessment needs to address both aspects.

IT Underlies All of Your Enterprise and So Does IT Risk

Your distribution company faces risk at various business levels. Enterprise risk management (ERM) typically deals with four main areas of risk, each of which can be positive or negative for your company. And keep in mind - IT underpins each of these areas. Determining your IT risk is an essential part of understanding your company’s risk overall.

Company Strategy - High-level decisions about which markets you want to operate in, your mission statement, and your strategic partners.
Operations - How effectively and efficiently your enterprise uses its resources to accomplish its goals.
Financial - How well you are funded, but also how well financial reporting is completed and communicated to decision makers.
Compliance - Not only do you have to play by the rules, but you also need to be able to prove you do. IT plays a critical role in helping organizations do both.

Bad IT Risk? Down, Risk, Down!

Effective IT risk assessment in terms of threats means a systematic approach allied with judgment and experience. Templates and checklists can help to get the process going. Each company however, even from one LA distributor to another, will have its own IT risk specificities.

The likelihood of a threat (IT failure, data theft, etc.) and its business impact both need to be evaluated. Multiplying these two items together (likelihood x impact) then gives a ‘risk value’. The higher that value, the more the risk needs to be mitigated, transferred, or eliminated. IT security solutions can bring down the likelihood of a risk manifesting and therefore its ‘risk value’.

Good IT Risk? Over Here!

The calculation above also applies to good IT risk, except that now we want both (positive) impact and likelihood to go up for increased business benefit. Take the example of a project to implement new shipping prices on your website that automatically picks the solution that’s most favorable to your resellers and your company.

The positive impacts are increased reseller loyalty and improved profitability. The tools to boost the likelihood of this project happening properly might then be project management and collaboration software applications.

Handling Multiple Risks

IT risk assessment should also handle several risks in combination. Data protection (against negative risk) will require backup strategies and tools, encryption, and anti-virus software on end-user devices and IT servers, for example.

On the other hand, multiple IT projects each with a business benefit (positive risk) can be handled in a software application that extends from individual project management to project portfolio (multiple project) management. This allows you to tune individual project schedules and investments to optimize the overall benefit to your business.

Do higher IT risks generate higher rewards? Give us your take on this aspect of IT risk assessment in the Comments box below.

And to follow-through on the tips introduced in this short article, be sure to download your free guide, How COOs at Los Angeles Distributors and Manufacturers Get More Done: A Guide to Productivity, Data, Staffing, Delegation, and Making It Home for Dinner Most Nights.