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Information System (CS507)
LESSON 38
Risk Management
Managing the companies risk is gaining more and more importance. Companies are getting more aware of
the fact that risks should be foreseen and addressed before they could prove havoc for the organization in
any regard.
38.1
Corporate Culture and Risk Management
As it goes, "The ultimate risk is not taking the risk". Recognizing and managing risk should be an important
part of the corporate culture. IS related risk management is a one level deeper into the over all corporate
risk strategy. Assuming that most of the business processes have become computer and technology
dependent to whatever extent actually used, a secure IS supported with a sound risk management strategy
must be available to the organization.
38.2
Constituents of Risk Management
Usually the following constitutes the risk management process.
 Audit trails
 Passwords ­ already been discussed
 Environmental and Physical Security
 Securing Web based transactions
 Implementation of security in IS
The objective of the entire risk management process is that no one should hamper the working of the
smooth working of IS. Risk management in a newly computerized environment and that in an ongoing
operation will have to be viewed differently. The scope of risk should be defined by the organization; only
then mitigation strategies can be undertaken. The organization should have a business continuity plan and
should also know how to use it.
38.3
Risk management
Risk management in a newly computerized environment and that in an ongoing operation will have to be
viewed differently. In an ongoing operation, risk management itself cannot be done without evidence
collection and evidence of risks. Where the organization is desiring to implement a new system, careful
thought needs to be given to see how potential risks can be managed. Security and risk management policies
can be developed s the system expands and greater evidence of actual threats begins to become available.
Audit Trails
Establishing clear audit trails is an absolute must as much as managing physical environmental risks. They
help in identifying the start and execution of transaction from the cradle to the grave. Audit logs to be kept
should also record the errors occurring and possible actions should be taken to mitigate risks. Maintaining
audit logs also helps in drilling down for investigation purposes. Exception report can also be prepared
from these audit logs.
38.4
Business Continuity Planning
Part of the Risk management process is to ensure that the organization has a well considered business
continuity plan. This becomes extremely essential in on-line environments where customer, supplier
interaction is high e.g. ATM, on-line supply or purchase orders. In online environment, a critical need arises
for an efficient recovery plan to minimize the discontinuation time and to perform back up activity.
"Business Continuity Planning (BCP) is a methodology used to create a plan for how an organization will
resume partially or completely interrupted critical functions within a predetermined time after a disaster or
disruption."
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Information System (CS507)
BCP can also be defined as
"BCP is the process where by the institutions ensure the maintenance and recovery of operations including
services to customers when confronted with adverse events such as natural disasters, technology failure,
human error and terrorism."
The Senior management and the board of Directors are responsible for identifying, assessing, prioritizing,
managing and controlling risks. They should ensure that necessary resources are devoted to creating,
maintaining and testing the BCP. The effectiveness of the BCP depends on management commitments and
ability to clearly identify what makes business processes work. BCP is not limited to the restoration of the
IS technology and services or data maintained in electronic form. Without a BCP that considers every single
business unit including personnel workspace and similar issues.
An organization may not resume serving its customers at acceptable level. Business Continuity Planning is a
process designed to reduce the organization's business risk arising from operational dysfunction. These
operations are critical and necessary for the survival of the organization. The operations which are critical
may be either manual or automated.
The planning of operations also include human/material resources supporting these critical
function/operations and assurance of the continuity of the minimum level of services necessary for critical
operations. BCP methodology is scalable for an organization of any size and complexity. The plan can be
made for an organization with operations of any type. Any type of organization may create a BCP manual,
and arguably every organization should have one in order to ensure the organization's longevity. A business
continuity plan is much more than just a plan or the information system. A business continuity plan
identifies what the business will do in event of disaster.
38.5
Components of BCP
The business continuity plan includes:
1. The disaster recovery plan that is used to recover a facility rendered inoperable, including relocating
operation into a new location.
2. The operations plan that is to be followed by the business units while recovery is taking place.
3. The restoration plan that is used to return operations to normality whether in a restored or new facility.
Business Continuity Planning vs. Disaster Recovery planning
Business continuity planning:
Where will employees report to work, how will orders be taken while the computer system is being restored,
which vendors should be called to provide needed supplies. For Example, in a web based environment
where operations are active 24/7, there should be such an arrangement that the system, in case of crash,
shifts over to a back up system to provide uninterrupted service.
Disaster Recovery Planning:
This typically details the process IT personnel will use to restore the computer systems. Disaster recovery
plans may be included in the business continuity plan or as a separate document all together. Business
continuity plan may not be comprehensively available in a non-critical environment but Disaster Recovery
Plan should be there at least to manage and help organization to recover from disasters. A subcomponent
of business continuity plan is the IT disaster recovery plan. IS processing is one operation of many that
keep the organization not only alive but also successful, which makes it of strategic importance.
38.6
Phases of BCP
The BCP process can be divided into the following life cycle phases:
 Creation of a business continuity and disaster recovery policy.
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Business impact analysis.
Classification of operations and criticality analysis.
Development of a business continuity plan and disaster recovery procedures.
Training and awareness program.
Testing and implementation of plan.
Monitoring.
Business Continuity and Disaster Recovery Policy
A business continuity and disaster recovery policy should be proactive and encompass preventive, detective
and corrective controls. The business continuity plan is the most critical corrective control. It is dependent
on other controls, being effective, in particular incident management, and media backup.
38.7
Incident Management:
An incident is any unexpected event, even if it causes no significant damage. Incident and crises are dynamic
by nature. They evolve, change with time and circumstances, and are often rapid and unforeseeable.
Because of this, their management must be dynamic, proactive and well documented. Depending on an
estimation of the level of consequential damage to the business, all types of incidents should be categorized.
Incidents may vary from causing no damage to serious impacts on the continued functioning of the
business. Hence they should be documented, classified, and followed up on until corrected or resolved. This
is a dynamic process, as a major incident may deescalate momentarily and yet later expand to become a
major crisis.
Media Back up
Taking back up on regular basis of business transactions and other data from the IS is very critical to an
effective BCP.
38.8
Business Impact Analysis (BIA)
In this phase, identification of the potential impact of uncontrolled non specific events on the institutions
business processes and outcomes. Consideration of all departments and business functions not just data
processing and estimation of maximum allowable downtime and acceptable level of data and financial
losses. To perform this phase successfully, one should obtain an understanding of the organization, key
business processes, and IT resource used by the organization to support the key business process. The
criticality of the information resources (e.g. applications, data, networks, system software) that support an
organization's business processes must be established with senior management approval. Various
approaches to perform a BIA can be followed, for instance, questionnaire, interview group of key users and
discussions with IT staff and end users together.
Classification of operations and criticality analysis
During this phase, risks and threats are analyzed. Impacts of these risks on the system are also computed.
For instance
 The Risk: The system will suffer a serious disruption over the next five years:
 Chance of Occurrence: 10% or 0.1
 Assessed impact of disruption: Rs. 10 million x 0.1 percent = Rs. 10000 over five years
Based on these assessed impacts, the risks are ranked so that suitable recovery strategies can be developed.
38.9
Recovery Strategies
There are various strategies for recovering critical information resources. The strategy is considered to be
appropriate if cost of implementation is acceptable, recovery time taken by the strategy is acceptable,
cost and recovery time are also reasonable compared to the impact and likelihood of occurrence as
determined in the business impact analysis.
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Types of recovery Strategies
Disaster recovery must meet two requirements. First, The minimum application and application data
requirements. Second, the time frame in the application and applications data requirements must be made
available. Following are the various recovery strategies.
1. Cold Site
2. Hot Site
3. Warm Site
4. Reciprocal agreement
5. Third Party arrangements
Cold sites
If an organization can tolerate some downtime, cold sites backup might be appropriate. A cold site has all
the facilities needed to install a information system raised floors, air conditioning, power, communication
lines and so on. The cold site is ready to receive equipment, but does not offer any components at the site
in advance of the need. Activation of site is may take several weeks depending on the size of information
processing facility.
Hot sites
If fast recovery is critical, an organization might need hot-site backup. All hardware and operations facilities
will be available at the hot site. In some cases, software, data, and supplies might also be stored there. Hot
sites are expensive to maintain. They usually are shared with other organizations that have same hot site
needs.
Warm sites
They are partially configured, usually with network connections and selected peripheral equipment, such as
disk drives, tape drives and controllers, but without the main computer. Sometimes a warm site is equipped
with a less powerful CPU, than the one generally used. The assumption behind the warm site concept is that
the computer can usually be obtained quickly for emergency installation and since, the computer is the most
expensive unit, such a arrangement is less costly than a hot site. After the installation of the needed
components the site can be ready for service within hours; however, the location and installation of the
CPU and other missing units could take several days or weeks.
Reciprocal Agreement
Two or more organization might agree to provide backup facilities to each other in the event of one
suffering a disaster. This backup option is relatively cheap, but each participate must maintain sufficient
capacity to operate another's critical systems. Reciprocal agreements are often informal in nature.
Third Party arrangements
Apart from having a give-and-take relationship with other organizations, an agreement may also be signed
with third party vendors so as to outsource the disaster recovery process. The responsibility of the site
development lies completely with the third party. The shift in responsibility can help organization to stop
worrying of the recovery site all the time.
38.10  Development of Business Continuity and Disaster Recovery Plans
In this phase, a detailed business continuity and disaster recovery plan should be developed. It should
address all issues involved in interruption to business processes, including recovering from a disaster. The
various factors that should be considered while developing the plan are:
 Pre disaster readiness covering incidence response management to address all incidence
affecting business processes and analysis
 Evacuation procedure
 Procedure for declaring a disaster
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Circumstances under which a disaster should be declared. All interruptions are not disasters,
but a small incident if not addressed in a timely or proper manner may lead to a disaster. For
example, a virus attack not recognized and contained in time may bring down the entire IT
facility.
Development Of Business Continuity And Disaster Recovery Plans
The various factors that should be considered while developing the plan are:
 The clear identification of the responsibilities in the plan
 The clear identification of the person responsible for each function in the plan
 The clear identification of contract information.
 The step by step explanation of the recovery option
 The clear identification of the various resources required for recovery and continued operation
of the organization.
 The step by step application of the constitution phase.
Training and awareness program
Now the employees need to be made aware of the policies which have been devise. Initially the program
will be an organization wide activity. Subsequently all new recruitments should be trained under the
program
Testing and implementation of plan
Since BCP is a plan devised for any emergency situation emerging, employees should be made to face
mocked situations so as to be prepared what to do when an emergency comes up. Certain issued may need
to be resolved even if there is no undesirable situation. For example, where an organization opts for hot site
strategy, basic equipment should be available all the time and ready to be used in the case of emergency.
38.11  Monitoring
Once the plan has been tested and implemented, it needs to be monitored and updated on regular basis for
following reasons.
 Changes in business strategy may alter the significance of critical application or deem additional
applications as critical.
 Changes in the software or hardware environment may make current provisions obsolete or
inappropriate
 Incidents emerging and affecting the organizations business continuity issues.
 Reassessing the risks, their impact and likelihood of occurrence
 Identifying any newly emerged risks and including them in the BCP
 Training of the new recruits as and when they are employed.
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Table of Contents:
  1. Need for information, Sources of Information: Primary, Secondary, Tertiary Sources
  2. Data vs. Information, Information Quality Checklist
  3. Size of the Organization and Information Requirements
  4. Hierarchical organization, Organizational Structure, Culture of the Organization
  5. Elements of Environment: Legal, Economic, Social, Technological, Corporate social responsibility, Ethics
  6. Manual Vs Computerised Information Systems, Emerging Digital Firms
  7. Open-Loop System, Closed Loop System, Open Systems, Closed Systems, Level of Planning
  8. Components of a system, Types of Systems, Attributes of an IS/CBIS
  9. Infrastructure: Transaction Processing System, Management Information System
  10. Support Systems: Office Automation Systems, Decision Support Systems, Types of DSS
  11. Data Mart: Online Analytical Processing (OLAP), Types of Models Used in DSS
  12. Organizational Information Systems, Marketing Information Systems, Key CRM Tasks
  13. Manufacturing Information System, Inventory Sub System, Production Sub System, Quality Sub system
  14. Accounting & Financial Information Systems, Human Resource Information Systems
  15. Decision Making: Types of Problems, Type of Decisions
  16. Phases of decision-making: Intelligence Phase, Design Phase, Choice Phase, Implementation Phase
  17. Planning for System Development: Models Used for and Types of System Development Life-Cycle
  18. Project lifecycle vs. SDLC, Costs of Proposed System, Classic lifecycle Model
  19. Entity Relationship Diagram (ERD), Design of the information flow, data base, User Interface
  20. Incremental Model: Evaluation, Incremental vs. Iterative
  21. Spiral Model: Determine Objectives, Alternatives and Constraints, Prototyping
  22. System Analysis: Systems Analyst, System Design, Designing user interface
  23. System Analysis & Design Methods, Structured Analysis and Design, Flow Chart
  24. Symbols used for flow charts: Good Practices, Data Flow Diagram
  25. Rules for DFDs: Entity Relationship Diagram
  26. Symbols: Object-Orientation, Object Oriented Analysis
  27. Object Oriented Analysis and Design: Object, Classes, Inheritance, Encapsulation, Polymorphism
  28. Critical Success Factors (CSF): CSF vs. Key Performance Indicator, Centralized vs. Distributed Processing
  29. Security of Information System: Security Issues, Objective, Scope, Policy, Program
  30. Threat Identification: Types of Threats, Control Analysis, Impact analysis, Occurrence of threat
  31. Control Adjustment: cost effective Security, Roles & Responsibility, Report Preparation
  32. Physical vs. Logical access, Viruses, Sources of Transmissions, Technical controls
  33. Antivirus software: Scanners, Active monitors, Behavior blockers, Logical intrusion, Best Password practices, Firewall
  34. Types of Controls: Access Controls, Cryptography, Biometrics
  35. Audit trails and logs: Audit trails and types of errors, IS audit, Parameters of IS audit
  36. Risk Management: Phases, focal Point, System Characterization, Vulnerability Assessment
  37. Control Analysis: Likelihood Determination, Impact Analysis, Risk Determination, Results Documentation
  38. Risk Management: Business Continuity Planning, Components, Phases of BCP, Business Impact Analysis (BIA)
  39. Web Security: Passive attacks, Active Attacks, Methods to avoid internet attacks
  40. Internet Security Controls, Firewall Security SystemsIntrusion Detection Systems, Components of IDS, Digital Certificates
  41. Commerce vs. E-Business, Business to Consumer (B2C), Electronic Data Interchange (EDI), E-Government
  42. Supply Chain Management: Integrating systems, Methods, Using SCM Software
  43. Using ERP Software, Evolution of ERP, Business Objectives and IT
  44. ERP & E-commerce, ERP & CRM, ERP Ownership and sponsor ship
  45. Ethics in IS: Threats to Privacy, Electronic Surveillance, Data Profiling, TRIPS, Workplace Monitoring