III.B.2     Likelihood and Impact

Management should evaluate the likelihood and impact of disruptive events. Risks may range from those with a high likelihood of occurrence and low impact, such as brief power interruptions, to those with a low probability of occurrence and high impact, such as pandemics. The most difficult risks to address are those that may have a high impact on the entity but a low probability of occurrence. The Department of Homeland Security’s (DHS) National Infrastructure Protection PlanRefer to DHS’s National Infrastructure Protection Plan. provides examples of risk measurement processes and methodologies to help analyze risks.

As part of the assessment, management should quantify the impacts and define loss criteria as either quantitative (financial) or qualitative (e.g., impact to customers, reputational impact). The BCM risk assessment should be commensurate with the entity’s risk and complexity and should include reasonably foreseeable events. Worst-case scenarios, such as destruction of the facilities and loss of life, should be addressed. State and local authorities may assist management with identifying specific risks or exposures for geographic locations, and special requirements for accessing emergency zones.

Management should also assess whether its third-party service providers consider the likelihood of a disruption based on the geographic location of facilities, their susceptibility to threats (e.g., location in a flood plain), and the proximity to critical infrastructure (e.g., power grids, telecommunications, nuclear power plants, airports, major highways, and railroads).

Management should determine the potential severity of threats and estimate the disruption’s impact under various threat scenarios as it assesses the likelihood and impact of a disruption. The results may be scored quantitatively (e.g., based on a numerical ranking) or qualitatively (e.g., high, medium, and low) and then prioritized. Refer to the IT Handbook’s “Management” booklet for additional information.

Once management identifies scenarios, it should evaluate specific threats to the entity’s controls, strategies, and plans. The difference, or the gap, between the risks from likely foreseeable threats and the mitigation provided by current controls, represents the risk exposure. Management should develop strategies to manage risk, which could include risk mitigation, avoidance, acceptance, or risk transfer, based on the entity’s risk appetite.

 

Previous Section
III.B.1 Risk Identification
Next Section
IV Business Continuity Strategies