Information Systems Risk Management: An Audit and Control Approach

Information Systems Risk Management: An Audit and Control Approach

Aditya Ponnam (Louisiana State University, USA)
Copyright: © 2009 |Pages: 17
DOI: 10.4018/978-1-59904-855-0.ch007
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Organizations worldwide recognize the importance of a comprehensive, continuously evolving risk assessment process, built around a solid risk strategy that properly manages internal and external threats. A comprehensive enterprise risk management strategy must ideally contribute to the protection of the organizations’ assets, operations, shareholder’s value, and customer satisfaction while meeting imposed regulatory requirements and standards. As IT represents an integral part of the process required to achieve the aforementioned objectives, managing the risks associated with the information technology infrastructure of an organization is critical. The goal of this chapter is to review the most common risks and threat agents for a typical organizations’ information technology infrastructure and to discuss how systematic risk management procedures and controls can manage and minimize these risks.
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Defining and Understanding Risk and Control

Today’s business environment requires highly competent risk management functions with the capabilities to address a continuously changing risk profile.

In order to put risk in the proper context, two terms are defined (Stoneburner, Goguen, & Feringa, 2002): vulnerability, and threat. Vulnerability is a flaw or weakness in system security procedures, internal controls, or implementation that can be exercised (either accidentally or intentionally) and that can result in loss or harm. For example, a weak disaster recovery plan of an organization located in a disaster-prone area represents a vulnerability to the organization. A threat, such as a natural disaster, is the potential for a threat-source to exercise a specific vulnerability, such as a weak disaster recovery plan.

A risk is a circumstance or event that has the potential to hinder achievement of specific objective(s) or to cause harm. With respect to the previous example, the sudden disruption of a business or the loss of critical data in the event of a natural disaster is a risk that must be addressed. Therefore, organizations located in areas prone to environmental disasters should pursue a strong off-site data backup and recovery strategy by selecting a location less vulnerable to environmental disasters. A risk always has a cost associated with it. Once the vulnerabilities, threats, and respective costs are rated, risk can be interpreted by the following equation (Akin, 2002).

Risk = Threat * Vulnerability * Cost

Cost is the total cost of the impact of a particular threat incurred by a vulnerable target. Costs are of three types: hard-dollar, semihard, and soft. Hard-dollar costs are measured in terms of “real “ damages to hardware, software, or other assets, as well as quantifiable IT staff time and resources spent repairing these damages. Semihard costs might include such things as lost business or transaction time during a period of downtime. Soft costs include such things as diminished end-user productivity, damage to reputation, decreased stockholder confidence, or lost business opportunities (International Charter, 2006).

Business risks can be broadly classified into the following types (Business Link, 2006):

  • Strategic (e.g., market competition, customer preferences, industry changes)

  • Compliance (e.g., regulations, standards)

  • Financial (e.g., foreign exchange, interest rates, credit)

  • Operational (e.g., organizational culture, process risk, technology risk)

  • Hazard (e.g., natural events, environment, physical employees)

These categories are not rigid, as some parts of your business may fall into more than one category. An environmental disaster threatening an organization’s ability to successfully back-up and recover data could, for example, potentially reach across and impact hazard, operational, financial, and compliance business risk categories.

Risks have the potential to deter an organization from achieving its goals and objectives. Management, therefore, must implement a risk control framework in order to prevent or mitigate risks to a level deemed acceptable to the organization.

It is important to understand the nature of controls. Controls are formal activities taken by business process owners to achieve an objective set by the organization to mitigate a respective risk. A control can be defined as a process, policy, or procedure designed to provide reasonable assurance that business objectives will be achieved. Controls, when exercised effectively, reduce or eliminate the exposure of a process to certain risks and, therefore, make the process less likely to incur losses associated with the risk. Controls can be preventive, detective, or corrective, as described below.

  • Preventive: Implemented to prevent the risk from causing any loss or harm.

  • Detective: Implemented in situations where it is important to understand that something adverse has happened. They warn of violations or attempted violations of organizational policy.

  • Corrective: Implemented when the objective is to fix errant situations or events as they are identified.

Controls can be further classified as automated or manual (Rajamani, 2006).

  • Automated or programmed controls: Automated controls are embedded within an organization’s application systems and work in the background by virtue of the programming logic or application configuration, without any need for manual intervention. A financial application that calculates interest rates automatically based on a hard coded logic is an example of an automated control.

  • Manual controls: These controls require a person to manually enforce the control. For example, a review and sign off that the quality of material obtained from a supplier has been inspected is a manual control.

Key Terms in this Chapter

Risk: A risk is a circumstance or event that has the potential to hinder achievement of objectives or cause harm.

Auditable Domain: An auditable domain is a manageable auditable activity, which may be defined in a number of ways, such as by function or activity, by organizational unit or division, or by project or program.

Vulnerability: Vulnerability is a flaw or weakness in system security procedures, internal controls, or implementation that could be exercised (accidentally triggered or intentionally exploited) and result in loss or harm.

Application Controls: Application controls are automated controls that relate to the processing of transactions within the business process. Application controls are typically preventative in nature and are embedded within the application or could be configured. Examples of Application controls are edit checks, data input validations, calculations, interfaces, and authorizations.

Residual Risk: Risk that remains after a control is implemented is called residual risk.

IT General Controls: IT General controls are controls that apply to the entire infrastructure of the organization. The most common IT General controls are logical access controls over applications, infrastructure and data, change management controls, system and data backup and recovery controls.

Internal Control: An internal control is processes, policies, procedures, and practices, designed to provide reasonable assurance that business objectives will be achieved, and that undesired events will be prevented or detected, and corrected or mitigated.

Threat: Threat is the potential for a threat-source to exercise (accidentally trigger or intentionally exploit) a specific vulnerability.

Complete Chapter List

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Editorial Advisory Board
Table of Contents
Jatinder N. D. Gupta, Sushil Sharma
Jatinder N. D. Gupta, Sushil Sharma
Chapter 1
Xin Luo, Qinyu Liao
In computer virology, advanced encryption algorithms, on the bright side, can be utilized to effectively protect valuable information assets of... Sample PDF
Ransomware: A New Cyber Hijacking Threat to Enterprises
Chapter 2
Joon S. Park
E-commerce has grown immensely with the increase in activity on the Internet, and this increase in activity, while immeasurable, has also presented... Sample PDF
E-Commerce: The Benefits, Security Risks, and Countermeasures
Chapter 3
Pamela Ajoku
Even though weapons and money are considered important factors for running a modern world, at the end of the day, it is all about controlling and... Sample PDF
Information Warfare: Survival of the Fittest
Chapter 4
Gaeil An, Joon S. Park
In this chapter, we discuss the evolution of the enterprise security federation, including why the framework should be evolved and how it has been... Sample PDF
Evolution of Enterprise Security Federation
Chapter 5
Roy Ng
The hypergrowth of computing and communications technologies increases security vulnerabilities to organizations. The lack of resources training... Sample PDF
A Holistic Approach to Information Security Assurance and Risk Management in an Enterprise
Chapter 6
John D’Arcy, Anat Hovav
A number of academic studies that focus on various aspects of information security management (ISM) have emerged in recent years. This body of work... Sample PDF
An Integrative Framework for the Study of Information Security Management Research
Chapter 7
Aditya Ponnam
Organizations worldwide recognize the importance of a comprehensive, continuously evolving risk assessment process, built around a solid risk... Sample PDF
Information Systems Risk Management: An Audit and Control Approach
Chapter 8
Udaya Kiran Tupakula
In this chapter we discuss Distributed Denial of Service (DDoS) attacks in networks such as the Internet, which have become significantly prevalent... Sample PDF
Distributed Denial of Service Attacks in Networks
Chapter 9
Andy Luse
This chapter describes various firewall conventions, and how these technologies operate when deployed on a corporate network. Terms associated with... Sample PDF
Firewalls as Continuing Solutions for Network Security
Chapter 10
Jamie Twycross
The immune system provides a rich metaphor for computer security: anomaly detection that works in nature should work for machines. However, early... Sample PDF
An Immune-Inspired Approach to Anomaly Detection
Chapter 11
Wasim A. Al-Hamdani
This chapter introduces cryptography from information security phase rather than from deep mathematical and theoretical aspects, along with... Sample PDF
Cryptography for Information Security
Chapter 12
Carlo Belletini
The chapter introduces and describes representative defense mechanisms to protect from both basic and advanced exploitation of low-level coding... Sample PDF
Memory Corruption Attacks, Defenses, and Evasions
Chapter 13
Dalila Boughaci, Brahim Oubeka, Abdelkader Aissioui, Habiba Drias, Belaïd Benhamou
This chapter presents the design and the implementation of a decentralized firewall. The latter uses autonomous agents to coordinately control the... Sample PDF
Design and Implementation of a Distributed Firewall
Chapter 14
Tom Coffey
This chapter concerns the correct and reliable design of modern security protocols. It discusses the importance of formal verification of security... Sample PDF
A Formal Verification Centred Development Process for Security Protocols
Chapter 15
Ahsan Habib
This chapter develops a distributed monitoring scheme that uses edge-to-edge measurements to identify congested links and capture the misbehaving... Sample PDF
Edge-to-Edge Network Monitoring to Detect Service Violations and DoS Attacks
Chapter 16
Doug White, Alan Rea
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A "One-Pass" Methodology for Sensitive Data Disk Wipes
Chapter 17
Lijun Liao
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Securing E-Mail Communication with XML Technology
Chapter 18
Li Yang, Raimund K. Ege, Lin Luo
This chapter describes our approach to handle security in a complex Distributed Virtual Environment (DVE). The modules of such an environment all... Sample PDF
Aspect-Oriented Analysis of Security in Distributed Virtual Environment
Chapter 19
Information Availability  (pages 230-239)
Deepak Khazanchi
This chapter describes the concept of information availability (IAV) which is considered an important element of information security. IAV is... Sample PDF
Information Availability
Chapter 20
Siraj Ahmed Shaikh
The purpose of this chapter is to introduce the reader to the research area of formal analysis of authentication protocols. It briefly introduces... Sample PDF
Formal Analysis and Design of Authentication Protocols
Chapter 21
Rajeev R. Raje, Alex Crespi, Omkar J. Tilak, Andrew M. Olson
Component-based software development offers a promising technique for creating distributed systems. It does require a framework for specifying... Sample PDF
Access Control Frameworks for a Distributed System
Chapter 22
Manish Gupta, JinKyu Lee, H. R. Rao
The Internet has emerged as the dominant medium in enabling banking transactions. Adoption of e-banking has witnessed an unprecedented increase over... Sample PDF
Implications of FFIEC Guidance on Authentication in Electronic Banking
Chapter 23
Sue Conger
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Disruptive Technology Impacts on Security
Chapter 24
Sushma Mishra
Internal auditing has become increasingly important in current business environments. In this era of the Sarbanes- Oxley Act and other similar... Sample PDF
Internal Auditing for Information Assurance
Chapter 25
William H. Friedman
This chapter is management oriented. It first proposes a general theoretical context for IT disasters within the wider class of all types of... Sample PDF
IT Continuity in the Face of Mishaps
Chapter 26
Yvette Ghormley
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Business Continuity and Disaster Recovery Plans
Chapter 27
Yvette Ghormley
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Security Policies and Procedures
Chapter 28
Arjmand Samuel
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Enterprise Access Control Policy Engineering Framework
Chapter 29
Sushil K. Sharma, Jatinder N.D. Gupta
The purpose of the information security policy is to establish an organization-wide approach to prescribe mechanisms that help identify and prevent... Sample PDF
Information Security Policies: Precepts and Practices
Chapter 30
Paul D. Witman
This chapter provides a set of guidelines to assist information assurance and security researchers in creating, negotiating, and reviewing... Sample PDF
A Guide to Non-Disclosure Agreements for Researchers
Chapter 31
Omkar J. Tilak
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Assurance for Temporal Compatibility Using Contracts
Chapter 32
Arjan Durresi
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Spatial Authentication Using Cell Phones
Chapter 33
Sushil K. Sharma, Jatinder N.D. Gupta, Ajay K. Gupta
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Plugging Security Holes in Online Environment
Chapter 34
Erik Graham, Paul John Steinbart
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Six Keys to Improving Wireless Security
Chapter 35
Robert W. Proctor, E. Eugene Schultz, Kim-Phuong L. Vu
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Human Factors in Information Security and Privacy
Chapter 36
Wm. Arthur Conklin
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Threat Modeling and Secure Software Engineering Process
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Christopher M. Botelho, Joseph A. Cazier
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Guarding Corporate Data from Social Engineering Attacks
Chapter 38
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Data Security for Storage Area Networks
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Security-Efficient Identity Management Using Service Provisioning (Markup Language)
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A Strategy for Enterprise VoIP Security
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Jose M. Torres
This chapter presents an Information Systems Security Management Framework (ISSMF) which encapsulates eleven Critical Success Factors (CSFs) along... Sample PDF
Critical Success Factors and Indicators to Improve Information Systems Security Management Actions
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Rebecca H. Rutherfoord
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Privacy, Societal, and Ethical Concerns in Security
Chapter 44
Rodolfo Villarroel, Eduardo Fernández-Medina, Juan Trujillo, Mario Piattini
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An MDA Compliant Approach for Designing Secure Data Warehouses
Chapter 45
Hai Wang
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Survivability Evaluation Modeling Techniques and Measures
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Art Taylor
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The Last Line of Defense: A Comparison of Windows and Linux Authentication and Authorization Features
Chapter 47
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