Risk Dynamics explained
Why Low Risks become High Risks ?
Risk is not static. A 'low' risk rating at one point in time reflects current probability and impact but those variables shift as the business environment, technology, behaviors and controls change. Risk dynamics occur when:
1. Probability changes
- External drivers (regulation, technologies, market conditions, geopolitical tensions) may increase the likelihood
- Internal changes (staffing, culture, processes, budget cuts) modify exposure
2. Impact changes
- The scale of operations grows
- New dependencies emerge (e.g., cloud providers, third parties)
- Process or system design changes expand the potential consequences
3. Controls decay
- Once-effective controls become obsolete, ignored, degraded or circumvented
- Monitoring fails to detect early-warning signals
4. Risk Interdependencies amplify
- A small risk linked to other risks can create compound or cascade effects
- 'Weak-signal' risks (latent risks) turn into systemic failures
How to manage these Dynamics ?
1. Continuous Risk reassessment
Risk assessments must be dynamic, not annual checklists.
2. Early-Warning Indicators (EWIs) & Key Risk Indicators (KRIs)
Define threshold-based indicators that show when risk conditions are changing.
3. Control Health monitoring
Assess control effectiveness continuously, not only at audit time.
4. Stress Testing & Scenario Analysis
Simulate what happens if this low risk goes wrong at scale ?
5. Risk Culture & Communication
Teams must escalate small problems early & leadership must reward transparency.
6. Dependency & Interconnectivity mapping
Understand how small risks interact with technology, vendors, regulations and processes.
Using the following link you can access this sandbox SIPOC model in the ProcessHorizon web app and adapt it to your needs (easy customizing) and export or print the automagically created visual AllinOne SIPOC map as a PDF document or share it with your peers: https://app.processhorizon.com/enterprises/46whCmoZ25K7sadEdwok2cxc/frontend