TL;DR: As software applications revolutionize business operations, they also introduce new cybersecurity challenges due to their unique functionalities, creating potential vulnerabilities that can be exploited by cybercriminals. Effective application risk management, which includes ensuring compliance with cybersecurity and privacy regulations, is key to protecting these technological assets from threats and ensuring an organization’s overall security and resilience.

Software applications are rapidly transforming how businesses operate, offering innovative solutions for engaging with customers, managing operations, and handling data. Yet, as these applications continue to reshape the business landscape, they also bring about a new set of challenges, particularly in cybersecurity. 

Each application, with its unique functionalities, creates potential vulnerabilities that cybercriminals are eager to exploit. To counter these cyber threats, organizations need a robust, proactive, and sophisticated strategy for identifying, assessing, and mitigating the risks lurking in software supply chains: application risk management. 

As we increasingly lean on software applications, we must also recognize the crucial role played by cybersecurity and privacy regulations in this landscape. These applications often handle, process, or store regulated data, subject to stringent privacy regulations such as FERPA, HIPAA, GLBA, GDPR, among others. An application risk management process isn’t just about ensuring the security of applications—it’s also about ensuring compliance with these regulations. 

Ultimately, the goal is not just to protect these vital technological assets from becoming weak spots but also to establish a compliance-ready environment. Through efficient and thorough application risk management, we can shield against the surge of potential security threats defiinig today’s digital environment, while simultaneously ensuring our organizations’ regulatory compliance, thereby bolstering their overall security and resilience. 

This comprehensive guide from SaltyCloud explains the importance of application risk management, exploring the critical roles of context, data, accountability, and privacy regulations. Then, we describe how to build an application risk management program with a step-by-step guide. Whether you’re a seasoned cybersecurity professional or a novice, this guide offers invaluable insights into strengthening your organization’s defenses against the looming threats of cyberattacks on software applications.

What is application risk management?

TL;DR: Application security risk management is a systemic process an organization employs to identify, assess, and mitigate security risks associated with its software applications, encompassing steps such as inventory listing, risk assessment, mitigation strategies, and ongoing monitoring and review, each of which involves a multitude of nuanced sub-steps and considerations for an effective risk management strategy.

Application security risk management is an organization’s process of systematically identifying, assessing, and mitigating security risks associated with an organization’s software applications. 

At its core, the process of application risk management includes:

1. Inventory: Listing all the software applications that an organization uses, along with their associated details, such as purpose, data handled, and users. 
2. Risk assessment: Evaluating each application for potential vulnerabilities that threat actors could exploit. Application risk assessments include technical and non-technical aspects like software bugs, insecure user behavior, or outdated security patches. 
3. Risk mitigation: Developing and implementing strategies to minimize or eliminate the identified risks. This can involve software updates, patching, changes in usage policies, or even decommissioning of certain applications. 
4. Monitor and review: Continually monitoring the risk landscape and reviewing and updating the risk mitigation strategies as needed. This is especially crucial because the threat landscape and the organization’s application inventory are dynamic, frequently changing over time. 

At a glance, the process may seem straightforward. However, the reality is far more nuanced. Each step involves a range of sub-steps, considerations, and specific actions that need to be taken to ensure the effectiveness of the overall risk management strategy.

Why is application risk management important?

TL;DR: Application risk management is crucial for safeguarding against cyber threats, ensuring regulatory compliance, maintaining business continuity, reducing the potential high costs of security breaches, and fostering trust and reputation, thereby forming a key component of a comprehensive cybersecurity strategy.

Application risk management is important for several reasons:

• Protection against cyber threats: Software applications are a common entry point for cyber threats. Threat actors can exploit weaknesses or vulnerabilities in applications to gain unauthorized access to an organization’s systems and data and execute cyber attacks. 
• Regulatory compliance: Many industries have regulations requiring the protection of sensitive data, often handled by applications. 
• Business continuity: Applications often support critical business processes. If an application fails due to a security incident, it can disrupt business operations. 
• Cost savings: The cost of dealing with a security breach can be high, including direct financial losses, reputational damage, and the cost of recovery. 
• Trust and reputation: Customers, partners, and stakeholders must trust that an organization can protect their data. 

Effective application risk management is a key component of a robust cybersecurity strategy, helping to protect organizations from threats, ensure regulatory compliance, maintain business continuity, save costs, and build trust.

Key components of application risk management

TL;DR: Application risk management is a proactive, context-aware process that balances the identification of application vulnerabilities, data type management, stakeholder accountability, and adherence to increasing privacy regulations.

Ultimately, the journey to robust application risk management begins with understanding the broader context in which this process operates, identifying the correlation between applications and data, and proactively managing application security risks. It’s a journey of transformation, where organizations move from being perpetually at risk to becoming secure, resilient entities in the digital world.

Context

Application risk management in Information Technology is not a standalone process. It’s a key part of the larger IT & cybersecurity risk management program, with each element intricately linked to securing an organization’s cyber ecosystem. 

Understanding the different strategies Chief Information Security Officers (CISOs) can employ to mitigate application risk is critical. These strategies can be broadly categorized as follows:

• Reactive tactics: Some organizations only address vulnerabilities after they’ve led to a breach and become a noticeable issue. This high-risk approach is unfortunately common, particularly in resource-constrained organizations. 
• Proactive measures: A more effective and safe strategy involves proactive measures to mitigate application risk. With data-driven strategies and effective tools, organizations can identify and prioritize vulnerabilities early, monitor the progress of remediation efforts, and ultimately strengthen their security posture. 

The choice between reactive tactics and proactive measures can significantly influence an organization’s cyber resilience. Recognizing the interconnected nature of IT security and taking preemptive action can shift the balance from crisis management to a more controlled, strategic approach to cybersecurity.

Data

Recognizing and efficiently managing the diverse data types processed by your organization’s array of applications is crucial to the success of application risk management. This task is complicated by the sheer number of applications—which can span from widely-used commercial platforms (such as enterprise resource planning (ERP) systems and customer relationship management (CRM) systems) to bespoke in-house-developed programs. Each of these applications introduces its unique set of potential vulnerabilities and handles its own category of data. 

Here are some of the core challenges faced in managing applications and their data types:

• Diverse applications: Your organization may use a wide spectrum of applications, which could be in-house-developed, on-premise hosted, or third-party-managed on the cloud. Each application carries unique risks, especially when they handle sensitive, critical, or regulated data types. Therefore, categorizing applications by their data type is essential for determining the risk level they represent. 
• Proprietary applications: In-house developed applications may harvor unique vulnerabilities, as they might not be subject to the same rigorous security testing that commercial software undergoes. Recognizing and understanding these risks can guide the creation of targeted security measures and risk mitigation strategies. 
• Stakeholder ownership: Different stakeholders within your organization, such as IT professionals and department heads, may own various applications. It’s necessary, albeit complex, to keep track of the types of data handled by these diverse applications to better understand the potential risks. 
• Regulatory oversight: Certain applications may process data under strict regulatory oversight (such as FERPA, HIPAA, GLBA, GDPR, etc.), and non-compliance can have serious repercussions, especially in the event of security breaches. 

In essence, effective application risk management and data management go hand in hand. Understanding the data that courses through your organization’s applications, you can identify and mitigate potential vulnerabilities, better protecting your valuable digital assets.

Accountability

Application risk management is more than just locating and addressing vulnerabilities—it’s about cultivating a culture of responsibility within your organization. This involves several critical steps:

1. Establishing ownership: Application owners—be they developers, managers, or IT personnel—need to recognize their crucial role in ensuring the security of the applications they handle. This means actively identifying and addressing potential vulnerabilities. 
2. Creating an application inventory: Your security team is pivotal in creating a comprehensive application inventory. This inventory should contain key details, such as where applications are deployed, who owns them, and the type of data they process. This rich dataset serves as a foundational knowledge base for managing and assessing application risks. 
3. Performing regular assessments: Creating an inventory is just the start. Regular risk assessments are also crucial. These may involve questionnaire-based self-assessments aligned with established security frameworks. These evaluations help confirm that the applications align with internal security policies, highlighting potential vulnerabilities and areas for enhancement. 

At its core, application risk management is a collaborative endeavor. Organizations can foster a culture of accountability by setting clear responsibility lines and regular assessment processes. When application owners understand their role and expectations, they become active partners in risk management, contributing to a more secure organization.

Privacy regulations

As data breaches and cybersecurity threats become increasingly common, governments worldwide are stepping up measures to protect consumer data. Today, privacy regulations significantly shape how organizations manage applications and their associated risks. 

Here are some of the factors influencing the complicated relationship between application risk management and privacy regulations:

• Regulatory influence: Various regulations, like the Texas Administrative Code (TAC) 202, have set clear standards for application risk management. TAC 202, for example, mandates biennial risk assessments for systems handling confidential data and enforces an inventory of information systems and the verification of security requirements. 
• Increasing privacy laws: The rise of privacy laws, not only the global ones like GDPR but also an increasing number of US state privacy regulations, alongside existing ones such as the CCPA and HIPAA, have underscored the need for organizations to protect their data. These regulations necessitate a comprehensive understanding of where applications are located, the specific nature of the data these applications manage, and the associated potential risks. 
• Compliance complexity: While compliance with privacy regulations adds a layer of complexity to application risk management, it also brings structure and rigor. It pushes organizations to better organize and track their applications, understand the nature of the process, and ensure its security. 
• Transparency: These regulations require transparency, compelling organizations to disclose potential application risks to data owners. 

Privacy regulations are redefining how organizations approach application risk management. But rather than viewing these regulations as hurdles, organizations should see them as a roadmap for mitigating application security risk. They serve as guiding principles to cultivate a culture of security and accountability. It’s not just about data protection but also about understanding applications, their associated data, and potential risks.

What is an application risk assessment?

TL;DR: An application risk assessment, an integral part of a robust application risk management program, involves identifying, evaluating, and mitigating potential security vulnerabilities within software applications.

An application risk assessment is the process of identifying, evaluating, and mitigating potential security vulnerarbilities within a software application. It involves a comprehensive analysis of an application’s security mechanisms, data handling, and compliance requirements to ensure its resilience against cyber threats. 

The application risk assessment is at the heart of a robust application risk management program lies t. This crucial process is designed to identify and mitigate potential threats and vulnerabilities that could compromise your data’s confidentiality, integrity, and availability. 

However, it’s worth noting that application security is not solely a technical issue; it’s also a business and a human one. It requires the involvement of various stakeholders, each with different roles and responsibilities concerning your data. This includes data owners, who need to understand the risks associated with the applications they own, and other stakeholders, such as management, who need to be informed about the overall risk landscape to make appropriate decisions. 

Ultimately, an application security risk assessment is vital in your application risk management toolbox. It provides a thorough understanding of where your organization stands concerning application security, helping you chart the course toward a more secure digital environment.

A step-by-step guide to building an application risk management program

TL;DR: An effective application risk management program involves developing an IT asset inventory, conducting self-assessments, generating insightful reports, securing stakeholder approval, tracking risks and exceptions, automating the process for repeatability, and enhancing security by incorporating a vendor risk management process.

Developing an effective application risk management program may seem daunting, but breaking it down into manageable steps makes the process more achievable. 

By following the steps below, your organization can develop a proactive application risk management program that addresses potential risks head-on, promotes accountability, and fosters a culture of security. It’s a journey, not a one-time event, but the pay-off in enhanced security measures and compliance is worth the effort. 

Here’s a step-by-step guide to help you build a robust and resilient program:

Step 1: Inventory

The first and most critical step towards building a robust application risk management program is developing a comprehensive IT asset inventory. Knowing what you have and where it is, is the first step in securing your organization. 

Maintain an up-to-date record of your organization’s hardware, software, users, and digital assets. This will help you understand your attack surface better and take proactive measures against potential threats. A good inventory process allows you to gather and manage information about your applications, their owners, and the data they handle, setting the stage for the subsequent assessment phase.

Step 2: Self-assessment

Self-assessments serve as a reality check for application owners to gauge their application’s adherence to specific policies and regulatory compliance. 

During the self-assessment phase, organizations can also enrich their inventory records by gathering more information about each application. Choose tools that enable you to conduct security self-assessment questionnaires at scale and keep track of responses over time.

Step 3: Reporting

Understanding your application inventory and risk landscape is critical. Develop insightful reports that summarize your organization’s applications and findings from self-assessments. Such reports can spotlight trends, potential risks, and the overall application security landscape, providing the necessary ammunition for senior leadership to prioritize budgets and initiatives, and for everyone else to understand what goals to work toward in the future.

Step 4: Stakeholder sign-off

Due to the rising tide of privacy and cybersecurity regulations, it’s crucial to ensure that internal data owners approve of how certain types of data are being used and whether the application’s security risks or gaps are commensurate. While it can be a convoluted process, teams should have an efficient solution that can send application risk assessment reports and other details to key stakeholders and send, receive, and track their acknowledgements in a single place.

Step 5: Risk register & exceptions manager

A successful application risk management program should be able to track risks and exceptions. Creating a culture of risk ownership assures people across the organization understand their responsibilities and actively work towards remediation. Moreover, tracking and updating exceptions periodically is critical when exceptions are made. Ideally, teams can take their self-assessments, funnel findings into a risk register or exceptions register, and easily assign and correlate risks to stakeholders, units, and employees.

Step 6: Automate & repeat

The effectiveness of an application risk management program largely hinges on its repeatability and automation. Organizations must implement a continuous process to ensure applications are inventoried, assessed, and potential risks are tracked to remediation.

Bonus step: Vendor Risk Management (VRM)

An application risk management program can be significantly enhanced by incorporating a vendor risk management (VRM) process. While it’s crucial to monitor how data is safeguarded internally, organizations must also scrutinize third parties who have access to this data. Ensuring their internal security policies meet the requirements to protect the data is essential.

How Isora GRC from SaltyCloud Can Help

TL;DR: Isora GRC from SaltyCloud enables organizations to manage application risks and strengthen cyber resilience by conducting risk assessments, creating a comprehensive application inventory, tracking users and owners, and understanding risks via dashboards and reports.

From small startups to multinational corporations, any organization that leverages applications, especially those developed in-house, faces potential risks. If not identified and mitigated, these risks could jeopardize your organization’s security posture, data privacy, and compliance with regulatory requirements. 

But remember, mitigating application risk is a continuous process, not a one-time task. It requires a dedicated team, constant vigilance, and the right tools at your disposal. 

To do so, organizations need an integrated application risk management platform that allows teams to inventory their applications, keep track of overship, launch application risk assessments, create insightful reports, facilitate data owner approvals, and track risks and exceptions across all business units for a precise understanding of your risk landscape. 

Isora GRC from SaltyCloud is the powerfully simple solution changing how information security teams manage governance, risk, and compliance (GRC). A new intuitive, automated, and collaborative platform designed by GRC experts, Isora GRC helps organizations ace compliance audits, build information security culture, and strengthen cyber resilience at scale.

With Isora GRC, your organization can:

✔ Conduct application risk assessments against security frameworks or compliance requirements. 

✔ Develop a comprehensive, centralized application inventory to keep track of important details like owners, data classification, deployments, and more. 

✔ Track application users and owners across business units. 

✔ Analyze, interpret, and understand application risks through dynamic dashboards and robust reporting capabilities to improve security posture and cyber resilience. 

Join dozens of customers who trust Isora GRC to deploy and scale their Application Risk Management Program, allowing them to assess hundreds of applications efficiently, automatically, and at scale. 

Discover how Isora GRC can revolutionize your organization’s approach to building and scaling its application risk management program.