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The use of enterprise architecture in the management of risk

Risks in business can never be eliminated, but they need to be managed by assessing the probabilities, balancing the tradeoffs and taking appropriate mitigating action. Organisations tend to carve up risk management into specialist areas and allocate responsibility to individual functions: Compliance, Security, IT and so forth. This may indeed be necessary from an operational standpoint. However, the regular review of the entire portfolio of risk management measures is a task that needs to be shared across the business. By providing models of the current state of the business that bridge the business and IT aspects, enterprise architecture can ensure that critical interdependencies are recognized, with a greater likelihood that gaps will be plugged.

Business risk can assume several forms, including regulatory, financial, operational and reputational risk. Companies in such sectors as aerospace, banking, chemicals or insurance are all subject to rules and regulations set by the relevant industry bodies and government agencies. Failure to comply represents a serious risk to a company’s ability to trade. This is equally true of regulations such as Sarbanes-Oxley that impact firms across many different sectors. Financial risk covers such areas as the avoidance of fraud or unauthorized dealing, such as the notorious case of the rogue trader at Société Générale back in 2008. The management of regulatory and financial risk calls for visibility of the business processes supporting these regulations and transparency of their supporting information, and an effective enterprise architecture should provide these.

The effective mitigation of operational risk necessitates not only a clear understanding of processes but also a commitment to ensuring business continuity. It is crucial to recognise that inadequate preparation for disaster recovery can have catastrophic consequences, potentially, in the worst case, leading to the downfall of an entire firm. Consequently, what might initially appear as a technology-related risk, such as outdated technology, is, in reality, a significant business risk. Moreover, an organisation’s vulnerability to reputational risk can be substantially heightened by insufficient information security provisions.  By understanding the operational processes, systems and identifying the dependencies between them, enterprise architecture has a key role in mitigating these risks.

Finally, enterprise architecture plays a pivotal role in identifying potential risks that may emerge when an organisation embarks on a radical restructuring exercise.  Whether it involves a major acquisition, divestment, or the outsourcing of a business -critical function, these transformative business changes have the capacity to expose an organization to a host of unforeseen risks. Take, for instance, the recent incident involving the MOVEit transfer software, where sensitive data was compromised. This breach occurred through the utilisation of the software by a third-party payroll provider, and although it exploited a zero-day vulnerability, making prevention highly improbable, the enterprise architecture ought to have recognised the risk of exposing sensitive information through third-party involvement.

Hence, a well-designed enterprise architecture should assist in anticipating and mitigating these potential risks, supporting the success and resilience of the organisation through the anticipation and mitigation of such potential risks.

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