Risk Appetite and Risk Tolerance

Topic 1 risk appetite and risk tolerance

1.

Risk Appetite and Risk Tolerance may sound similar but distinctly different. According to RiskOptics (2023), the understanding behind risk appetite is the level of risk an organization deems acceptable within daily activities. This differs from risk tolerance, which an organization sets as an acceptable level of variation intended to achieve strategic objectives.

Risk appetite is typically a level of risk an organization is okay with before taking action to reduce the risk. An example of this is the speed limit set on a highway. The officers who enforce the speed limit would then set the risk tolerance by choosing to ticket the drivers.

2.

Risk appetite, is where an organization has a broad level of risk that they will accept to take in order to advance. Risk Tolerance is how much risk an organization is willing to take. (Global Fund Board,2018) Risk Appetite is more of a general level while Risk Tolerance is more specific for each organization. Companies can look at the risk appetite level and play it safe, meaning that the organization not risk too much since they organization will try to match the risk level with the general risk factor. Companies can play a very risky game and try to risk more than the usual company would.

3.

The major difference between risk appetite and tolerance comes down to business growth and goals. Risk tolerance factors are the amount of risk a company can handle without compromising operations or growth. Risk appetite is the level of risk a company decides is worth taking, to achieve its goals.Risk tolerance sets the boundaries of risk that the organization can take without compromising its efficiency in pursuit of long-term objectives. While risk appetite is about “taking risk” and risk tolerance is about “controlling risk, both are valuable to success in the decision making process. They must be considered and applied in conjunction optimal outcome of an organizations long term health.

Topic 2, supporting a culture of integrity

Notes for topic 2 replys

In your responses, find at least one post from a classmate who you disagree with and provide constructive criticism about their positions and reasoning. Be respectful in your counterarguments. You are required to comment on at least three other students’ posts. Use the RISE model for providing feedback, constructing responses that foster discussion and reflection

1.

From the CEO and Board Member’s (if applicable) perspective, the lack of transparency with customer and public are worse than the actual data breach. And while I’m not ignorant to the realities of the corporate world, the data breach is the real issue. Cloud based services and data security go hand in hand. If you don’t have the second, you don’t have the first, no matter the name of your company or its intended mission.
This is likely the reason the breach was hidden from customers and the public, and based on the reading, the CEO. At the foundation of the company, is the trust it’s customers have in Cloudster maintaining their data’s integrity and security. Potentially the biggest risk to Cloudster is it’s relationship with clients. Based on how the situation was handled, customers could accuse Cloudster of Fraud, Misrepresentation, or even Breach of Contract (Reynolds, 2018) All could have financial implications, but fraud has a potential for legal troubles.

If the CEO was truly kept in the dark about the situation, then they must dig down to find out if there’s a culture issue at the supervisor level. Did his employees fear reprisal from their immediate supervisor, or was it a rogue indiviidual employee? Sometimes, supervision needs to be cleaned out in order to fix culture at a company.

2.

In my opinion, the worst choice is that Cloudster, as a company that handles cloud services, by not stating to their customers and the public about the data breach, lowers their reputation and very well could harm the company based on non-transparency. In addition, the data breach is a significant risk to companies that handle data via the cloud or on physical servers. A data breach is defined as, from an article titled What is a Data Breach? from TechTarget, “cyber attack in which sensitive, confidential or otherwise protected data has been accessed or disclosed in an unauthorized fashion” (Froehlich, A. et al., 2022). Since Cloudster must have contingency plans in place for the aftermath of a data breach, it may not have included whether or not to disclose information about the breach to the public. I believe, in my opinion, Cloudster had decided to not disclose the breach initially to the public for the reason of wanting to save face and their reputation. While that reasoning is really upsetting because if I were a customer who used the cloud services with Cloudster and my data was potentially breached, I would want to know about that so I could take the necessary steps to further protect my information.

Some risks that were involved for Cloudster were a lack of firewalls and negligence of Cloudster’s IT department in not disclosing the incident for a significant period of time. From the text Ethics in Information Technology, the authors mention how negligence is an IT malpractice that coincides with the duty of care, in their terms, is defined as the “obligation to protect people against any unreasonable harm or risk” (Reynolds, G., 2018). This means the violation of countless IT worker relationships with the company in their failure to disclose the significant data breach to both their management and the public. In my opinion, I would implement a few changes for the IT department with guidance from the executive board per their approval. Two changes would be both an acceptable use policy (AUP) and a stronger code of conduct. An example of AUP would be for employees to undergo training that puts focus on the ethical use of programs within the company to learn about the AUP and abide by the change. Additionally, a new code of conduct that outlines the AUP and requires employees of the Cloudster company to report any wrong doings, including the failure to create routine firewall testing for any future possible breaches that can be prevented. Cloudster can repair its reputation if the executive board is willing to apply and implement changes that can benefit the company from any security incident with strengthed policies.

3.

Introduction: Cloudster, a global cloud services company, recently faced a significant ethical and compliance crisis when it failed to report a data breach to its customers and the public promptly. As the newly appointed Chief Ethics and Compliance Officer, my role is to foster an ethical corporate culture and prevent such incidents from happening again. This discussion will address the severity of the data breach versus the lack of disclosure, reasons behind the non-disclosure, the associated risks, and the steps to promote ethical conduct.

Severity of the Data Breach versus Lack of Disclosure: The failure to disclose the data breach was worse for Cloudster than the breach itself. While data breaches can happen in any organization, failure to disclose it represents a breach of trust and transparency, which are essential for maintaining client and public confidence. The lack of disclosure not only damages the company’s reputation but also leads to potential legal and regulatory repercussions.
Reasons for Non-Disclosure: Several factors may have contributed to the initial non-disclosure of the data breach:a. Fear of Reputation Damage: Cloudster might have been concerned that disclosing the breach would tarnish its reputation, leading to customer churn and loss of business.b. Legal and Financial Consequences: The company may have feared lawsuits, regulatory fines, and a decline in stock value, which often accompany data breach disclosures.c. Internal Accountability: A lack of a well-defined ethics and compliance framework might have led to a culture where employees were hesitant to report the incident for fear of retaliation or lack of proper channels for reporting.
Ethics and Compliance Risks: The incident exposed Cloudster to several ethics and compliance risks, including:a. Legal and Regulatory Risks: Failure to report a data breach in a timely manner can result in regulatory investigations, fines, and lawsuits.b. Reputational Risks: The company’s reputation has suffered, potentially leading to loss of customers and partners.c. Trust and Transparency Risks: Lack of transparency erodes trust with customers, shareholders, and the public, making it difficult to rebuild.d. Cultural Risks: The incident may have created a culture where employees are less likely to report ethical violations or compliance issues, which can lead to more problems in the future.
Steps to Promote an Ethical Culture: To promote an ethical corporate culture at Cloudster, several measures should be implemented, drawing from this week’s readings:a. Develop a Comprehensive Code of Conduct: Create a clear and comprehensive Code of Conduct that outlines expected behaviors, reporting mechanisms, and consequences for ethical violations.b. Whistleblower Protection Program: Establish a robust whistleblower protection program to encourage employees to report concerns without fear of retaliation.c. Ethical Leadership Training: Provide ongoing training to leaders and employees on ethical decision-making, compliance, and the importance of transparency.d. Regular Audits and Assessments: Conduct regular ethics and compliance audits to identify and mitigate risks within the organization.e. Join Professional Associations: Become a member of industry-specific ethics and compliance professional associations to stay informed about best practices and regulatory changes.f. External Ethics Hotline: Implement an external ethics hotline for stakeholders, including customers and the public, to report concerns independently.g. Ethical Communication: Foster a culture of open communication and transparency through regular updates and reporting on ethical and compliance matters.
In conclusion, Cloudster must prioritize ethical conduct and compliance to rebuild trust and mitigate the risks associated with the recent data breach and non-disclosure. By implementing comprehensive policies, training, and a culture of transparency, the company can move toward a more ethical corporate culture and prevent future incidents.

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