If there’s one thing that’s certain in the expanding digital world, it’s that nothing is certain. Unseen cyber risks are always lurking, even in the age of zero-trust and artificial intelligence. That erroneous click on a phishing bait is inevitably going to happen, and CEOs have seen from personal experience that cyber risk must be built into business strategy. Instead of burying their heads in a compliance system and hoping for the best, business leaders are using a risk-based approach to accept risks, mitigate them, and capitalize on them.
It is essential for business leaders to get an understanding of the monetary bottom line of risk. Only with an in-depth understanding of how cyber risks correlate to the business strategy can educated steps be taken to prioritize and manage risks by investing in cyber technology, cyber insurance, and mitigation strategies.
Enter Cyber Risk Quantification
Cyber risk quantification is the process of measuring IT and cyber risk in monetary terms. Quantifying cyber security risks helps management teams concretize the abstract concept of cyber risks, prioritize which risks to focus on first, and determine how to distribute cybersecurity resources for maximum impact.
With cyber risk quantification, CEOs can comprehend the likelihood and potential frequency of an event occurring, the value of assets that are threatened, and the cost incurred due to the impact. Board members can more easily weigh the value and impact of various mitigation strategies by analyzing a comparison of costs and expected risk mitigation, and using that data to illustrate ROI for security-related investment.
By quantifying the financial impact of a risk incident, quantitative cyber risk assessment
helps board members answer questions like:
“How much should we invest in a security team or external professionals to manage cybersecurity?”
“What will be the return on investment with the implementation of a given technology?”
“Do we have enough cyber insurance coverage?”
“How much will a ransomware attack cost?”
“What will be the range of impact of a malware phishing campaign?”
“What kind of losses can be incurred in case of a data breach?”
Security risk quantification takes security strategy straight to upper management in a consumable form. Board executives can easily comprehend potential financial losses due to cyber-related risks in estimated monetary amounts because that is a language that everyone understands.
What are the benefits of CRQ (Cyber Risk Quantification)?
Getting executive leadership to agree with a risk quantification initiative isn’t always a smooth process, but research shows that a quantification approach to risks enables cyber-related decision-making through the sharp lens of experienced business strategists. Regardless of industry or type of risk, quantifying risk scenarios makes good strategic sense. By properly implementing cyber risk quantification, the benefits are evident. With CRQ:
- Executives are empowered in their cyber security roadmap planning and enable the building of a strong business case to present to stakeholders and investors.
- Information security leaders can present and explain, in a communicable language, the strongest cyber threats facing the enterprise.
- Clear visibility into the most imposing and expensive threats facing the company is possible.
- Business and security teams know where to focus their cyber investments, and how to reduce risk exposure in line with business objectives. Overreacting or under-reacting to potential risk events is less likely with CRQ.
- Cyber security teams can concentrate their efforts on ensuring the business has enough controls and processes to defend against critical risks and make additional investments if indicated by risk quantification results.
- Time-consuming debates and confusion about what the top cyber risks are and which technologies will address them with the greatest return on investment (ROI) are eliminated.
- You will gain a competitive edge. Cyber risk quantification strengthens cyber posture and resilience. It gives insights to respond to cyber threats in a more targeted and cost-efficient way. This translates into greater credibility and a strong brand reputation.
Start Getting Value With
Centraleyes for Free
See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days
What is the Most Popular Cyber Risk Quantification Model?
FAIR (Factor Analysis of Information Risk) is a popular framework used to understand and quantify cyber risks in financial terms. Created by Jack Jones and reworked by The Open Group, the FAIR model provides a standard taxonomy and ontology for information and operational risk. The framework helps facilitate decisions using an advanced risk model, while also determining how security investments will impact the risk profile.
The FAIR cyber risk quantification model systemizes and monetizes risk. It breaks risks down into small building blocks and measures their relationship to one another. The relationships between each building block or element of risk can be quantified mathematically and assigned monetary values so that ultimately risk can be calculated as financial loss exposure.
Translating the impact of cyber risk into dollars and cents enables the type of business planning that board members from the non-cyber world are used to:
- weighing priorities
- calculating the ROI of security investments
- choosing cost-effective, efficient solutions
In short, the FAIR method can be described as economically driven cyber risk management.
The FAIR model can be used in conjunction with other risk assessment frameworks like ISO 27005, NIST SP 800-53, OCTAVE, and BOBIT. While many of them rely on qualitative methods to scale and assess risks, the FAIR method adds a unique quantitative dimension that makes risk assessments more holistic.
Best Practices for Cyber Risk Quantification
The well-known risk frameworks discussed above provide clear guidelines and procedures on how to measure cyber risks. But before you dive in, here is a list of baseline practices to get you ready for risk quantification:
- Build a comprehensive inventory of your information assets. Know where data is stored, transported, and processed.
- Identify threats that could undermine the security and privacy of your assets. Determine which of the inventoried assets are most vulnerable to the identified threats.
- Assess the operation of controls that are in place to minimize the probability of threats or vulnerabilities.
- Capture the financial risk and scale of impact should a threat materialize. For example, a data breach could result in multiple financial losses like legal liabilities, regulatory penalties, reputational costs, or customer loss.
- Don’t take on a project scope so big that it becomes difficult or even impossible to address risks. It’s neither efficient nor necessary to cover all possible risk scenarios. Start small, and build your way up. And remember that for many low-scoring risks, acceptance of the risk is sometimes the smartest option.
- Document, monitor, and report the results.
- Automate. The beauty of risk quantification technology is in its ability to combine data metrics and logs to measure risk accurately. Don’t go it alone.
Remember, quantification isn’t a total solution to risk management. On the contrary, cyber risk quantification should enhance, not replace, other IT and security policies. Its value is best realized when complemented with risk assessments, compliance solutions, and good governance practices.
Centraleyes’ Primary Loss Calculator
Centraleyes’ platform contains a wildly popular cyber risk quantification tool called the “Primary Loss Calculator”. The calculator examines six different factors of cyber loss:
- productivity loss
- response loss
- replacement loss
- competitive advantage loss
- fines and judgment loss
- reputation loss
Across each one of these factors, users set a minimum and maximum exposure threshold, a likelihood lever, and a confidence level. As they set these up they will see the computation of their primary loss. Once they are done setting up and calculating these different factors, they will get a “total primary loss” number that can be attached to various assets and items in the platform, including the risks in the Centraleyes automated Risk Register.
Centraleyes provides the clarity and visibility around cyber risk quantification that businesses need to drive critical cyber security decisions. Our cutting-edge platform provides real-time insights into the risk landscape and automates risk quantification, enabling users to make data-driven decisions that add to business value.
Start Getting Value With
Centraleyes for Free
See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days
