With so many threats facing modern companies, knowing which threats to address first can be challenging. Risk quantification is a technique that frames your vulnerabilities in a numerical representation, allowing you to prioritize issues that are most likely to occur or cause the most significant harm.
This method does not work for all cyberattacks. Quantifiable risks can be expressed in monetary value (say, lost profits), while non-quantifiable or qualitative risks are more anecdotal. A quantitative risk assessment (QRA) can assist you in figuring out what risks your business faces and how to measure them.
While risk quantification originated in the financial sector, it is becoming increasingly common in cybersecurity. Much as a financial institution will take risks to gain profit, cyber threats frequently rise during periods of growth and expansion for a company.
Risk quantification can be a beneficial strategy for many companies. Knowing the pros, cons, and best practices will help you determine whether it’s a viable option for your organization.
Why Is Quantifying Cyber Risk Important?
Quantifying risk can be a valuable tactic for many organizations. Having standard metrics at your fingertips is a great way to explain your risk landscape to board members and other stakeholders.
As your firm grows and expands, this information can be helpful for financial planning, mergers, and questions about cybersecurity investment. In addition, having a “single language” to communicate your company’s risk mitigation activities to all employees is always a good idea.
Quantifiable data also allows you to chart your progress over time. With this data, you’ll have definitive proof of whether your risk management efforts are sufficient and your cost estimates are correct. Data doesn’t lie; it will be valuable for creating your risk register and developing a successful risk management program at your company.
What Are the Most Common Types of Cyber Risk?
There are many common cybersecurity threats that can be identified and avoided. This article will look at the security dangers organizations face today.
Malware and Viruses
Malicious software includes spyware, ransomware, viruses, and worms. Malware can be activated to deploy hazardous software when a user clicks on a malicious link or attachment. After the malware is installed, it can:
- Restrict access to essential network components (ransomware)
- Increase the number of potentially hazardous applications installed
- Send data from the hard disk to obtain information without being discovered (spyware)
- Render the system dysfunctional as individual sections are interrupted
Emotet
Emotet is a powerful, modular banking Trojan that primarily operates as a downloader of other banking Trojans, according to the Cybersecurity and Infrastructure Security Agency (CISA). Unfortunately, Emotet remains one of the most costly and damaging types of malware.
Service Disruption
A denial of service (DoS) attack overloads a computer or network with queries, causing a website or network to shut down. A distributed DoS (DDoS) attack uses multiple devices, or botnets, to achieve the same result much more quickly.
Cybercriminals typically use a flood attack to interrupt the “handshake” protocol and carry out a DoS. Other tactics are also sometimes used, and some cybercriminals use the time when the network is down to conduct other assaults. A botnet is a type of DDoS where a hacker can control millions of devices by infecting them with malware.
Man-in-the-Middle Attacks
A man-in-the-middle (MITM) attack occurs when hackers insert themselves into a two-party transaction. After blocking communication between the two parties, the attacker can filter and collect data.
MITM attacks commonly happen when a visitor uses an unsecured public Wi-Fi network. Attackers use malware to install software and steal data, creating a barrier between visitors and the web.
Phishing
Phishing attacks involve the forgery of seemingly legitimate email addresses to dupe someone (say, an employee) into opening an email message. The message will appear authentic, even though it isn’t; and will instruct the user to click on a link that actually is malicious, or to disclose personal information. The aim is to infect the user’s device directly or steal sensitive data, such as credit card numbers and passwords.
SQL Injection
An SQL injection occurs when an SQL server is infected with malicious code. When a server is under attack, data is released. All that’s necessary is to type the malicious code into a search field on a vulnerable website.
Attacks on Passwords
With the correct password, a cyber attacker can obtain access to a lot of information. Password attacks include accessing a password database or guessing passwords.
How Do You Quantify Cyber Risk?
Risk quantification is a rapidly growing but still new topic in cybersecurity, and defining optimal practices can be difficult. There are several considerations when determining whether risk quantification is suitable for your company.
Use a Model That Meets Your Needs
Any model your firm employs will attempt to assess the amount of damage each cyber risk could cause, referred to as “value at risk” or VaR. That said, a variety of approaches exist to model risk and arrive at your desired datasets. Carefully consider the differences between these models when creating your risk assessment matrix.
For example, one common model is the Monte Carlo analysis (or Monte Carlo simulation); it allows you to explore all possible outcomes of a specific risk. Other models exist too, and you find one with the methodology that suits your business and facilitates decision-making.
Understand That Quantifying Risk Is Only the First Step
The primary benefit of quantification is the ability to rank your most significant risks by dollar values, which allows you to prioritize security efforts accordingly. Don’t ignore that prioritization part.
Use your quantitative risk analysis predictions and associated metrics to create a cyber risk management program that correctly allocates your resources, and gives you the most vigorous possible defense in the fastest possible time frame.
Communicate Risk Throughout Your Organization
Risk reduction efforts, cybersecurity audits, and overall management processes are most successful when fully integrated throughout the organization. So once you’ve determined which risks are the most critical, you need to make sure everyone at your company – across all operating units, from top to bottom – understands that information.
All employees can make more informed decisions day-to-day when business leaders regularly present risk metrics, risk scenarios, and financial impacts.
Challenges of Risk Quantification
Cybersecurity risk quantification can be a complicated initiative. The effort can be expensive, and some organizations don’t have the resources to execute the assessment process properly.
The technique also has some drawbacks. For example, one might be tempted to depend on proven data and formulas, but this can result in false correlations and equivalencies that misdirect your security efforts. The data collection used for quantification is also based on past events, and as such, it can’t always account for new risks that may arise in the future.
This rigidity may keep you from understanding the whole picture and result in misplaced complacency. Focusing too much on predicting likely loss events can result in a “black swan event” – a statistically unlikely event with repercussions more severe than you expected.
To that end, remember the value of qualitative risk assessments and the need to identify emerging risks. Threat actors and hackers are increasingly skilled and clever. It’s critical for security leaders to also be innovative and forward-looking to avoid data breaches and protect your company’s data.
Steps for Improving Cyber Risk Quantification
Companies that have mastered cyber risk quantification usually have one thing in common: they understand how to integrate their cyber risk model with their enterprise risk model and overall data-driven risk management. When cyber risk quantification fails to produce results, it’s usually because this integration is insufficient or some basic capabilities are missing.
Five mutually reinforcing characteristics pave the path to sophisticated cyber risk estimation. They are as follows.
Start With Governance
Your organization needs a consistent, enterprise-wide approach to handling cyber threats as the organization grows over time. You impose this approach through governance. Define an operating model that aligns with your company’s risk appetite and goals. Then, create functional groups to address cyber risk and compliance; that includes defining roles and responsibilities to manage risk, and oversight committees to assure your cybersecurity operations are keeping pace with evolving threats and compliance duties.
Formalize Cyber Risk Monitoring
If you want to rely on data-driven decision-making, you must have good data and review it regularly; so establish a structured, repeatable procedure to monitor cyber risk data. Monitor key performance indicators (KPIs) and create a reporting structure for the board of directors or risk committees based on customizable criteria.
Risk Classification
You must first identify and characterize cyber hazards before you can quantify them. After that, you may work with stakeholders together to achieve an alignment of priorities. Then you can implement necessary internal controls more easily.
Accelerate the Evaluation Process
Evaluating risk correctly depends on discipline and rigor; use a cybersecurity risk framework to achieve that level of performance. The most popular security frameworks come from the National Institute of Standards and Technology (NIST), and other frameworks are widely available as well.
Following a framework will allow you to develop accurate, consistent risk management plans for the entire organization; and it will pave the way for automation of risk management processes, too.
Embrace Technology
Risk management software solutions combine data and bring disparate risk management tasks together for a more holistic, data-driven program. These tools integrate your quantitative and qualitative data for comprehensive risk assessments and reports on your overall risk exposure.
Protect Your Business from Cyber Risks with Reciprocity ZenRisk
If you’re unsure how to implement risk management throughout your company, Reciprocity ZenRisk can help. Integrate your quantitative and qualitative risk management initiatives to make informed decisions based on contextual insights.
Get off to a quick start with ZenRisk’s guided set-up process and a built-in library of frameworks. Automated workflows, risk scoring, and metrics give time back to your teams by eliminating manual, tedious tasks. Reciprocity Zen Risk delivers actionable insights and visual dashboards to prioritize investments and stay ahead of hackers.
Schedule a demo today to see how Reciprocity ZenRisk can help you create a cyber risk management program that works for you.
