As companies continue to face new and increasing cybersecurity risks, the National Institute of Standards and Technology (NIST) has developed a cyber risk scoring methodology that helps organizations to assess, quantify, and manage their cybersecurity posture effectively. The NIST Cyber Risk Scoring solution improves NIST’s security and privacy assessment processes by providing real-time contextual risk data, enhancing awareness, and prioritizing necessary security actions.

This article explores how that risk scoring system works and how CISOs can put the system to good use.

What Is Risk Scoring?

Risk scoring is a disciplined, systematic process to assess and quantify the level of risk associated with specific events or situations a business might face. Scoring uses metrics and baseline data to evaluate various risk factors that could lead to bad outcomes.

The risk factors are analyzed based on their potential effect they might have on the overall objective, which results in an “impact rating.” The higher the rating, the riskier the project is, and the more an organization should implement measures to address the identified risks.

The NIST cyber risk scoring methodology gives organizations a comprehensive perspective on their risk status, using quantitative measurements for systems. Additionally, it illuminates the organization’s security position from various angles, such as the Risk Management Framework (RMF) and Cyber Security Framework (CSF).

Types of Risk Scores

While there are different ways to categorize risk scores, one common classification is internal versus external risks.

Internal Risks

This risk score is based on evaluating factors within the organization. It involves analyzing data and information directly related to the company’s operations, processes, resources, and overall business environment.

Internal risk scoring typically considers financial performance, operational efficiency, employee capabilities, and internal control measures.

External Risks

External risk scores, on the other hand, are derived from evaluating factors outside the organization’s direct control. These factors include market conditions, industry trends, regulatory changes, economic indicators, geopolitical events, and other external influences that may impact the business.

External risk scoring helps a business to understand how external events could affect its operations and strategic decisions.

How to Calculate Your Risk Score

While the exact method may vary depending on the context and industry, calculating a risk score would generally involve the following steps:

  1. Identify risk factors. Determine the risk factors relevant to your specific situation or business. These factors could include cybersecurity vulnerabilities, financial risks, market volatility, compliance issues, reputational concerns, and so forth.
  2. Define metrics and baseline. Establish metrics and baseline data for each risk factor. Metrics quantify the extent of risk associated with each factor, while the baseline provides a reference point for comparison.
  3. Assign weight. Assign weight or importance to each risk factor based on its significance and potential impact on your objectives. Weightage reflects the relative importance of each factor in the overall risk assessment.
  4. Rate the level of risk. Rate the level of risk for each factor on a predetermined scale. According to the NIST cyber risk scoring model, each control is given an initial weight (ranging from 1 to 10) determined through an evaluation of its significance to the overall security and privacy stance. This rating indicates the severity of the risk based on the defined metrics and baseline.
  5. Calculate impact rating. Multiply the rating of each risk factor by its assigned weightage to calculate the impact rating for that particular risk factor.
  6. Add up the impact ratings. Add together all the impact ratings obtained in the previous step to get an overall risk score.
  7. Interpret the risk score. Analyze the risk score to understand the amount of risk your business is facing. A higher risk score indicates a greater potential for bad outcomes, while a lower score suggests a lower level of risk.
  8. Implement mitigation strategies. Based on the risk score and identified risk factors, develop and implement appropriate mitigation strategies to address the high-risk areas and reduce the overall risk exposure.
  9. Regular review and update. Revisit the risk score from time to time (say, annually or quarterly) to reflect recent changes in your business environment, risk factors, and the effectiveness of your risk mitigation efforts.

Key Components of Calculating Your Risk Score

The key components of calculating your risk score include:

  • Risk factors. Identify the specific risk factors relevant to your situation or business. These factors could include cybersecurity threats, financial risks, operational challenges, regulatory enforcement risks, and more.
  • Metrics. Define the metrics that will be used to quantify the extent of risk for each factor identified in the previous step. Establish a baseline of data or reference point to compare and assess changes in risk levels over time.
  • Rating scale. Create a rating scale to measure each factor’s risk level. This scale could be qualitative (low, medium, high) or quantitative (a scale from 1 to 10). The rating scale helps to standardize and compare risk levels consistently.
  • Risk thresholds. Establish risk thresholds or acceptable levels of risk for your business. These thresholds help determine whether the risk score falls within an acceptable range or requires immediate attention and mitigation efforts.

Common Risk Scoring Methodologies

Below are the three risk scoring methodologies.

  1. Qualitative Rating

    The qualitative rating is a risk-scoring methodology that relies on subjective judgments and descriptive terms to assess potential risks.

    In this approach, risk assessors evaluate risk events based on their expertise without assigning specific numerical values. They use predefined criteria and qualitative scales (low, medium, high) to rate the likelihood and impact of identified risks.

    Security teams typically use this method when dealing with new risks, or when there is a lack of historical data to perform a more quantitative analysis.

  2. Semi-Quantitative Rating

    The semi-quantitative rating is a risk scoring system that combines qualitative and limited quantitative elements. Risk assessors assign numerical values to predefined qualitative ratings, allowing for a partial quantification of potential risk.

    For example, they might use a scale of 1 to 5 to rate the likelihood and impact of risk events, and then multiply these values to derive a semi-quantitative risk score.

  3. Quantitative Rating

    Quantitative rating uses a fully numerical, data-driven approach to assessing risks.

    In this method, security teams use historical data, statistical analysis, and probability distributions to estimate the likelihood and impact of risk events. A precise risk score is calculated by assigning numerical values to different risk factors and using mathematical models.

    This method is particularly beneficial when dealing with well-understood risks and when sufficient data is available. It provides an objective assessment, allowing organizations to make more informed decisions regarding risk management and resource allocation.

Manage and Mitigate Risk with the ROAR Platform

To manage risks effectively, you need robust risk management software such as the RiskOptics ROAR Platform. The ROAR Platform is a comprehensive and unified cybersecurity risk management solution with powerful tools (real-time risk monitoring, automated workflows, and cross-object risk scoring) to guide you through the entire risk management process, from assessing risks to monitoring them continuously.

Schedule a demo to see how ROAR gives you the visibility required to assess your current risk posture and improve your risk profile.