Organizations constantly face new tactics from cyber criminals who aim to compromise their most valuable assets. Yet despite evolving techniques, many security leaders still rely on subjective terms, such as low, medium and high, to communicate and manage cyber risk. These vague terms do not convey the necessary detail or insight to produce actionable outcomes that accurately identify, measure, manage and communicate cyber risks. As a result, executives and board members remain uninformed and ill-prepared to manage organizational risk effectively.
At the same time, executives are feeling increasing pressure to improve cybersecurity programs with the rise of newly adopted U.S. Securities and Exchange Commission (SEC) regulations, which require publicly traded companies to rapidly disclose cyberattacks and material information about their cybersecurity risk management, strategy and governance.
Cyber risk quantification (CRQ) has emerged as the most effective way to maximize cyber risk management programs by translating cyber risk into specific financial impacts. According to Forrester Research, “CRQ will fundamentally revolutionize the way that security leaders engage with boards and executives to discuss cybersecurity.”
Reporting cyber risk to executives and boards of directors
News headlines of cyberattacks and zero-day vulnerability exploits have become typical conversation topics in boardrooms. In fact, cyber risk has become one of the top five risks facing organizations. In today’s world, it is essential for security leaders to communicate cyber risks to their boards in a clear, concise and understandable way. Often, cybersecurity reports are filled with too many technical details, hindering executives from making well-informed decisions and accurately assessing the cybersecurity risk landscape. This can lead to confusion and subjective decision-making.
By operationalizing CRQ, security leaders can provide executive-level reporting that communicates the financial impacts of cyberattacks targeting vital business assets, leading to disruptions in operations, system outages and reduced production and costs associated with recovery.
Put simply, cyber risk is a business risk and should be communicated in business terms. Using the outputs of a CRQ program, leaders can drive alignment with their boards and executive teams and improve their overall risk reduction strategies and investments.
Security spend optimization
Security executives feel pressured to increase protection measures and reduce risk in the most cost-effective way, taking into consideration economic constraints and limited budgets. However, traditional decision-making methods often rely on subjective information, making it challenging to objectively justify previous or upcoming security investments. Operationalizing CRQ adds objectivity to the decision-making process. It enables organizations to optimize cybersecurity programs and tool investments by prioritizing spending based on financial risk reduction and maximizing return on investment (ROI).
Without first quantifying the risks in the context of the current security control posture as a baseline, organizations cannot accurately quantify the effectiveness of their security initiatives or determine their next investment. Understanding the organization’s financial risk exposure allows security leaders to focus on areas with the most significant risk reduction opportunities and prioritize security initiatives that align with the business to better mitigate the most significant risks facing the business.
Enterprise risk program development
To provide decision-makers with an overall organizational risk profile, cyber risk must be fully integrated into the overall enterprise risk management (ERM) program. However, this is only possible by understanding the financial implications of cyber threats so that organizations can align their risk mitigation efforts with business objectives and enhance overall organizational resilience.
Historically, many organizations have developed independent risk management procedures, including ERM, cybersecurity risk, operational risk and compliance and IT risk. CRQ is becoming a best practice among leading organizations to develop and operate effective risk management programs, re-vamp risk scoring and integrate ERM procedures. Leading organizations that have leveraged CRQ to improve their management processes have developed a single, integrated operating model for risk management. This allows for better analytics to identify and track trends across lines of business or functional areas, as well as systemic risks to the organization.
While this requires a fresh approach to thinking about risk management, incorporating several risk management functions, the result is a standardized, consistent and well-understood risk identification, analysis and reporting process. CRQ provides the organization with a singular definition of risk and removes any uncertainty about how to report risks to leadership and the board. By reporting risks in terms of business impact and financial exposure, CRQ removes the subjective interpretations that rely on nominal scales or color codes.
As one chief risk officer recently shared, “We noted that many risks stemming from different lines of business are similar in nature and share common root causes. Using a singular risk management evaluation process allows us to identify expected impacts quickly and, more importantly, leverage proven mitigation approaches to address those risks.”
As companies continue to mature their cyber risk capabilities by adopting CRQ, they should consider incorporating CRQ into other risk functions and work towards adopting an integrated risk management operating model.
Getting started with cyber risk quantification
Whether you are trying to stay ahead of regulations, reacting to a cyber event or being proactive, adopting CRQ can help your organization improve cybersecurity reporting, optimize budgets, create risk-based security roadmaps, prioritize vulnerabilities and enhance ERM. By doing so, security leaders enable their executives and board members to make well-informed, risk-based and financially responsible decisions when it comes to risk.
Organizations can take simple steps to make progress on this journey. We recommend starting small, picking one or two use cases that best align with your organization’s security goals and integrating CRQ into business processes that drive actionable results.
If you would like to learn more, please contact Randall Spusta ([email protected]) at IBM or Cary Wise ([email protected]) at ThreatConnect, and we can assist you in operationalizing CRQ for your organization.
Watch this on-demand webinar for a deeper dive into these real-world CRQ use cases.