Cyberattacks are constantly on the rise and this is something that most businesses are aware of. For this reason, there is an increasing need for cyber risks to be measured and reported in financial terms. Business leaders want to know more about the risks they face and the potential costs. Therefore, CISOs should start working with Cyber Risk Quantification (CRQ).
What is cyber risk quantification (CRQ)?
Doing cyber risk quantification means prioritizing risks based on their potential for financial loss, allowing a company’s managers to create budgets based on mitigation strategies that provide the best protection and return on investment.
In a CRQ, you look at the economic impact of cyber risk on your business, but also on more intangible but fundamental areas like customer satisfaction, employee engagement, reputation management, brand protection or supply chain management. All of these risks will cost you money in the end.
First you need to do a risk analysis
To be able to quantify the cyber risk, you must do your risk analysis. This identifies the risks your organization is currently exposed to. The goal of risk analysis is to be able to finally apply the right risk reduction measures needed and create a safer business where the focus is on the right places.
Read more about risk analysis in our blog post!
How to do a cyber risk quantification
Once you have identified your risks, you need to put all this information together to understand the types of cyber events you might face and how this can translate into monetary impact. This includes mapping the cost components of different events to understand the different types of financial impacts that may occur.
The cost of risk is the probability of a certain consequence multiplied by the cost of that consequence. Thus, for a consequence that would cost the firm or organization 1 MSEK and has a probability of once every ten years, the cost of risk is 100,000 SEK/year. The protection for this particular risk should then not exceed this amount.
When performing this quantification, it is important to remember that a cyber event that results in business interruption can incur expenses in many areas. An example is public relations, where costs to minimize any reputational damage that may occur is a possible additional cost that you should put into your quantification. A cyber event can also result in lost revenue due to the inability to operate the business as usual during this downtime, and this cost should also be included. Understanding these different cost drivers is necessary to gain a full understanding of a company’s exposure, as well as to then determine a cost breakdown by event by modeling the impact that a specific type of event is likely to have. to have on an organization.
It may sound complicated, but considering the likelihood and financial impact in this way is not something unique to cyber risks, it is the same method used to discuss other risks to a business or a organization.
What are the benefits of the CRQ?
When you work with Cyber Risk Quantification, you get a better understanding of the costliest risks facing your organization. You will know where to invest, how much to invest and what type of protection you will need.
This means that the security team can align their efforts and prioritize the most important risks rather than devoting resources to less important and lower priority risks. Their focus will be to ensure that the business has sufficient protection and processes in place to defend against more costly risks and make additional investments if necessary.
By quantifying cyber risk, you will also have the basis for discussions across the organization on how and what the organization can do to increase its cyber resilience. This will help the organization realize that the fight to protect against cyberattacks is not just the responsibility of the IT department, but the responsibility of the entire organization!
If you want to know more about cyber risk measurement, read our Know-how section on the risks.
To find out what solutions might work for you, you can also check out our guide “Are you sure you are safe “.