Risk is part of our everyday life. Whether you're an adrenaline seeker who pushes the boundaries of what's possible or someone who prefers a warm drink and a good book - there is risk in nearly everything we do. The decision we all make at some time or another is how to deal with the risks we face.
Risks can be found in all industries. Examples of other types of business risks include compliance risk, political risk, inflationary risk, and interest rate risk. While risks are not unique to cybersecurity, they are significant in determining how cybersecurity processes should be managed.
The best way for organizations to protect themselves against these cyberattacks is to implement cybersecurity measures specifically modified to protect the organization. Cyber security risk management is a strategy that aims to deal with cybersecurity threats that might negatively impact a business's operations.
What is Risk?
Risk is quantitatively defined and used to determine what plans of action are necessary when it comes to cybersecurity. The most commonly used formula for risk in cybersecurity was the following.
Risk = Probability x Impact
This formula shows that risk is heavily dependent on how great of a negative impact the event will have. The cyber security formula for risk is vastly different from the formulas used in other fields such as business. According to Damodaran, a professor at NYU Stern business school, risk is defined as:
Risk = Danger & Opportunity
In terms of business, risk is determined by both positive and negative results. This is important because it helps those in business determine what risks are worth taking since the opportunity may be greater than the risk. While cyber security risk management is about creating an unbiased way to analyze risk, the business formula for risk allows the formula to be subjective.
What is a Risk Assessment?
Risk assessment is how your team will define the levels of risk and determine which risks are worth acting on. For example, your team will need to decide if they want to use qualitative or quantitative risk assessments. In addition, your business's risk assessment method must be standardized. If the business judges each risk on a different scale, there will be many holes in your cybersecurity.
What is Cybersecurity Risk Management?
Cyber security risk management is a specific process that responds to threats based on seriousness. The method identifies possible risks, analyzes the severity, evaluates how the risk fits within your acceptable level of risk, prioritizes high risks, and addresses threats in a timely manner. The process involves:
- Identify possible risks that may affect your business.
- Analyze the severity and likelihood of each risk.
- Evaluate each risk to see how it ranks on your predetermined level of acceptable risk (risk appetite).
- Prioritize the most dangerous risks.
- Respond to the risk appropriately with one of the four methods; avoidance, acceptance, transfer, or reduction.
- Monitor your risks repeatedly to ensure your process is still up to date.
Identifying Cybersecurity Threats
When you think of your business or organization, do you know what happens to the data you are in contact with? Is it stored in a specific server room? Or is it on the cloud being accessed through mobile by all your employees? These are important questions to start off with to help identify the risks that your business is vulnerable to.
What Are Your Assets?
Assets in the field of cybersecurity are valuable to a business. Therefore, thinking about what assets your business has that could be attractive to cybercriminals is one of the first things you should do during risk management. Assets are typically grouped into categories such as hardware, software, data assets, and intellectual property assets.
You can find what your business holds by documenting all electronic devices, listing data types, and what departments access the system. It is also important to note whether or not you store information in the cloud. Cybercriminals tend to target customer data, so it is likely your most valuable asset at risk.
Analyze the Risks
The next step in cybersecurity risk management is to analyze the possible damage that can be done if the assets are stolen. Once all of your assets are determined, it is important to list each risk's impact and the likelihood of being compromised. Analyzing the risks will help you determine which part of your business needs to be secured first.
How Comfortable Are You With Risk?
Once you know your company's risks, you will need to compare them to your company's predetermined levels of acceptable risk. This will help you prioritize each risk and what you should do to solve the issues.
What Is a Risk Appetite?
The risk appetite is the level of risk a company is willing to take on. The risk appetite is predetermined. Once the risks are identified, they are compared to the risk appetite to help decide how to deal with each of the risks. Risk appetite is typically dependent on the company's industry, culture, competitors, and the objectives they are pursuing. Since the risks change, it is crucial to modify the risk appetite to keep it updated.
Prioritize the Risks
The most dangerous risks to your company can now be prioritized in the cybersecurity risk management process. These risks should be tended to first. You can start to make changes to your security system at this stage. You should also test them to make sure any changes you have done work. This is also important to ensure the changes don't accidentally take away from a defence system currently in place.
How Can You Manage Risk?
Each identified cyber risk will need to be dealt with in one of four ways. The following solutions are listed below.
- Risk avoidance - When the identified risk exceeds the risk appetite, they will eliminate the risk.
- Risk transfer - This risk reduction method moves the risk to a different party - like an insurance company.
- Risk reduction - This plan of action simply reduces the impact or possibility of a risk.
- Risk acceptance - Understanding the risk could be bad and accepting the possible consequences.
Risk avoidance is a strategy that minimizes risks by not performing the activities that may be considered risky. The simplest example of risk avoidance is to decide against running across a busy road without looking both ways. Another example is when people believe bungee jumping is a risk to their health and decide to avoid doing the activity.
These examples of risk avoidance can be applied to most industries, such as the financial industry. For example, if an investor finds a company's stock too risky, they may avoid buying it. Risk avoidance guarantees that no risk will damage the company in any way.
A risk transfer is when the risk taken on by a company is passed to a third. This allows the responsibility to be shifted to the third party. Risk transfers typically involve injuries and property damage. The most popular form of risk transfer is insurance.
Insurance companies are third parties that get paid to take on the negative impacts of risks in unforeseen situations. Another example of risk transfer is when an apartment complex hires a security company to ensure the safety of the residents. If the security guard neglects his post and there is a robbery at one of the resident's homes, the individual could sue the security company rather than the apartment complex.
In everyday life, there are always risks. However, most of the time, something can be done to lower the consequences. Risk reduction reduces the possibility of severe loss while participating in an activity.
There are two main ways that risk reduction can work. The first is to take precautions to reduce the chance of the risk happening. An example of this would be to use the headlights on your car so that you can see better at night and reduce your chances of crashing. The second method that helps risk reduction is to reduce the change of a severe impact if the risk were to happen. This would be like wearing a seat belt so that you do not get as injured in a car crash or getting a vaccine to lower the effects of diseases.
Risk reduction allows for the possibility of gaining some positive benefits from taking on risks while lowering the chance of a severe loss. Changing the ways risk is managed would reduce the likelihood, danger, chance that something terrible happens.
What Is a Security Control?
A risk control or a security control helps improve companies' cybersecurity by defending against hacking, data loss, and online threats. act as a security framework for the company. This makes it easy to conduct cybersecurity risk management every once in a while. Risk control is a great starting point for cybersecurity. However, it cannot be the only way of thinking about risk as there may be some residual or inherent risk that cannot be controlled.
Risk acceptance is when the risk exposure has been considered to be an acceptable level. This can be because the level of risk is highly insignificant compared to the benefit of taking on the risk. Ultimately risk acceptance is the final step of all risk management. Your business must decide if the company accepts the risk based on the expected returns and all the partial transfers or mitigations. If not - and the risk is unpalatable - then the only way is to avoid the risk in its entirety and simply not undertake the activity. An example of risk acceptance is if a snowboarder has a 20% of getting a broken bone when snowboarding. Still, they decide the risk of getting a broken bone is worth the reward of snowboarding.
A Final Thought
As cyber threats are constantly changing, it is important to note that cyber risk management is a continual process. You need to review this process periodically to ensure your company's data is secure. Monitor your risks at least every 6 months so that your cybersecurity is not out of date.