Integrating High-Level Risk Management and Cyber Security

‍TL;DR

• Business leaders know that managing risk effectively is an essential part of running a successful business. They do so by assessing internal and external vulnerabilities and developing appropriate risk mitigation and transfer strategies.
• Although cyber risks are newer than other forms of business risk, they likewise need to be managed at the highest organizational levels, especially considering their propensity to cause far-reaching financial consequences. 
• Cyber risk management involves identifying, evaluating, and subsequently mitigating relevant threats proactively by leveraging historical data and objective information about the cyber risk landscape. 
• Cyber risk quantification (CRQ) helps to facilitate this management, translating complex cyber risk terms into a broader business language and allowing management tactics to be discussed by all key stakeholders and aligned with the broader business mission. 
• Ultimately, effective cyber risk management should be an organizational effort. Without the support of C-suite executives and board members, the enterprise will remain unnecessarily vulnerable to the inevitable cyber event. 

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Translating Cyber Risk Into Tangible Terms for Effective Management

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Successful entrepreneurs all have one thing in common: they know how to manage business risks effectively, even as they evolve. Since the inception of the modern marketplace, and arguably before, innovative leaders have been able to assess their organizations' internal and external vulnerabilities and develop mitigation strategies accordingly.

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Some of these corporate threats, such as strategic, reputational, and environmental, have existed for hundreds of years, allowing executives to come to a general agreement on the optimal ways to address them. For example, nearly all companies across industry and revenue bands have opted for third-party transfer as their chosen method for managing general liability risks.

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However, there is less of a shared understanding about how to address other, newer forms of business risk, such as cyber. Around for merely a few decades and morphing at a rate faster than anticipated, cyber risks are presenting obstacles not only for chief information security officers (CISOs) but also for other key stakeholders needing to incorporate them into overall risk management strategies.

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Often making matters more complicated is the complex, technical jargon that surrounds cyber security, likewise resulting in crucial issues being excluded from high-level meetings. 

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To combat this issue, CISOs and other cyber leaders need a way to translate this unfamiliar language into broader business terms, ensuring it can be meaningfully discussed, appropriately managed, and consequently contribute to overall growth. With on-demand cyber risk quantification (CRQ), they finally can.

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What Is Risk Management In Cyber Security?

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In the corporate realm, general risk management is the systematic process of determining events likely to cause business harm, evaluating their potential impact, and subsequently investing the resources necessary to minimize them, both in likelihood and severity. When applied within the cyber context, it specifically involves an organization's digital assets and information systems. 

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Cyber security risk management enables CISOs and other cyber security professionals to take a proactive, data-driven approach to digital threats, as opposed to investing available resources into attack containment after the fact. Such a strategy thus relies on leveraging historical, objective information to generate a data-driven picture of the risks an organization is likely to experience in the near future. 

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Assessing Cyber Risk Likelihood and Severity

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Before cyber risks can be managed, CISOs, of course, need an understanding of the types of risks their organizations face, the respective likelihoods of experiencing various events, and the projected severity should such a scenario occur. To gather this data, cyber security leaders will typically adopt one or more types of cyber risk assessment, for instance, a

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• Vulnerability evaluation
• Penetration test
• Threat intelligence assessment
• Business impact analyses
• Third-party risk management assessment

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After the assessments have been conducted, the results will need to be considered in combination with the business’s unique cyber risk landscape, based on factors including, but not limited to, industry, revenue, number of data records, and location. This information is usually then documented within the company’s risk register, enabling risk managers to systematically compile a risk mitigation plan.

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However, it’s important to note the variations between the available assessment methodologies. Some rely heavily on manual data gathering and expert input, such as FAIR, and are, therefore, subjective in nature. Other methodologies harness objective, real-world information to sharpen the accuracy and precision of the results.

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While the different approaches all have advantages and disadvantages, subjectivity often leads to skewed conclusions, which, in turn, leads to cyber security programs that overlook potential severe risks. Ultimately, the aim of these assessments is for CISOs to be able to develop overarching strategies that ensure cyber resilience while simultaneously optimizing limited budgets and resources.

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The Power of Cyber Risk Quantification (CRQ)

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CRQ combines many of the various risk assessments, analyzing the most pivotal components of cyber risk and offering a comprehensive evaluation of the events and loss scenarios an organization is likely to experience, as well as the potential respective severity of such occurrences. Moreover, on-demand CRQ harnesses objective global intelligence, ensuring results accurately reflect the current risk landscape. 

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With CRQ platforms like Kovrr’s, CISOs have quick access to their likelihood of experiencing specific events, such as a ransomware attack, business interruption, and data breach, within an upcoming year. By performing an outside-in and inside-out analysis, Kovrr’s solution also reveals, on average, how much the organization is likely to suffer financially should that event occur.

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For example, as presented in the figure above, eMerchify faces a 6.74% likelihood of experiencing a ransomware attack within the next year. Should such a scenario occur, business leaders should expect to lose, on average, $4.18 million. This insight alone offers the company’s cyber risk manager valuable insights that will undoubtedly guide mitigation strategies regarding a ransomware incident. 

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Learn more about how Kovrr performs its cyber risk quantification analyses by leveraging Monte Carlo simulations. 

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The Three Cyber Risk Management Techniques 

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Once all of the potential risks have been thoroughly identified and analyzed according to likelihood and potential severity, cyber risk managers have to decide the best course of action for addressing them. Typically, these business leaders will pursue one of the three most common risk management tactics: acceptance, transfer, or mitigation. 

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Acceptance: Acceptance or absorption refers to the informed decision to do nothing. This option is typically chosen when the forecasted consequences of the scenario do not outweigh the costs it would take to alleviate them otherwise. With this tactic, executives are communicating that the specific risk in question is low-priority and unlikely to cause any significant hindrance to business growth.

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Mitigation: Mitigating cyber risk is where the bulk of the cyber security department focuses its energy. It involves investing resources in security control upgrades, deploying new tools, reducing data-sharing capabilities, or creating new internal policies to reduce the likelihood of vulnerability exploitation. Mitigation initiatives, when pursued, are often prioritized according to the average reduction in financial exposure they’ll deliver or for compliance reasons.

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Transfer: Risk transfer is the choice to commission the specific risk to a third party. The most common example of risk transference is adopting an insurance policy. Ideally, premiums are less expensive than the price of mitigating the risk internally, and if a cyber event occurs, the insurance company will cover the majority of the costs. The transfer provides organizations with a financial safety net, allowing them to focus on the third risk management strategy: mitigation. 

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Aligning Cyber Risk Management With Broader Organizational Goals 

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Before any finalization, CISOs must meet with C-suite and board members to ensure that cyber security strategies align with corporate aims. Only with this mutual understanding can cyber security leaders determine the optimal course of action. For instance, stakeholders may determine that a cyber risk initially deemed severe enough by the CISO to mitigate may actually fall within the company's risk appetite levels and is, therefore, better to be absorbed.

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Thus, this alignment process ensures that resources are distributed optimally. However, it also requires that cyber executives translate complex metrics and KPIs into terms that are more universally familiar, allowing everyone to tangibly understand the potential value that cyber security initiatives are bringing to the business.

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CISOs should likewise be able to highlight that, in addition to creating a safer digital environment, cyber investments also contribute to growth and profitability. When these leaders demonstrate that they've considered their department's aims within the context of the organizational structure, they're much more likely to obtain the resources and budgets necessary for the robust programs they want to pursue.

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Adopting a Shift Up Strategy for Strategic Alignment

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One practical approach to achieving this alignment between cyber risk management programs and higher-level corporate aims is to adopt a Shift Up Strategy. This innovative approach to managing cyber risk involves leveraging on-demand CRQ to translate complex, esoteric terms and KPIs into a broader business language. 

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Only once all stakeholders, technical and non-technical alike, have a tangible understanding of how cyber risk can potentially affect the organization can critical cyber security matters be meaningfully discussed and incorporated into high-level operational processes. 

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Furthermore, by facilitating this collaboration, a Shift Up Strategy significantly aids CISOs as they develop their cyber security programs. Knowing that key stakeholders have a tangible and financial understanding of what’s at stake vis-a-vis the organization’s digital operations, the cyber security leader can more easily communicate why certain initiatives are essential for business success.

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To learn more about the Shift Up Strategy and how it supports organizations in aligning cyber risk management with underlying business goals, contact one of our experts today. 

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Looking Toward the Future: Evolving Trends in Cyber

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After cyber risk programs have been effectively aligned with the corporate mission and approved by all key stakeholders, CISOs can start implementing the relative mitigation initiatives. At the same time, it’s crucial for cyber security leaders not to become too complacent. The cyber risk landscape evolves continuously, with the ever-increasing sophistication of cyber threats and new regular compliance requirements being enacted.

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Cyber security leaders need to be aware of these emerging trends and adjust strategies accordingly. In fact, it’s recommended for cyber executives to review their company’s risk landscape, at minimum, on a quarterly basis, ensuring that any updates to the organizational structure or cyber security posture have been well accounted for.

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A Non-Negotiable Bond Between Risk Management and Cyber Security

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While many individual organizations still leave cyber security as an isolated business function, the global marketplace is generally starting to recognize the direct and positive correlation between cyber risk management and company success. 

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In fact, effectively managing cyber risk is wholly indispensable, as experiencing a breach is almost certainly a matter of “when” and not “if.” By translating their company’s cyber risk into broader business terms, CISOs can help ensure that organizational leaders have a tangible understanding of the resources necessary to achieve high-end resiliency.

To learn more about how CRQ can transform complex cyber risk metrics into a language that can be elevated to the highest levels, allowing stakeholders to embed it within organizational processes, contact a Kovrr expert or schedule a free platform demo today.