Now Is the Time to Introduce Cyber Risk Quantification. Here’s Why.

It’s 2024, and the board is asking questions.

By 2024, cyber risks have become a central topic of board-level discussions, causing organizations to shift their perception and approach to security challenges fundamentally. According to the Allianz Risk Barometer of January 2024, cyber risk now claims the top spot as the number one global risk for companies of all sizes. With ransomware alone projected to cost victims a staggering $265 billion annually, it’s evident that traditional approaches to risk management are no longer sufficient.

The same forces making cyber risk more of a topic in executive circles are also changing the role of the CISO. Previously, the role of the CISO was primarily technical, but now it is evolving into a business-focused position where technology is just one factor to consider. While this poses a challenge for CISOs, it also presents an opportunity for career growth.

Qualitative risk management isn’t enough anymore.

Despite the growing awareness of cyber risks, many organizations continue to rely on qualitative methodologies characterized by subjective estimates and simplistic risk ratings like red, yellow, and green. However, these approaches are marred by significant limitations:

1. Subjectivity: Risk ratings are heavily influenced by individual experience and perception, leading to inconsistent evaluations across different stakeholders.
2. Lack of consistency: Different evaluators may arrive at disparate conclusions about the same risk without a universal measurement standard, impeding effective decision-making.
3. Risk inflation: Under qualitative models, there’s a tendency to overestimate risks, driven by a cautious approach to risk management.
4. Difficulty in prioritization: The crude granularity of qualitative risk scales, coupled with varying interpretations, makes it challenging to prioritize risks effectively, often resulting in an overwhelming backlog of “red” risks.

Let’s talk about money.

Cyber Risk Quantification (CRQ) represents a paradigm shift in risk management, where cyber risks are expressed in monetary terms such as Euros, Dollars, or Pounds.

The adoption of a quantitative approach to cyber risk management offers considerable benefits:

1. Universality: Money is the universal language of business, making cyber risks more comprehensible to stakeholders beyond the technical realm.
2. Comparability: Expressing risks in monetary terms enables direct comparisons between different risks, facilitating more informed decision-making and resource allocation.
3. ROI calculation: Quantifying cyber risks empowers organizations to calculate the Return on Investment (ROI) of security investments, enabling a more strategic and cost-effective approach to information security.
4. Boardroom influence: By translating cyber risks into financial terms, CRQ enhances the CISO’s ability to communicate effectively with the board and garner support for critical investments and initiatives.

That’s it for day one of this introduction to CRQ. Now you know why organizations should evolve from a purely qualitative approach to risk management to a quantitative one.

Tomorrow, we will dive deep into the specific use cases in which cyber risk quantification can support your organization.