Implementing cybersecurity risk management into business initiatives has become imperative since ~60% of risk executives continuously ranked cyber threats as one of the top five threats for the current and upcoming three years.1
These threats can bring down infrastructure or cause vulnerabilities in various ways, which might result in lost profits, stolen data, reputational harm, and penalties from the authorities. Today’s businesses need to understand cybersecurity risk management to be aware of potential risks.
This article aims to provide a guideline for IT and security risk professionals about cybersecurity risk management, its benefits, and use cases to address the complexity of their operational environments.
What is cybersecurity risk management?
Cybersecurity risk management is the process of detecting, classifying, controlling, and monitoring information system risks to protect information networks from cyberattacks and other virtual and tangible threats.
Why is cybersecurity risk management important?
Businesses now employ technology for everything from routine tasks to crucial business activities, which has led to an increase in the size and complexity of their IT infrastructure.
Read more: Top 10 insider threat management software.
The statistics show that there is an accelerating trend in the number of cyber risks:
- Threat analysts found that there were ~5.5 billion malware assaults in 2022 — a 2% rise from the previous year mostly caused by an ~85% increase in IoT malware and a ~45% increase in cryptojacking.2
- The (National Vulnerability Database) receives over 2,000 new vulnerabilities each month in the U.S.3
Companies may improve their security posture by managing and mapping their dynamic attack surfaces (e.g. by leveraging network segmentation, microsegmetation, and network security policy management) through the implementation of cyber risk management programs.
4 stages of cybersecurity risk assessment
Cybersecurity risk management has become a need for organizations since the average cost of a data breach increased to $9.48 million in 2023 from $9.44 million the year before in the U.S. 4
Leaders can foster an organizational culture that prioritizes cybersecurity and risk management activities in 4 stages:
1. Risk framing
Determining the whole scope of each evaluation is the initial step in the cybersecurity risk management process. The ideal course of action is starting with a certain location, company branch, or component. For instance, a single web server or order management app are examples of things to evaluate individually.
Each stakeholder within the scope of the evaluation should fully support the risk assessment process. Their opinions are essential for the following:
The scope of the procedure: Which resources and systems will be investigated? How long the risk assessment process will be carried on in terms of — and the timeframe for investigations will be scheduled (e.g. weekly, bi-weekly)?
Prioritization: What information, hardware, applications, and other resources are present in the system? Which business procedures and computer systems are vital for business operations? How should resources be prioritized?
Legal standards: What rules, regulations, or additional instructions should an organization be aware of while executing cybersecurity risk actions?
2. Evaluation of risks
Businesses employ cybersecurity risk assessments to rank the most important risks and evaluate threats, vulnerabilities, and impacts.
Figure: 5×5 risk matrix
Threats: Threats are individuals and situations that have the potential to breach cybersecurity, steal information, or harm a computer system. Malicious cyberattacks (such as phishing, brute-force, or ransomware attacks) and negligent staff errors (such as keeping private data on insecure databases) are examples of threats.
Computer systems can be affected by natural occurrences such as earthquakes.
Vulnerabilities: The weaknesses in a system, procedure, or resource that might be used by attackers to harm an organization can cause vulnerabilities. Technical vulnerabilities include things like an improperly set firewall that allows malware to enter a network that allows hackers to remotely take control of a device. Poor policies such as (weak password policy, or role-based access control (RBAC)) that grant users access to more resources than they require, can also lead to vulnerabilities.
This evaluation can be conducted by two methods: qualitative and quantitative.
The purpose of the qualitative risk assessment is to ensure that the risk supervisory group has an understanding of which elements in the organization are the most crucial. Using the project’s criticality scales as a guide, the risk assessor can order and classify each risk and opportunity based on the likelihood of occurrence and impact degree.
Assessing the likelihood of incidence (P): A measured on a scale of 1 to 99% and is ideally based on the risk expert’s knowledge and assumption.
For instance, the risk manager can conclude that there is a probability of 25% that “customer Bert will not be able to receive his spare parts for product XY by the end of 2026.” This might be found by examining the workload, inventories, supplier feedback, and production forecasts.
Assessing the degree of impacts (I): Estimating the degree of each impact that can be established at the project stage to calculate the total impact. To categorize the various effects and their degree of severity, a scale can be employed by the risk analyst. This guarantees a consistent evaluation of the risk elements.
The following formula determines a risk or opportunity’s importance level:
- How important is the risk = P x I
The purpose of the quantitative assessment is to provide an economic evaluation of the potential benefits of the effect of risk. These figures indicate possible expenses that were not factored into the budget.
To assess the expenses a financial review can be confused by examining the following:
- Internal man hours.
- Hours spent on sourcing the workforce.
- Contract claims.
Then risk experts can analyze these numbers and determine the cost of the risk impacts.
3- Responding to risk
Companies can decide how they will react to any threats based on the findings of the risk assessment. Certain risks that are thought to have a low impact could be allowed since the cost of installing security measures could exceed the risk involved. High-level risks that are more likely to occur and have more consequences will be addressed first.
Major risk reactions are:
Risk reduction: Risk reduction lowers the likelihood of an attack occurring or makes it more difficult to exploit a vulnerability (an intrusion prevention system (IPS) protecting important resources and putting incident response policies in place to address threats effectively).
Risk remediation: Remediation entails fixing a vulnerability completely to prevent its exploitation (e.g. patching an application).
Risk transfer: Risk transfer is an approach that allows companies to assign risks to third parties (purchasing cyber insurance coverage).
Risk monitoring is the evaluation of risks in an organization. By collecting data through automated or human means, risk monitoring activities contribute to the risk management strategy. The information is then alerted and reported using the data about:
- the leadership of risk control
- contributing to continuing hazards
- upgrading network security policies and creating new risk evaluations
The evolving causes of cyberattacks
First computer worm: In 1988, Robert Tappan Morris, a Ph.D. student at Cornell University, created the first computer worm known as the Morris worm.
First ransomware: Next followed ransomware, DDoS, and Trojan horse assaults, The 1989 AIDS Trojan, also known as PS Cyborg1, was the first known instance of ransomware created by Harvard scientists.
The growing usage of Internet of Things (IoT) devices is one of the major factors for growing cybersecurity risks. Because a company gains an additional potentially susceptible endpoint with each networked IoT device it creates difficulties in ensuring network security due to the complex device connections.
Remote access policies (ZTNA and VPN): The Bureau of Labor Statistics reported that about ~30% of American workers worked remotely, at least periodically in 2022.7 The use of remote workplaces has increased due to COVID-19 to the point that security concerns and capabilities have not kept up with the pace of technology. Several businesses are still catching up when it comes to reducing vulnerabilities in their wider networks.
Remote workers frequently utilize free wireless networks that are shared with outsiders and insecure devices, which increases the risk to enterprises from phishing, malware, and data breaches, among other sources.
Digitalization: Several businesses have been migrating to cloud-based systems and digitizing. Organizations’ attack surfaces rose significantly as a result of having many more digital assets, sometimes with no consideration given to how to protect them. Because of the quick change, some organizations may not be aware of the risks.
Cryptomining malware: The 2010s subsequently saw the rise of “cryptomining malware,” or “cryptojacking,” which is the practice of hackers using malware to systematically take over a machine’s processing capacity to use it to mine cryptocurrencies by solving difficult mathematical puzzles.
The usage of machine learning (ML) and artificial intelligence (AI) technology in cybersecurity will be increasing. Companies will heavily rely on chatbots and other automated IT tools in their operations. This might boost the volume and pace of their cyberattacks. For instance, hackers looking to launch social engineering attacks may find value in AI’s capacity for pattern recognition, or private information may be exposed by reverse engineering an AI system.
Methodology used for cybersecurity risk management
Vulnerability assessment: Examining the digital architecture of a company to find vulnerabilities. Vulnerability assessment entails routinely scanning systems, networks, and apps to identify vulnerabilities that hackers may exploit. When vulnerabilities are found, proactive mitigation can be done before malicious parties.9
Read more: Vulnerability management automation.
Penetration testing: Penetration testing methods use ethical hackers to simulate cyberattacks. It helps users determine the organization’s resilience to cyber threats by modeling actual assaults, pointing out possible avenues of entry, and evaluating the effectiveness of current defenses.
Scenario analysis: Scenario analysis is a tool used by companies for studying the consequences of cyberattacks on strategic goals. Companies are better able to identify possible risks and develop mitigation methods by modeling different attack scenarios and assessing the results.11
Risk evaluation models: Structured procedures for evaluating cyber risks are provided by frameworks like ISO 27001 and the NIST Cybersecurity Framework.12 13 Through an in-depth examination of their risk environment, these models assist companies in identifying vulnerabilities and quantifying possible impacts.14
Data analytics and machine learning: Organizations examine massive information using data analytics and machine learning to identify trends and anomalies that might be signs of cybersecurity risks. By enabling early identification of suspicious activity, these tools improve the organization’s capacity to react quickly to potential risks.15
Benefits of cybersecurity risk management
Companies can use cybersecurity risk management to build information security efforts on the risks, threats, and vulnerabilities to avoid putting costly security controls on non-essential and low-value resources and maintaining compliance standards.
Cost benefits: The average cost of a data breach as of 2023 was ~$9 million in the U.S.16 Cyber threats cost a significant amount of financial resources for businesses. Organizations can decrease the level of cyber incidents (e.g. data breaches) by detecting and remediating vulnerabilities. This will minimize the financial losses brought on by breaches, system failures, or fees from regulators.
Maintaining compliance standards: Companies may benefit from cyber risk management initiatives by adhering to rules such as the Health Insurance Portability and Accountability Act (HIPAA) and general laws GDPR, the SHIELD Act, and CCPA.17 18 Throughout audits and post-breach examinations, organizations can use reports and data produced during the monitoring stage to demonstrate that they exercised proper diligence.
Federal contractor companies may be required to adhere to mandatory enterprise risk management guidelines. For example, the 23 nycrr 500, NIST CSF, and NIST RMF are required for federal U.S. government entities to follow.19 20 21
The future of cybersecurity risk management
The cybersecurity risk management landscape is scheduled to grow and transform.
Growth: The number, expense, and effect of cyber attacks keep rising because of evolving cybersecurity technologies such as artificial intelligence (AI) and predictive analytics access organizational frameworks.
- The fourth quarter of 2020 saw the detection of around 125 million data sets.22
- The frequency of significant breaches experienced by evaluated companies has increased by 20.5% between 2020 and 2021.23
- In the first quarter of 2023, data breaches globally compromised over six million records of personal information, this is the greatest amount of exposed data records since the first quarter of 2020.24
- 40% of chief security executives paying more attention to and spending additional financial resources on cybersecurity than ever before stated their organization is poorly prepared for the constantly changing risk environment.25
Transformation: In the future, businesses will cultivate cultures that are cyber-resilient, with each employee to assess cybersecurity risk management initiatives.
Read more: Digital transformation.
- AI-powered solutions will increase: Businesses will use data-driven insights more often to forecast cyber threats, allowing for active risk reduction. By automated threat identification, AI-powered solutions will improve incident response by enabling quick and accurate responses to cyber-related incidents.
- Real-time monitoring techniques will enhance: Risk assessment techniques will change in the future, moving from static assessments to dynamic, continuous monitoring. Companies will be able to quickly detect new risks and weaknesses through continuous risk assessment, allowing risk management plans to keep up with the quickly changing strategic environments.
- Integration efforts will align with compliance needs: Integration efforts will become more closely aligned with compliance needs as regulations change. To ensure concurrent compliance and corporate resilience, companies will not only integrate risk management with their business objectives but also with constantly evolving regulatory frameworks.
- Crisis simulation: To improve incident response readiness and strengthen the relationship between risk mitigation and strategy execution, organizations will regularly run “crisis simulations” to evaluate the efficacy of their integrated risk management plans.
- Organizational shifts: More cross-functional interaction will be promoted by the integration process, which will go beyond conventional departmental silos.
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