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Risk management is a key part of any cybersecurity maturity model, from ISO 27001 and HITRUST to SOC 2 and NIST CSF. Unfortunately, many frameworks only outline broad requirements for carrying out risk assessments, with few instructions on calculating the impact of threats to your operations. To make more strategic decisions, a growing number of enterprise-level businesses are turning to cyber risk quantification models.
Cyber risk quantification is a risk analysis method that translates cybersecurity risks into measurable business statistics. CRQ models usually express risk exposure in terms of monetary losses.
For example, the average cost of a data breach in the healthcare industry in 2023 was approximately $9.75 million. For banks and financial institutions, the average is $6.05 million.
CRQ also works with other types of quantifiable business impacts:
Using well-defined costs to analyze risk events can help you determine which vulnerabilities have the largest impact on your organization’s financial health and continued operations.
CRQ models always require quantifiable metrics. They only work with loss-based risks that you can define as a percentage or a monetary value, such as:
Of course, some values are subjective, relying on an expert’s interpretation of your business data. Still, these judgment calls should be backed by reliable loss records, such as comparative analysis of industry trends.
What CRQ can’t do is assign costs to qualitative risks, such as:
Trying to turn “low-risk,” “medium-risk,” or “high-risk” scenarios into concrete percentages is a guessing game at best. It doesn’t work with the precise nature of CRQ applications. This is the main difference between a risk quantification framework and NIST 800-30 assessments.
There are several ways to calculate the financial costs of cybersecurity threats. The model you choose depends on whether you’re calculating risk for a single risk event or your entire organization.
A high-level model looks at event probabilities and event impact to determine overall risk costs:
For example, if your organization has a 40% chance of suffering a ransomware attack in the next year, and the average cost of this type of attack is $5 million, then the risk quantity would be $2 million.
Calculating the likelihood of an event is easier when you have a lot of historical data to rely on. Otherwise, you need to weigh a range of factors, such as how exploitable the vulnerability is, how effective your security controls are, and how easy it is for bad actors to access the affected systems.
Some third-party CRQ assessments calculate risk percentages by measuring three pillars:
Adding resilience to the mix can help you account for your current cybersecurity protections and calculate the value of investments.
Most frameworks lack a standardized method of calculating the financial cost of cyber risks, providing only general indications. The Factor Analysis of Information Risk model was designed to get around these limitations. FAIR applies standardized definitions and risk quantification calculations.
The FAIR model breaks down every risk calculation into its contributing parts, allowing for more precise assessments:
All of these elements are quantifiable with enough data. Even threat capabilities can be assigned a percentage based on attacker skill level and success rates. Nation-state threats have a greater likelihood of succeeding because of superior skill and access to more resources and technology.
The more data you have for risk assessments, the more accurate your estimates become. The best source of risk data for your organization comes from internal records. This information applies directly to your company’s unique profile, reducing subjective conclusions.
What if you don’t have enough data on specific risks to look at? CRQ can still work. You just need to look at high-quality resources:
Some enterprises also use cost data from insurers, but you need to exercise caution. Estimates from organizations that benefit financially from adverse events can be inflated.
Between internal resources, external consultants, and technology support, in-depth cyber risk quantification initiatives can carry a significant price tag. There are at least five reasons why the costs are worth it.
For many CISOs, getting budget approval for key cybersecurity resources is challenging, to say the least. Most organizations are willing to increase spending after a data breach, but by then, the damage has been done.
On average, infosec budgets increased by less than 10% in 2024. That doesn’t keep pace with the rapid increase in cyberattacks. Ransomware attacks increased nearly 70% in 2023.
CRQ assessments can be a game-changer. They allow IT professionals to speak in the board’s “language.” Assigning specific financial costs to inaction can provide the impetus needed for investment in cybersecurity personnel, technology, and compliance efforts.
Organizational leadership and cybersecurity stakeholders often have a fundamental disconnect — unless IT teams have executive buy-in. C-suite decision-makers tend to take a short-term, profit-oriented approach to business investments, especially in publicly traded organizations. Process owners prefer long-term solutions instead.
By focusing on quantifiable risks, cybersecurity professionals can convince executives that strong defenses are cost-effective and good for the organization’s financial health. Vaguely talking about “reputational risks” or “unauthorized access to customer data” doesn’t have the same impact as showing exactly how severe losses will be in the event of a breach.
Trying to shield operations from cyberattacks and insider threats isn’t easy for large organizations. Countless factors can introduce vulnerabilities into the complex networks, apps, platforms, and computer systems that enterprise-level businesses rely on every day.
Finding the ideal path forward without sufficient data can feel like picking a horse to bet on with your eyes closed. Data-driven risk management evens the playing field. Accurate cyber risk calculations help you make smarter decisions:
Nothing is a sure bet in today’s environment, but the law of averages hasn’t changed. When you have the numbers, you can “rig” the table in your favor. Good decisions — like network segmentation, monitoring, and breach mitigation strategies — can significantly reduce the financial cost of cybercrime even if the worst happens.
Another benefit of using CRQ to determine financial specifics and risk percentages is that it creates a trustworthy baseline that you can measure performance against. Spending a lot of money hiring information security professionals is essentially a waste if employees aren’t actually following company standards for data security.
Similarly, cyberattack readiness plans may look good on paper, but how well are they faring against recent intrusions and malware attacks? Comparing your organization’s CRQ assessment against current trends can highlight weaknesses or indicate the need for updated risk management approaches.
Conventional enterprise risk management frameworks take a top-down approach to vulnerabilities, risks, and threats. Integrating governance, risk policies, and cybersecurity controls across your organization is a good thing, but it can lead to “non-secure compliance” if you’re not careful.
This is where enterprises technically comply with regulatory standards but have significant breaches in practice. A common example is an encryption pipeline that is vulnerable to man-in-the-middle attacks.
Cyber risk quantification methods allow for a middle-out approach instead. This brings together the enterprise-wide advantages of top-down governance with the practical benefits of bottom-up touchpoints and stakeholder feedback.
Middle-out risk management starts with the right people, such as a CISO, compliance team, or enterprise cybersecurity team. It can also be project-specific. Both strategic risks and ground-level trends are factored into decisions, improving compliance and real-world data security simultaneously.
Enterprise risk frameworks are most effective when they’re ongoing, evolving initiatives. To benefit from cyber risk quantification, your organization needs to use the data to continually strengthen cybersecurity and compliance. State-of-the-art compliance tracking and automation platforms are an ideal solution. Discover how Compyl can help streamline risk management and improve your data gathering capabilities.
