Quantitative risk analysis predicts the likelihood and potential impact of attacks on your system. It illustrates in numbers what kinds of vulnerabilities exist and what threats they’re subject to so that you can prevent and mitigate risks more effectively.
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Risk Management Quantitative Analysis 101
Risk management is a suite of tools and practices organizations use to prevent, mitigate, and minimize risk. Quantitative analysis aids in this process by providing insights into the kind and amount of risks that need to be managed, in terms of their probability and likely expenses.
There are three primary areas to cover for a full understanding of quantitative risk analysis:
- What factors quantitative risk analysis comprises
- How to perform quantitative risk analysis effectively
- Which best practices optimize quantitative risk management
Working with a security program advisor will help you implement and leverage risk analyses and other prevention strategies for comprehensive threat and vulnerability management.
What is Quantitative Risk Analysis?
Risk analysis illustrates what risks exist and what kinds of impacts they could have on your organization if they materialize into incidents. Quantitative risk analysis uses numbers and figures to describe its findings in specific, applicable terms.
This differs from qualitative analysis, which describes similar phenomena without the clarity and conviction of numerical values. However, most analyses are not strictly one or the other; in practice, your analysis will likely have both qualitative and quantitative elements.
For example, a risk analysis might determine that the likelihood of a certain vulnerability being exploited sits at around 70%. On a more qualitative level, this might qualify the risk as “high,” which might trigger a specific response from your IT and security teams. It might also mean that specific privacy or confidentiality requirements for regulatory compliance are also at risk.
The most critical components of any risk analysis, including quantitative assessments, are the two inputs that are used to determine risks and associated costs: vulnerabilities and threats.
Vulnerabilities and Their Relationship to Risk
Vulnerabilities are weaknesses or gaps in your security infrastructure and architecture that could allow for data to be compromised if exploited by an attacker or otherwise realized. Risk is the relative likelihood that this would happen and the likely impact if it does.
Some common vulnerabilities include:
- Missing or weak firewalls and web filters, allowing dangerous traffic
- Unsecured networks, or proximity and connection to public networks
- Poor identity and access management (IAM) controls, like weak passwords
- Unaccounted for or unprotected personal devices accessing sensitive data
- Out-of-date protections and a general lack of patch management
These all have the potential to be exploited by a threat. Risk is the potential for an attacker or other threat to take advantage of these vulnerabilities and cause damage to your organization.
Threats, Threat Actors, and Security Incidents
Threats are phenomena that directly exploit vulnerabilities or lead to their exploitation. These are the specific attacks and events that cause damage to your data, including but not limited to:
- Viruses and Malware – When malicious software is placed on individual devices or within a network, it can directly change, steal, or otherwise tamper with sensitive data.
- Social Engineering – Some incidents involve the human element, with fraudulent emails or other messages tricking employees into disclosing sensitive information.
- Denial of Service (DoS) – Attackers can also jam up IT systems by inundating them with traffic and server requests, grinding business and security operations to a halt.
If a human attacker or group of attackers are involved, they are often referred to as “threat actors.” These may include internal threats, such as begrudged employees who purposely or unintentionally lead to data being compromised. But threats can also be non-human, such as environmental catastrophes that could destroy physical IT or security infrastructure.
These and other threats pose risks to your organization to the extent that they can exploit vulnerabilities, leveraging sensitive data to cause damage to your personnel and clientele.
Quantitative risk analysis seeks to express that risk in numbers.
How to Perform Quantitative Risk Analysis
There isn’t one correct or proper way to conduct a quantitative risk analysis. The specific risks you analyze and the kinds of data they concern will determine what protocols and strategies you use. Nevertheless, all methods converge in dissecting vulnerabilities and threats.
In the basic quantitative risk assessment example above, an unnamed, abstract vulnerability is found to have a 70% chance of being exploited. In a real-world quantitative risk analysis, the terms would be far more specific and impactful. Risk analyses look at both individual risks and risk environments in the aggregate, and they provide incredibly granular information about which vulnerabilities could be exploited and how—and what the implications are.
At a base level, they do this by answering questions about likelihood and cost.
How Likely is an Attack to Occur—and Succeed?
Quantitative risk analyses predict the chances of an attack impacting your organization. They take stock of the total number of assets and system components that can be targeted and plot scenarios in which they would be exploited. The methods used differ drastically based on the number and variety of assets and vulnerabilities, along with the specific threats accounted for.
But the general procedure is the same: analysts plot out a number of likely attack scenarios, say 1000, and estimate how many would be successful given our current architecture. These may be theoretical calculations, or they may be simulated in a penetration test or similar exercise.
The more successful simulations, the more likely an attack is to exceed (and vice versa).
These figures may be presented as standalone percentages. Or, they may be expressed in more complex ways, such as sliding scales of likely costs (see below) tied to those chances.
How Much Damage Could the Attack Cause?
The other primary component to risk calculations is cost. Analysts determine how expensive it will be if a vulnerability is successfully exploited by a threat actor or any other incident.
For example, consider the costs of an effective cyberattack on your organization:
- DoS attacks can cost up to $22,000 per minute, according to the Ponemon Institute.
- Per IBM, data breaches cost $9.44 million on average in the US ($4.35 M globally).
- FBI data indicates that ransomware attacks can incur up to $1.2 M in costs per incident.
A quantitative analysis can map estimates like these to the specific kinds and amounts of data that would be exposed in various attack scenarios. The most powerful analyses calculate costs per asset and over time, accounting for factors like the number of people impacted.
These potential damages can be weighed against the costs of mitigation strategies, or other related costs (legal liability, fines, etc.) in a risk-informed cost-benefit analysis.
Risk Management Quantitative Analysis Best Practices
Optimizing risk management means minimizing the scope of vulnerabilities and maximizing your preventive and mitigative capacity for threats. In practice, that can mean deploying an incident management program to account for risks before, during, and after they materialize.
As a baseline, implementing passive threat and vulnerability management helps to minimize vulnerabilities and build intelligence on threats, preventing them from materializing. A more proactive approach, such as Managed Detection and Response (MDR), seeks out indicators of risk and mitigates them, treating identified threats and vulnerabilities as quasi-incidents.
Organizations should also account for threats and vulnerabilities to which their partners, vendors, and other strategic partners are subject. A Third Party Risk Management (TPRM) program will help you map and mitigate these risks alongside those internal to your system.
Compliance Considerations for Quantitative Risk Analysis
Finally, your organization should also ensure that its qualitative and quantitative risk analyses meet the security requirements of applicable regulations. In most cases, that means assessing risks specific to a kind of data protected by industry, government, or other standards.
For example, consider the following widely-applicable regulatory stipulations:
- Organizations in or adjacent to healthcare need to conduct risk analysis assessments on Protected Health Information (PHI) as per the specifications of the HIPAA Security Rule.
- Organizations that process cardholder data (CHD) need to analyze the risks surrounding it to comply with the Payment Card Industry’s (PCI) Data Security Standards (DSS).
Accounting for specific compliance frameworks’ rules and thresholds for risks to protected data categories means adjusting your calculations. For example, you may figure in non-compliance costs, like monetary penalties or reputational damage, to the risk matrix you develop.
Optimize Your Risk Management Strategy Today
Quantitative risk analysis is a process of enumerating the likelihood and impact of risks to your IT systems. The calculations require a deep understanding of threats and vulnerabilities specific to your organization. Knowing the likelihood and potential cost of an incident can help you manage risk more effectively—especially when working with a quality partner.
RSI Security is committed to helping organizations optimize cyberdefenses. We believe that discipline creates freedom in risk analysis and all other cybersecurity measures. Committing to the process is ultimately what delivers the most robust protection at the best value.
To rethink your risk management quantitative analysis strategy, get in touch today!