Cyber Risk Quantification Methods: How to Select the Right Framework

A rise in cyber incidents and an increase in cyber risk governance and regulations is fueling the need for you to perform and integrate cyber risk quantification methods into your cybersecurity program.

Cyber risk quantification (CRQ) empowers you with data-driven metrics that indicate your exposure to cyber risk. But instead of presenting these findings in technical terms – such as traditional red-amber-green heat maps and scorecards – CRQ helps you talk about risk in terms of business and financial impact. 

For instance, with CRQ you can answer important questions such as:

  • “How much could we lose financially if we don’t address a particular gap in our security program?”
  • “What kind of cyber events would have the most business impact?”
  • “Which security projects are priorities and critical to stabilizing risk?”
  • “What investments do we need to make in security controls/resources – and where?”

Before you get started with CRQ, you need to define a strategy for measuring and quantifying risk.

Selecting the right cyber risk quantification method

There are two leading cyber risk quantification methods or frameworks. Let's take a look at both and see which might work best for your business.

1. Factor Analysis of Information Risk (FAIR)

FAIR is a model for understanding, analyzing, and quantifying cyber risk in any organization.

According to the FAIR Institute:

  • FAIR can help you understand, analyze, and quantify cyber risk and operational risk in financial terms.
  • It is unlike risk assessment frameworks that focus their output on qualitative color charts or numerical weighted scales.
  • It builds a foundation for developing a robust approach to information risk management.

FAIR is an in-depth model that includes its own risk taxonomy and technical standards. Its probability-based approach can be applied to any type of asset your business works with.

Although FAIR is widely adopted, it’s a highly manual and time-consuming approach to CRQ. A FAIR assessment requires you to gather infinite detail about your digital environment (systems, assets, data flow) and your vendors and suppliers (especially those who have direct access to your systems or data). Then, you must identify potential threats, evaluate your controls, categorize risks (high, medium, low), and calculate potential impacts across a variety of scenarios.

Because of the effort required to collect this data and the expertise needed to model various cyber risks to calculate a risk exposure range, FAIR assessments are complex, hard to scale, and not easily repeatable.

2. Turnkey cyber risk modeling

Automated, turnkey cyber risk modeling is an alternative method to FAIR. A good example of such a model is BitSight Financial Quantification for Enterprise Cyber Risk.

Using BitSight for CRQ, you can streamline the process of quantifying your cyber risk financially – without investing in any additional headcount or resources.

The solution combines data about your digital assets and the systems they rely on, business information, cyber insurance claims, and cyber scenario probability calculations. You can quickly and easily simulate your organization’s financial exposure across multiple types of business impact scenarios (ransomware, data breach, denial of service attack, third-party breach, regulatory compliance issues, etc.).

Available on-demand, BitSight calculates cyber risk in a repeatable and efficient manner without the need to hire any additional personnel or engage a consulting firm.

Findings are presented in a graphical interface that lets you drill down into cyber event examples so you can diagnose the underlying causes of financial exposure quickly and more efficiently.

In this way, BitSight helps you:

  • Streamline your process for quantifying cyber risk
  • Make more informed business decisions using real-time data
  • Report effectively to the board
  • Using these insights, your team can determine which risks to accept, mitigate, or transfer - and where to focus limited time, budget, and resources.

Quantified risk is managed cyber risk

With the right cyber risk quantification method, you can bring about an unprecedented awareness and understanding of risk beyond the technology function into the boardroom — where important decisions around risk management and insurance policy are being made.

Leveraging a quantification framework empowers you to guide strategic conversations around managing your cyber risk, prioritizing new technology investments, and measuring the ROI of those investments in specific controls or programs.

Learn more in our eBook: Establishing a Universal Understanding of Cyber Risk with Financial Quantification