Why Quantifying Risks is strategic to financial and operational success
Today, cybersecurity is no longer a technical issue but a critical business imperative. Cyber threats are evolving at an unprecedented rate, and organizations need to adopt robust strategies to safeguard their operations and financial health.
Cybersecurity Risk Quantification (CRQ) offers a pivotal approach to help CISOs and security leaders translate cyber risks into financial terms, making it easier for top corporate managers and boards of directors to understand and more effectively mitigate risks.
Evolving cyber threats
Verizon's 2024 Data Breach Investigations Report (DBIR) highlights how cyber threats are becoming increasingly common and complex through the following key statistics:
- A 180% surge in vulnerability exploitation from the 2023 DBIR is primarily due to ransomware and extortion attacks exploiting zero-day vulnerabilities, such as those in MOVEit. Quantifying risks associated with unpatched vulnerabilities enables organizations to prioritize their patching and vulnerability management efforts.
- The human element remains a significant factor in 68% of breaches. By quantifying potential losses from human errors, CISOs can justify investments in security awareness training and robust access controls and identity management.
- Breaches involving third-parties account for 15% of breaches, which is a 68% increase from the prior reporting year, underscoring the importance of assessing and managing third-party risks. Quantifying these risks can also influence cyber insurance terms and ensure adequate coverage.
- The median loss from a combination of ransomware attacks and other extortion breaches was $46,000, with ransom demands typically ranging from 0.13% to 8.30% of the victimized organization's revenue in 80% of cases. Understanding the financial impact of ransomware attacks helps organizations justify investments in preventive measures, such as advanced threat detection and robust backup solutions.
By quantifying risks, organizations stand to gain a clearer understanding of their vulnerabilities, along with the potential financial impacts they face from a cyberattack. “This allows them to prioritize their security efforts more effectively and allocate resources where they are needed most,” said Chris Novak, Senior Director of Cybersecurity Consulting at Verizon.
Unlocking the power of CRQ: Understanding Verizon’s CRQ capabilities
Verizon’s CRQ methodology is designed to provide a comprehensive framework for quantifying and managing cybersecurity risks. Here’s how Verizon's CRQ capabilities are used to support CISOs and business leaders:
- Risk Identification and Prioritization: CRQ helps organizations identify and prioritize cyber risks based on their potential financial impact. This allows for more informed decision-making and resource allocation.
- Enhanced Decision-Making: By translating technical risks into financial terms, CRQ bridges the gap between cybersecurity teams and executive management, facilitating better communication, strategic alignment and leadership support.
- Use of Advanced Technologies: Verizon leverages AI and predictive analytics to enhance its CRQ capabilities. AI-driven risk models analyze historical data to forecast future cyber threats, helping organizations prioritize coverage elements most needed.
CRQ use case examples
Verizon’s CRQ services deliver actionable insights that clients may use to prioritize cybersecurity investments, more effectively manage third-party risks and, in some cases, even provide CRQ findings to potential insurers for consideration during the underwriting process. Below are three use case examples that highlight CRQ advantages:
- Negotiating Premiums
One mid-sized financial services company struggled with high cyber insurance premiums due to perceived cybersecurity risks associated with their operations. By engaging Verizon's CRQ services, they were able to present a quantified risk profile to the insurer that showcased the comprehensive cybersecurity measures they had put in place.
Verizon conducted a thorough risk assessment using CRQ methodologies, quantifying the potential financial impact of various cyber threats and demonstrating the likely effectiveness of the client’s current cybersecurity controls. Detailed reports and data-driven insights were provided to the client to present to insurers and this data may have helped the client successfully negotiate a 20% reduction in cyber insurance premiums.
“Using this data, organizations may be able to demonstrate to insurance companies that they are a safer bet than others, which may lead to better policy tailoring,” Novak explained.
Verizon’s experience suggests that clients may be able to boost their cybersecurity posture, improve insurance coverage and reduce premiums by showcasing their managed risk profile through CRQ.
- Prioritizing Investments
Verizon’s CRQ approach has proven effective in helping organizations to enhance their cybersecurity investments as well. One large retail organization needed to justify increased cybersecurity investments to its board of directors. The company faced frequent phishing attacks and was concerned about potential data breaches.
Verizon applied CRQ to quantify the potential financial impact of phishing attacks and data breaches, identified gaps in the retailer’s existing security framework, and prioritized areas needing investment. A comprehensive report detailing the potential ROI of proposed cybersecurity investments led the board to approve a 30% increase in the cybersecurity budget based on CRQ findings.
The retail giant deployed advanced phishing detection tools and enhanced employee training programs. “Risk quantification can help influence cybersecurity investment decisions,” said Novak. “It's used to understand and prove cybersecurity health to partners, and during contract negotiation. This approach helps paint a clear picture of potential losses along with the benefits of proactive investments.”
- Reducing Third-Party Risks
A healthcare provider sought to improve its third-party risk management after a breach involving one of its vendors. The provider needed to better assess and mitigate risks associated with third-party vendors. Verizon conducted a comprehensive third-party risk assessment using CRQ methodologies, quantified the potential financial risks associated with each vendor used, and prioritized them based on risk exposure.
Specific controls and monitoring mechanisms were recommended for high-risk vendors. As a result, the healthcare provider implemented the recommended controls, significantly reducing breach risks. The provider also enhanced its vendor contracts to include stringent cybersecurity requirements based on the CRQ findings.
“Assessing the financial impact of risks posed by third-party vendors can help CISOs make informed decisions about vendors and the level of scrutiny required in third-party vendor security practices. Quantifying third-party risks also influences cyber insurance terms and contractual obligations, ensuring more tailored coverage,” Novak pointed out.
How CRQ is transforming cyber insurance
Integrating CRQ into cybersecurity and insurance strategies may help improve cyber resilience and insurance coverage. Detailed CRQ data assists organizations in presenting a well-defined risk management strategy to their insurers, which may help organizations secure more favorable insurance terms. This transparency may lead to more comprehensive and tailored policies.
Quantifying cyber risks helps organizations demonstrate their cybersecurity maturity to insurers, which could potentially be used to build a case for reduced premiums and broader coverage options. As Novak explained, “By using quantified risk data, our clients have been able to negotiate better terms with their insurers. This data suggests that they are managing risks effectively, which in turn can help lower premiums and enhance their coverage.”
AI’s impact on CRQ
Artificial Intelligence (AI) is revolutionizing CRQ by enhancing the accuracy, efficiency, and predictive capabilities of risk assessments. AI-driven models can help predict potential cyber threats and simulate scenarios to quantify the financial impacts of specific threats. This information may help organizations lower risks to critical operations and negotiate lower insurance premiums.
Insurers are also increasingly using AI to analyze risk, which allows them to tailor policies more specifically to the risks presented by individual organizations.
This alignment of CRQ data with AI insights may result in more appropriate coverage terms. “We're already using artificial intelligence on the back end of our analytics to produce insights that were previously impossible to derive,” Novak said, adding, “AI helps us enhance our risk models, making them more predictive and allowing us to offer more precise recommendations to clients.”
Why CRQ should be your next strategic move
Incorporating Verizon’s risk quantification capabilities into business and cybersecurity decision-making strategies delivers:
- Clearer communication between technical teams and executive leadership, converting technical cybersecurity analysis to financial terms that are better understood by senior leadership, which may lead to better risk management.
- Prioritized investments as organizations can invest in cybersecurity solutions based on potential financial impacts.
- Regulatory compliance support via a quantifiable measure of cyber risks, which may help streamline reporting.
“CRQ is a critical component in understanding and managing cyber risk exposure. It quantifies in dollars the estimated cost of not addressing risks, making it a powerful tool for CISOs to communicate the potential value of cybersecurity investments to the C-suite,” Novak explained.
By integrating CRQ into their cybersecurity frameworks, organizations can make data-driven decisions, prioritize investments, and enhance their overall resilience. CISOs and business leaders should consider Verizon’s CRQ framework to better quantify their cyber risks and improve cybersecurity protections.
For more insights into the benefits of CRQ, visit Verizon here.