January 4, 2023

Definition of Cyber Risk

Cyber risk occurs through compromised confidentiality or integrity of information or information technology and can result in financial losses, negative operational impacts, and damages to systems, organizations, governments, and people. Cyber risk is associated with losing information or information technology in any of its forms, whether data or the systems themselves, through any cyber incident. 

Don’t ignore a root cause of cyber risk; when it comes to security, companies must start with protecting digital identities.

Cyber risk exists due to the inherent uncertainty associated with technological and data availability needs that result in easy access to large volumes of information for many users and systems. Unauthorized access can happen for many reasons, from confused or negligent employees to overprivileged access or even to corporate espionage, and may take time for organizations to discover and understand, slowing response times and exacerbating organizational disruption and reputational damage.   

In spite of the dire warnings surrounding cyber risk, it is a likely consequence of the tremendous benefits of digital technologies and access to big data. Rather than meeting baseline cybersecurity requirements and hoping for the best, healthy enterprises focus on properly managing cyber risk, from understanding its constant evolution to gaining the best tools and techniques for addressing it.  

Managing Cyber Risk

Managing cyber risk, especially for the enterprise, increasingly requires highly sophisticated systems developed and maintained by elite professionals proficient in delivering global end-to-end organizational solutions. To protect the organization’s reputation, it’s also critical to understand, measure, and manage cyber risk seamlessly and confidently. This requires not only knowing which cyber risks exist but quantifying their potential impact and prioritizing risk mitigation strategies accordingly. 

The interconnectedness of the enterprise means that cyber risk from a single incident can quickly extend to many areas of the organization, with damage spiraling and exponentially increasing as the business attempts to react and recover. Beyond the usual suspects of phishing, ransomware, and data breaches, proactively and reactively managing cyber risk requires taking the following situations into consideration: 

  • System upgrades and updates 
  • Migrating to the cloud 
  • Implementing new technologies, such as the Internet of Things (IoT) 
  • Onboarding new third-party relationships 
  • Mergers and acquisitions
  • New and updated regulations
  • Responses to civil litigation
  • Accidental loss of sensitive information 
  • Malicious external and internal threats 

Fast but carefully considered and methodical responses to cybersecurity challenges are crucial to managing cyber risk.

Although the IT team leads the charge, limiting cyber risk management to a single department in the enterprise is shortsighted and highly likely to compound problems in an emergency. Along with the usual cybersecurity training, team members need tests and drills to practice proper responses to cyber emergencies without panicking and potentially exacerbating the problem.

Reframing Cyber Risk

The enterprise that truly acknowledges and prepares for cyber risk has an opportunity to reframe it from a dark, frightening shadow that continually threatens the organization to a good business practice that doubles as a market differentiator. The program the enterprise develops for managing cyber risk can serve as an added value and symbol of organizational integrity and accountability for customers, analysts, board members, investors, and other stakeholders, and generate confidence in the company’s brand and reputation. 

Reframing cyber risk requires viewing it as a strategic, enterprise-wide issue rather than a siloed security challenge for the IT team to manage. Perceptions regarding the volume and intensity of cyber risk can vary widely throughout the enterprise if a foundational understanding is not targeted, achieved, and socialized. Managing cyber risk depends on accurately assessing and determining cyber risk.  

Assessing and Determining Cyber Risk

Even enterprise organizations can underestimate cyber risk if they consider themselves lower-risk because they’re not one of the top name brands, financial services firms, or healthcare companies that most often make headlines for cyber attacks. However, cyber risk does not align only with industry categories; extensive digital operations generate numerous vulnerabilities, and threats can come from many different directions. Assessing and determining cyber risk is an integral part of understanding the enterprise’s overall cybersecurity posture.  

The commonly understood notion of the lone, disgruntled, hoodie-clad hacker in a garage should be dispelled throughout the enterprise. Though cyber attacks by hackers dominate news headlines, employees should be aware of the breadth and scale of organized crime when it comes to cyber risk, as well as the many ways the business could be impacted, including catastrophic technical failure and disruption of business operations.  

Identifying Elements of Cyber Risk 

Open discussion at all organizational levels supports a proper assessment of cyber risk. This discussion should be ongoing and evolve to keep pace with the ever-changing threat environment. Topics to introduce include: 

  • Known and suspected organizational, systems, and data vulnerabilities and exposures
  • Recent cyber attacks, their effects, and both positive and negative reactions from the targeted organizations
  • Changes in legislation and regulations 
  • Updated and new cyber risk strategies
  • Operational IT challenges, such as poor system integrity 

Specific items to review regularly include: 

  • Remote access policies and procedures 
  • Use of company-owned devices for non-work activities
  • Device safety and security, including bring-your-own-device (BYOD) rules
  • Physical access to company offices 
  • IT system integrity
  • Network disaster recovery 
  • Cybersecurity policy documentation

Identifying cyber risk enables the enterprise to continually mature organizational resilience concerning not only customer or client data, but internal financial data and intellectual property.

Quantifying cyber risk facilitates a discussion at higher organizational levels that considers business goals and objectives and positions cyber risk mitigation as enabling operational resilience. 

Global Cyber Risk Management

Globalization and increased interconnectivity support the growing enterprise, but when combined with increasingly sophisticated and widespread cyber crime and the progressive number and severity of cyber attacks, cyber risk also escalates. Conducting business in areas with varying privacy regulations also presents many logistical challenges, from avoiding fines to managing data breach notifications to responding to data subject access requests.  

Privacy legislation in many countries is expected to become even more stringent over the next several years. Governments have also become increasingly involved in protecting information and systems, resulting in higher levels of scrutiny into how business operations are conducted.

Rapid response is key to managing cyber risk during a cyber incident no matter the size of the attack surface, but it also presents many more challenges for the international enterprise. Important considerations for a global cyber risk management program include the following tips for reducing cyber risk. 

Tips for Reducing Cyber Risk

A one-size-fits-all approach to reducing cyber risk is not suitable for the enterprise. Weaknesses in the workforce, information, operations, and systems vary widely among large organizations, as do the solutions for making realistic, scalable, and sustainable cybersecurity improvements. An assessment of the existing expertise, processes, and technology available to the enterprise and how they interact is a good first step towards understanding what should happen next. 

Create a Cybersecurity Policy

  • Establish the direction and nature of the enterprise’s cybersecurity approach 
  • List assets that must be addressed, anticipated threats to those assets, and which cybersecurity procedures and systems protect them 
  • Identify weaknesses, especially overreliance on third parties and vulnerabilities from the “human factor” 
  • Consider the impact of older devices on organizational vulnerability and set standards that avoid dependence on outdated and unsupported software and operating systems 
  • Cross-reference compliance and regulatory mandates with the organizational cybersecurity policy to ensure proper coverage and avoid duplicated efforts with built-in efficiencies 
  • Structure team member training and development to provide a full view of organizational cyber risk and fulfill cybersecurity requirements  
  • Determine the cadence for cyber policy reviews, as well as triggering events for reviews, such as acquisitions and launching new business units 
  • Carefully control and monitor user access to the enterprise’s data and systems and how that access is utilized throughout onboarding, transitions, and offboarding 

Increase Employee Training Investment 

  • Ensure strong support between IT teams and executives by quantifying cyber risk mitigation tactics for leadership and evangelizing for operational resilience 
  • Expand awareness and knowledge while continuing to provide a strong foundation on cyber threats, cyber risk, how cyber attacks work, and how to respond to a suspected cyber attack 
  • Simulate phishing attacks and conduct drills while supporting employees with resources for seeking help without fear of being disciplined or shamed 
  • Explain BYOD, Wi-Fi, email, and social media policies clearly, review them regularly, and offer employees opportunities to ask questions at any time 

Implement Cybersecurity Best Practices

  • Create a cybersecurity culture and an intelligent and thoughtful approach to cyber risk; emerging risks, including the impact of new technologies on the enterprise, should be proactively anticipated 
  • Examine the options for mitigating cyber risk to determine the proper mix for the organization:  
    • Technology solutions, including cybersecurity software and hardware
    • Consulting and training, including cyber risk assessment, scenario-based loss modeling, impact analysis, benchmarking, and reputation management 
    • Services such as penetration testing, threat hunting, and endpoint detection 
  • Generate opportunities for different stakeholders from the enterprise to share knowledge and participate in cyber crisis response plans 
  • Align cyber risk management to the organization’s cybersecurity lifecycle for more consistent mitigation and recovery 
  • Consider cybersecurity and its resource allocation balance alongside planning for and responding to other risks and disruptions, such as those impacting the supply chain 
  • Ensure a data-driven cyber risk management program utilizing risk intelligence, threat intelligence, risk-based economic modeling, and quantification tools

Generate Cyber Risk Key Performance Indicators (KPIs) 

While quantifying cyber risk exposure helps the enterprise understand the efficacy of cybersecurity controls from a financial perspective, selecting KPIs enables a pivot towards creating and evolving a measurable cyber risk mitigation plan. Possible KPIs for cyber risk include: 

  • Level of preparedness 
  • Effectiveness of prioritizing cyber risk 
  • Number of exposures 
  • Identification of assets vulnerable to cyber risk 
  • User access management and application of the principle of least privilege 
  • Unidentified devices on internal networks 
  • Average third-party security rating 
  • Financial consequences of cyber risk 
    • Revenue loss
    • Stock price decrease
    • Productivity loss 
    • Fines
    • Litigation expenses 
  • Intrusion attempts
  • Cybersecurity incidents
  • Third-party incident response time 
  • Time to detect cyber risk 
  • Time to contain cyber risk 
  • Time to remediate cyber risk 

Frequently Asked Questions about Cyber Risk and Cybersecurity

The landscape of cyber risk and cybersecurity is constantly changing. Every technological innovation brings new cyber risk challenges alongside the benefits of the technology itself. For example, the internet of things (IoT) widened the attack surface for many organizations as cybercriminals quickly began to exploit the new opportunities created by increased connectivity.  

Following are frequently asked questions about cyber risk and cybersecurity that provide foundational support for understanding how to mitigate cyber risk.   

What Is Cybersecurity? 

Cybersecurity describes the protection of information, data, programs, networks, and systems from unauthorized access. Protecting these assets from cyber attacks requires a robust and ever-evolving cybersecurity program that keeps pace with the changing threat climate.  

Cybersecurity is increasingly demanding, not only due to the growing threat landscape but because the enterprise is accountable for more data and systems as technological needs rise. Organizations also require sophisticated business intelligence when it comes to cyber attacks, and must be willing to continually invest in people, processes, and technologies to improve cybersecurity and mitigate cyber risk.  

How Are Cyber Risk and Cybersecurity Related?  

The term “cybersecurity” includes the processes, practices, and technologies organizations use to protect data and systems. Cybersecurity is enabled by the enterprise to mitigate cyber risk and recover from a cyber attack.  

Cyber risk is unavoidable to any organization that utilizes technology; cybersecurity addresses cyber risk by finding and correcting deficiencies in cybersecurity. Cybersecurity helps decrease the possibility of a cyber attack, as well as limit cyber risk and support recovery in the event that the organization suffers a cyber incident. 

What Is a Cyber Attack?

A cyber attack occurs when cybercriminals attempt to expose, destroy, or steal information or data via unauthorized access to electronic systems. Malware, ransomware, phishing, and denial-of-service (DoS) are all types of cyber attacks.

The purpose of cyber attacks is relevant to the enterprise when designing plans to minimize cyber risk. Targeted attacks focus on a specific organization, while untargeted cyber attacks include as many users, devices, services, or systems as possible.  

Which Organizations Have No Cyber Risk?

Although some industries and businesses are targeted less frequently than others, every organization that utilizes data and technology is vulnerable to cyber attacks and should anticipate and prepare to mitigate cyber risk. 

Who Is Responsible for the Enterprise’s Cybersecurity?

Although the Chief Information Security Officer (CISO), Chief Information Officer (CIO), or Chief Security Officer (CSO) technically is responsible for cybersecurity, provides leadership, and will be held accountable for cybersecurity incidents, every employee in the enterprise must understand how to follow the organization’s policies and procedures and take responsibility for their part in implementing and maintaining them. Due to the sheer size of the enterprise and its threat landscape, forgetting about cybersecurity except when actively completing trainings is not an option. 

What Are the Three Pillars of Information Security?

The three pillars of information security (InfoSec) are Confidentiality, Integrity, and Availability (the CIA triad). 

  • Confidentiality: Ensuring systems are protected from external unauthorized access 
  • Integrity: Making sure data has not been tampered with and is correct and trustworthy  
  • Availability: Ensuring that applications, networks, and systems are operating and usable when needed 

These three pillars are the foundation for creating and maintaining a strong cybersecurity program. Safeguarding confidentiality, integrity, and availability allows the enterprise to better understand how cyber risk corresponds to primary security objectives. 

What Is the Difference Between Cyber Risk and Cyber Threats?

The term “cyber risk” refers to the potential impact of a cyber threat on an organization; it considered the possibilities of a cyber incident, including financial losses, being unable to conduct business, operational stress, damage to technical systems, and negativity associated with the company’s reputation and brand. 

A “cyber threat” is defined as any event in which an organization’s data and systems might be affected by unauthorized access to its technology, including possible data damage, alteration, or unauthorized release. Cyber criminals exploit cyber threats to steal or destroy data, with many possible motivations including financial gain, activism, and espionage.  

What Is Cyber Risk Insurance?

Cyber risk insurance provides expert support in managing the repercussions of a data privacy breach, ransomware, or other cyber attack and coverage to enable the organization to become operational again if needed. It may also provide assistance with any third-party damages, legal fees, and regulatory impacts suffered from a cyber attack. Cyber risk services such as employee training, incident preparation and response, and forensics may be offered as well. 

Cyber risk insurance comprises a very small, but growing, part of the insurance industry. Enterprises that manage large amounts of personal data and rely on digital technology are most likely to consider purchasing cyber risk insurance. Supply chains also increase exposure for some businesses; realizing the potential organizational impact and costs from a cyber attack on the supply chain can spark interest in obtaining cyber risk insurance. 

The Many Benefits of Mitigating Cyber Risk

As the enterprise continues to grow and expand by taking advantage of new technologies and assets, cyber risk increases and cybersecurity becomes more challenging and complex. Continuing deep dives into assets and identities across all environments helps the enterprise keep track of evolving vulnerabilities and strategically prioritize how best to address cyber risk in support of organizational goals and objectives.  

Besides the obvious benefits of mitigating cyber risk such as reducing financial loss and minimizing operational downtime, the enterprise that implements a robust cyber risk management program can have more confidence in its abilities to meet compliance and regulatory requirements, manage its way through cyber incidents with a lower degree of concern about data loss and impacted systems, and enjoy greater assurance regarding the stability of the organization.  

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