The foundation of any successful cybersecurity infrastructure is a thorough understanding of the risks an organization faces. Without this insight, it is virtually impossible to identify the most effective ways to reduce cyber exposure, and avoid the costly consequences of an attack.
A cyber risk assessment is a critical tool for helping businesses identify their level of exposure, and the most effective risk management strategy. Cyber insurance is one element of a holistic approach to risk management. However, without understanding what is at stake, you will not be able to select the best coverage for your client.
What Is a Cyber Risk Assessment?
At its core, cyber risk is a security threat specifically related to online activity, which can disrupt or damage a company’s finances, sensitive data, or online functions. While a data breach is the most common outcome, cyber risks can also threaten a business’s financial stability, reputation, productivity, and more.
Some of the most common security threats organizations currently face include:
- Data leaks
- Insider threats
Any threats can result in significant losses, but the specific risk to any organization depends on several unique factors.
The National Institute of Standards And Technology (NIST) defines a risk assessment as follows:
“[A process] used to identify, estimate, and prioritize risk to organizational operations, organizational assets, individuals, other organizations, and the Nation, resulting from the operation and use of information systems.”
In short, it’s a means of communicating risk to stakeholders, and a tool for developing responses that improve security.
Why Cyber Exposure Assessments Matter
Understanding your company’s cyber risk does more than reveal areas that need additional security and guide insurance purchases. There are many reasons these assessments matter, including:
- Improving organizational knowledge and transparency
- Ensuring regulatory compliance with HIPAA, PCI DSS, and other industry standards.
- Preventing data breaches and data loss
- Preventing application downtime
- Reducing financial and reputational losses due to cyber incidents
- Reducing financial expenditures with a strategic approach to cyber security
Identifying Threats and Calculating Risk
A cyber risk is the probability that a vulnerability—a weakness that could allow unauthorized access to your network—will be exploited. Calculating this probability involves identifying specific threats, your network’s vulnerability to those threats, and the value of your data. Another simple way to look at risk is:
Cyber Risk = Threat x Vulnerability x Data Value.
Cyber risks are typically categorized on a scale from zero to high risk. Very few, if any things have zero risk. The level of risk is the basis for determining the actions necessary for mitigation, and the highest risks need to take priority.
Identify Cyber Exposure Risk to Protect Business Operations
IBM’s Cost of a Data Breach Report for 2021 revealed that the average total cost for a data breach reached $4.24 million, the highest level in 17 years. The costs for breaches involving remote work were more than $1 million higher than for incidents that didn’t involve employees working from home.
Clearly, the risk of a cyberattack continues to increase. Already in 2022, 92% of data breaches are attributable to cyberattacks, with ransomware and phishing topping the list of causes for the compromise. Some notable attacks that have already occurred in 2022 include:
Hackers circumvented the company’s two-factor authentication protocols, stealing $18 million in Bitcoin and $15 million in Ethereum from 500 users.
Hackers were able to breach Microsoft and compromise several products, including Cortana and Bing. The company claims only one account was compromised, though, and that they were able to stop the attack before additional data was breached.
- Red Cross
The Red Cross was breached via an attack on a third-party vendor, which resulted in the personal data of thousands of people—most of whom are already deemed missing or vulnerable—being stolen.
The gaming platform’s lax security standards contributed to the theft of more than $600 million of cryptocurrencies.
When even major organizations like Red Cross and Microsoft are vulnerable to attacks, small and mid-size companies need to take notice and be aware of their cyber exposure.
Cyber Risk Management with ProWriters
Assessing and calculating cyber risk is a complex process. However, it is critical to understand a business’s cyber exposure—and ultimately, their best insurance solution. ProWriters makes it easier for brokers to explain cyber risk to their clients with a full array of educational materials, including Cyber Risk Management 101.
This free download makes it simple to explain cyber risk, and outlines a five-step process clients can take to recognize their risk and take the necessary steps. Get your copy today, and be prepared to help your clients protect themselves against the ever-changing cyber threat landscape.