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How To Calculate Cybersecurity ROI and Communicate It to Executives

January 15, 2024

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Organizational leaders have generally viewed cybersecurity as a costly yet essential business function and recognize that Chief Information Security Officers (CISOs) and other cyber leaders make strategic decisions to safeguard the company's digital assets. Still, until recently, these higher-level executives have never sought to make sense of the technical cyber activities in a broader business context, believing their value to be too complex to discern.

Amid the rising global cost of cyber attacks, there is a growing acceptance that cybersecurity qualifies as a higher-level strategic issue. As a result, private, public, and governmental entities alike have all slowly begun to demand greater collaboration and transparency between CISOs and other stakeholders. Unfortunately, the traditional challenge of translating cyber terms into a more inclusive language lingers, hindering this necessary shift.

In an attempt to combat the pressing obstacle, CISOs have turned toward security compliance frameworks, hoping that a standardized template would demonstrate how cyber initiatives directly contribute to business goals. But even with these internationally recognized standards, board members don't grasp the underlying implications. For these executives to truly understand the value of cyber, cybersecurity leaders would need to speak in monetary gains.

Indeed, the market demanded a solution that could calculate the financial benefits of the CISO's initiatives, allowing business leaders to make more informed decisions about where they invested the budget. Thus, on-demand cyber risk quantification (CRQ) emerged, an assessment process that attributes financial values to a cyber event's impact on an organization, enabling enterprises to manage their cyber risks at the operational level.

 

Leveraging millions of data points and global intelligence, CRQ models have the power to calculate cybersecurity ROI, finally bridging the language gap between CISOs and executive stakeholders. With this valuable tool, cybersecurity leaders are equipped to meet the modern challenges of the digital age and develop a stronger relationship with all key stakeholders to ensure business resilience.  

Calculating Cybersecurity ROI Manually

Before on-demand CRQ solutions were introduced, many earlier attempts to calculate the ROI of cybersecurity initiatives involved extensive research and data gathering. Despite the fact that these manual methods were very labor intensive, many of them are still employed today. 

To generate the financial estimates, CISOs collaborate with top personnel to determine the average cost of an event and multiply that figure by the number of such events the business anticipates in the upcoming year. The resulting approximation is then weighed against the cost of the new solution or upgrade and evaluated for cost-effectiveness. 

While these results offer some measure of insight into what an organization can expect in terms of its cyber losses, they inevitably produce a biased overview. Individuals may interpret data differently, making subjective judgments on the various components needed for the final calculation inputs. Human interpretation often overlooks the complexity of risk, leaving significant room for error. 

This innate shortcoming of the manual cybersecurity ROI assessment can have a resounding impact, potentially leaving an enterprise vulnerable to high-impact risks. Based on the subjective outcomes, risk managers may also end up pursuing initiatives that do not yield a positive return. In a time when budgets are being cut and economic growth is slowing, optimizing resource allocation is critical for business resiliency. 

Using an On-Demand Cybersecurity ROI Calculator for the Most Reliable Data

To overcome the challenges of manual calculations and avoid the potentially harmful consequences that can ensue, organizations are increasingly turning toward automated CRQ solutions that streamline this process and provide much more accurate data. CRQ platforms like Kovrr’s offer a cybersecurity ROI calculator that reveals whether or not a specific initiative will reduce risk in a cost-effective manner.  

Calculate cybersecurity investment ROI with Kovrr's on-demand cybersecurity ROI calculator.
Figure 1: Kovrr’s Cybersecurity ROI Calculator

This cyber risk analysis methodology takes the guesswork and human interpretation out of the equation by employing advanced cyber risk models that incorporate data from millions of companies worldwide, global insurance intelligence, and internal activity logs. Utilizing the results in combination with the ROI calculator, CISOs can make financially justified decisions that align with broader business goals. 

With cybersecurity ROI calculators like the one from Kovrr, organizations have access to:

Timely Results

Compared to the manual process, the calculator saves cyber risk assessors a massive amount of resources. Instead of spending time gathering information and making judgment calls, cybersecurity professionals can focus on implementing effective cybersecurity strategies that address the most pressing problems. In a landscape where risk evolves rapidly, time analysis becomes a critical asset. 

Accurate, Objective Data

Planning for the future effectively requires access to accurate data. By harnessing external intelligence, the calculator provides calibrated insights into the potential return on investment and minimizes the risks that come along with miscalculation. Not only does the cybersecurity ROI calculator ensure sensible action plans, but it also facilitates trust among the higher-level executives when it comes time for the next budget request.

Nuanced Understanding of Upgrades

In addition to knowing if a specific mitigation initiative results in cost savings, Kovrr’s ROI calculator also illuminates the various company assets that would be better protected. For instance, as demonstrated in Figure 2, moving up from an IG2 to IG3 for  CIS Control 4 helps secure the system’s infrastructure, as well as employee endpoints. While ROI is traditionally thought of in terms of finance, there are other aspects to it as well. 

Discover how much financial savings a security control upgrade results in and determine ROI.
Figure 2: Cost Savings of and Relationships Between Control Mitigations

How to Communicate Cybersecurity ROI to Stakeholders

With access to the financial cybersecurity ROI data in combination with how certain initiatives fortify specific defenses, the CISO is ready to communicate with stakeholders. Because a CRQ solution frames this information in broader, monetary business terms, non-technical executives are able to embed it within the overall company strategy and make data-driven decisions, such as: 

Defining a Risk Appetite

Cybersecurity ROI allows CISOs to demonstrate how much businesses stand to lose financially due to a cybersecurity incident. If executives already have a specific risk appetite figure they’d like to stick to, then these insights will show them how much they need to invest in cybersecurity risk management initiatives to reduce the expected loss down to appropriate levels. 

However, if, after seeing that investing the resources to mitigate cyber risks down to a level they’re more comfortable with is too expensive, these stakeholders may decide to readjust the company’s risk appetite. By translating the cost of initiatives into financial figures and illuminating the ROI, the cybersecurity calculator ensures decision-makers are aware of how their cyber budget allocation affects potential loss levels. 

Creating Opportunities for Optimization

Likewise, because cybersecurity risk and corresponding initiatives have been transformed into financial implications with CRQ’s cybersecurity ROI calculator, key stakeholders also have an understanding of where they can afford to reallocate resources and spend the budget more optimally. For instance, if a specific initiative costs more to implement than it lowers the potential cost of the risk, it may be more strategic to invest elsewhere.

While ROI is typically thought of in financial terms, it can also be construed in the reduction of risk likelihood. As seen in Figure 2, bringing CIS Control 20 up to level IG2 only reduces risk by 0.07%. An organization may, therefore, decide, although the financial investment in a mitigation initiative would be financially sound, that, given the low reduction, it prefers to absorb this risk and use the resources elsewhere. 

Determining the Cybersecurity Budget

After risk appetites have been defined and specific risk mitigation investments have been assessed for cost-effectiveness and resourcefulness, key stakeholders can leverage the cybersecurity ROI calculator to determine the department's budget. How the board decides to divide the company's available capital can be the determinant factor in whether the upcoming year is profitable. 

The financial insights, based on objectively quantified cyber risk data, give the board and C-suite members the reliable information they need to make the most expert decision. Ultimately, the most accurate financial planning can only occur when there is a monetary awareness of how every single component of an organization contributes - and cybersecurity should be no exception. 

Take the Next Step Toward Higher Cybersecurity ROI Today

Empowering CISOs with the ability to calculate cybersecurity ROI rapidly is crucial for enhancing cyber resilience. Cybersecurity ROI calculators enable these team leaders to articulate complex technical details in financial terms that resonate in the boardroom and with other key stakeholders. By shifting the cybersecurity discussion up to the highest organization levels, CISOs help leaders make data-driven business decisions. 

Take the next step towards better understanding your cybersecurity ROI today with Kovrr’s calculator, arm upper management with the insights necessary for financially-strategic, and become an integral part of the decision making process. 

Get started with a free demo today with one of our cybersecurity experts.

Shalom Bublil

Kovrr Co-founder & Chief Product Officer

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