October 31, 2023
The global economic situation is far from encouraging. The IMF’s World Economic Outlook predicts growth will again fall by 3% in 2024 as central banks continue to fight inflation. Businesses throughout all industries are expected to tighten their budgets for the upcoming year, scrutinizing and slashing spending across departments.
At the same time, recent research reveals that the global cost of cyber attacks is expected to reach $10.5 trillion annually. But despite this startling figure, Chief Information Security Officers (CISOs) still find it challenging to secure funds for crucial cybersecurity tools. In 2023, 37% of CISOs reported flat or declining budgets, significantly up from last year’s 21%.
With the ever-evolving threat landscape and the increasing complexity of cyber attacks, the need for robust cybersecurity protocols is undeniable. But this reality, paired with the economic situation, shunts security leaders into the formidable challenge of demonstrating ROI on initiatives that have historically only been assessed based on subjective terms.
Fortunately, there is an easy-to-use software that can help CISOs worldwide justify the necessity of their budget proposals to the C-suite and demonstrate that every penny is spent cost-effectively: A financial cyber risk quantification (CRQ) solution.
CRQ, or Cyber Risk Quantification, is the practice of assigning quantitative values to the impact of a cyber incident. A financial CRQ, as the name suggests, articulates these consequences in monetary terms, empowering organizations to make cost-effective risk mitigation decisions.
To learn more about CRQ, read “What Is Cyber Risk Quantification (CRQ)?”.
In most organizations, there’s an underlying animosity between cybersecurity teams and stakeholders responsible for budget approval. Instead of recognizing the economic advantages of a robust cyber program, skeptical executives believe the department to be a resource drain.
But, once on-demand CRQ models were introduced to the industry, CISOs finally had the power to prove their worth and obtain the budgets they needed to economically secure their organization’s cyber environment.
There are several ways in which a financial CRQ platform can bolster a CISO’s argument for their requested budget or, at the very least, help explain how cybersecurity practices generate value for the organization.
Once equipped with a CRQ solution that allows everyone to discuss cybersecurity in the same language, it’s time to provide details and reasonings of your budget allocation choices.
Unfortunately, teams nowadays need unlimited budgets and resources to address all the vulnerabilities in an organization’s cyber environment. This modern fact of business is why it’s essential for CISOs to identify those cyber risks most likely to cause a severe financial impact and prioritize security programs accordingly.
A financial CRQ illuminates this data by evaluating multiple organizational components, such as historical incident data, digital asset value, current defenses and compliance, and (industry-specific) external threat landscape.
With this information, the statistical model generates the likelihood of specific event types occurring. For instance, an assessment might reveal that an organization has a 43% chance of data breach and only a 15% chance of system interruption. The analysis also uses the data to calculate the expected financial loss of the event, considering factors such as regulatory fines, legal costs, and reputational damage.
After the assessment is complete, CISOs will thoroughly understand which business areas are most at risk. In board meetings, they can leverage this objective information to justify why they propose to invest in specific initiatives rather than others.
One of the board's highest, if not the top, priorities is understanding ROI. They understandably want to know if a proposed strategy will prove profitable for the company. Financial CRQ assessments are the most appropriate solution to communicate this information, as they can precisely calculate how much a specific initiative would reduce an event's financial impact.
For example, a CRQ might determine that the expected loss from a data breach, which has a 75% chance of occurring in the next year, is $2 million. If a CISO can implement a specific cybersecurity measure that costs $500,000 but reduces that impact by $1 million, then the risk mitigation plan results in a clear ROI.
Conversely, a CRQ can also demonstrate why it might not be worth investing in other internal cyber risk programs and instead absorb the risk into the organization's appetite or transfer it. For instance, a well-meaning board member might suggest investing in third-party service insurance, given the current risk climate.
However, after running a financial CRQ simulation, the CISO could reveal that there's only a 5% chance that the company's third-party network would lead to more than $10,000 in damages due to cyber events. This amount is so insignificant that the board member's initial idea, although not without merit, is costly and unnecessary.
By clearly demonstrating ROI, the boardroom gains a tangible understanding of the value of specific cyber programs, maximizing the CISO's chance of securing the necessary funding.
Another strategy CISOs can harness with the support of a financial CRQ is incorporating industry standards into their budget requests. The argument for this approach is straightforward: If other similarly-sized organizations invest a specific amount in cybersecurity, it’s a strong indicator that your organization should do the same to avoid common industry risks.
If relevant, CISOs can also leverage the fact that their organization trails behind in cyber spending. Boards are often concerned about maintaining a competitive edge, and security measures play a pivotal role in this. CISOs can build a strong argument for budget approval by highlighting that competitors dedicate more resources to cybersecurity.
If you’re interested in learning more about how a financial cyber risk quantification can help CISOs in executive discussions, watch “Leveraging CRQ for Effective Board Level Decision Making.”
Speaking in a vocabulary that the boardroom and C-level executives understand should be the top priority when making the case for the proposed budget, ensuring more effective communication. Indeed, a rising narrative in the cybersecurity industry states that CISOs must start developing this historically underrated soft skill to succeed in their positions.
A financial CRQ significantly aids security leaders in this mission, translating technical cyber jargon into familiar business terms. Leveraging the language of finance makes your message more accessible and reduces confusion because executives are accustomed to discussing risk in monetary values.
This reframing also fosters a sense of trust and reliability, as boards are more likely to engage in the conversation. By converting complex cyber risk assessments into dollars and cents, vague warnings about data breaches and risk mitigation plans transform into tangible business implications.
In a time when CISOs are under immense pressure to explain in detail their cybersecurity programs, justify prioritization decisions, and demonstrate ROI, financial CRQ models emerge as a power ally. This solution arms CISOs to make data-driven decisions and provide clear evidence of their cybersecurity spending choices while speaking the board's language.
Moreover, when navigating tricky economic situations, remember that CRQ isn't merely a tool for justifying a cyber budget. It also offers your team a strategic approach to protecting your organization from a cyber event's potentially devastating financial consequences.
By quantifying risks, demonstrating ROI, and identifying areas for cost savings, you can easily build a compelling business case that not only secures the necessary cybersecurity budget but also positions you for future success.
When it comes to cybersecurity, it’s not just about defending against threats; it’s about safeguarding your organization’s financial stability. Equip yourself with Kovrr’s leading CRQ solution that can help make a data-driven case for strong cyber programs.
Sign up for a free demo today. Your organization’s financial future depends on it.
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