INFORMATION SECURITY

MANAGEMENT

LECTURE 8: RISK MANAGEMENT

CONTROLLING RISK

You got to be careful if you don’t know where you’re going,

because you might not get there. – Yogi Berra
Introduction

To keep up with the competition, organizations must

design and create a safe environment in which business
processes and procedures can function
Risk Control Strategies

Choose one of four basic strategies:

 Avoidance
 Transference
 Mitigation
 Acceptance
Avoidance

The risk control strategy that attempts to prevent the

exploitation of the vulnerability

•Examples
Transference

The control approach that attempts to shift the risk to

other assets, other processes, or other organizations

•Examples
Mitigation

The control approach that attempts to reduce the damage

caused by exploitation of vulnerability

•Types of Mitigation Plans

Acceptance

• Do nothing to protect an information asset

– To accept the loss when it occurs
Managing Risk

• Risk appetite (also known as risk tolerance)

Managing Risk – Residual Risk

• Residual Risk is a combined function of:

– Threats, vulnerabilities and assets, less the effects of the
safeguards in place
Managing Risk – Residual Risk

• Once a control strategy has been selected and

implemented:
– The effectiveness of controls should be monitored and
measured on an ongoing basis (remember our discussion
on metrics and baselining)

• determines effectiveness and accuracy of the residual

risk estimate
Managing Risk – Risk Control

• Risk control involves selecting one of the four risk

control strategies

Should the organization ever

accept the risk?
Risk Acceptance

Figure 9-2 Risk-handling action points

Source: Course Technology/Cengage Learning
Feasibility and Cost-Benefit Analysis

• There are a number of ways to determine the

advantage or disadvantage of a specific control
• The primary means are based on the value of the information
assets that it is designed to protect

• Economic feasibility
– Evaluating the worth of the information assets to be protected
and the loss in value if those information assets are
compromised
Cost-Benefit Analysis: Cost

• Factors that affect the cost of a safeguard

– Cost of development or acquisition of hardware, software,
and services
– Training fees
– Cost of implementation
– Service and maintenance costs
Cost-Benefit Analysis: Benefit

The value to the organization of using controls to prevent

losses associated with a specific vulnerability
Cost-Benefit Analysis: Asset Valuation

The process of assigning financial value or worth to each

information asset

Involves estimation of real and perceived costs associated

with the design, development, installation, maintenance,
protection, recovery, and defense against loss and litigation
Cost-Benefit Analysis: Asset Valuation

• An organization must be able to place a dollar value

on each information asset it owns

• Potential loss is that which could occur from the

exploitation of vulnerability or a threat occurrence
Cost-Benefit Analysis Calculation

• CBA determines whether or not a control alternative is

worth its associated cost

• CBAs may be calculated before a control or safeguard

is implemented Or calculated after controls have been
implemented and have been functioning for a time
Cost-Benefit Analysis Calculation

CBA = ALE(prior) – ALE(post) – ACS

– ALE (prior to control) is the annualized loss

expectancy of the risk before the implementation
of the control

– ALE (post-control) is the ALE examined after the

control has been in place for a period of time

– ACS is the annual cost of the safeguard

Example of Cost-Benefit Analysis Calculation

Dropping an iPad and breaking the screen

Asset value: $700
 Exposure factor: 50%
 SLE = ?
 ARO = 25% chance of damaging
 ALE (prior) = ?
 Assume the ARO is reduced to 5% by using control
 ALE (post) = ?

CBA (cost of case = $30)

 CBA = ALE(prior) – ALE(post) – ACS
 CBA = ?
Example of Cost-Benefit Analysis Calculation

Unprotected customer database

Asset value: $200,000
 Exposure factor: 50%
 SLE = ?
 ARO = 75% chance of occurring
 ALE (prior) = ?
 Assume the ARO is reduced to 5% by using control
 ALE (post) = ?

CBA (ACS = $5,000)

 CBA = ALE(prior) – ALE(post) – ACS
 CBA = ?
Other Methods of Establishing Feasibility

• Organizational feasibility analysis

• Operational feasibility
• Technical feasibility
• Political feasibility
Alternatives to Feasibility Analysis

• Benchmarking
• Due care and due diligence
• Best business practices
• Gold standard
• Government recommendations
• Baseline
Risk Management and Employees

“Only two things are finite, the universe and human stupidity,
and I’m not sure about the former.”
- Albert Einstein

Types of Employees and Security Knowledge

 Those who know
 Those who don’t
 Those who think they know but don’t