At a recent BT security forum, one of the participants expressed the following opinion: “I think risk assessments are an outdated rather subjective approach to security. Probabilistic analysis is only leading to predictable results. Sociology suggests basing security in trust base methods – not risk.”
This is an interesting statement and many of our readers are probably trying to determine the best way to analyze security metrics and determine their risk appetite. Rather than just comment back, we thought we’d asked our experts within BT for their opinions on this issue.
Michael W Nawrath, BT Senior Security Consultant, says:
I cringe at the statement that a “risk register doesn’t work” or implying risk management is not a good process to continue to develop; I find that statement totally incorrect. A lot of thought has to go into developing an adequate risk management process and when implemented correctly can greatly focus spending more wisely for an organization.
Risk Management works very well if implemented and used correctly. Risk Rating can be thought of as an equation: Likelihood x business impact. We use effective risk ratings to help decide where to focus our time and resources.
A big problem in the past for many financial organizations was that, all too often, IT folks would determine the risk rating. The Federal Financial Institutions Examination Council (FFIEC) has, over the past few years, helped guide financial companies towards a more comprehensive risk rating process. It incorporates key information from business decision makers that is used to feed the Business Impact determination, with IT SME’s or assessors determining the Likelihood.
Tom Le, Director of Research and Development, BT Managed Security Solutions Group offers a competing point of view:
The main argument against risk assessments and risk registers being effective is the same argument that Nassim Nicholas Taleb uses to explain outlier events: that almost all major events and innovations are unpredicted and unpredictable. Describing these outlier events as ‘Black Swans’ he argues that the unlikelihood of an Outlier events is so huge, that risk models just don’t account for them properly. Even if you assign something a .0001% probability, what if that probability does occur and destroys your entire business?
I’m not arguing against risk models, just suggesting that from a customer communication perspective, if they believe that the reason risk models do not work well is because of outliers, then there is no way to convince them, no matter how structured and developed a risk model you present. A good approach is to understand what they find subjective. Somewhere in the discussion, I expect you will hear them say something like “how do you know if the probability of a targeted attack is really 0.00001% and not 0.001%? And how do you decide that the damage to the business is only $135 x number of accounts breached and not significantly more based on brand damage and legal liability? If you can’t answer this with any degree of certainly, how do I know that you’re not off by a factor of 10 or 100… or 1000?”
Omar Zaidi, Senior Principal Consultant, IT Optimization Practice Head, BT, offers additional guidance:
You have to have a way of assigning likelihoods to risks so you can balance off where to assign your resources to mitigate them. That’s not where you stop. I highly doubt sociology on its own can give you the answers, and I would challenge the CSO back to ask how a sociological approach is better than a risk management approach. Many, many sociological studies I’ve seen done have flawed statistical analysis and data gathering methods.
As mentioned above, Black Swans are always there, but you have to decide how much capital (people, tools, etc.) is going to be tied up in mitigating something with 0.001% probability, but, which if it happens, could put your company into a fatal death-spiral.
Savvy CIOs and CSOs and business risk analysts should factor this in. If they’re not, you run the risk of ending up with a headline and a news story that has legs at best, and a business closing its doors, at worst. Risk assessment is the first step. Once you know what the risks are, you need to dig into each one deeper to find out what you would have to do if that risk emerges. Then, you can assign a financial/capital/business/customer impact. At that point, you know how to reorganize your risk matrix from to better reflect a total picture.
In my opinion, true risk management is about digging deeper into the events, looking for black swans, figuring out what your company’s level of exposure is, and how your IT and Risk teams would handle the situation.
SecureThinking readers: What’s your take on this debate? Join in on the conversation by including a comment below.