Translating Preventative Risk Mitigation to ROI 

Cybersecurity is a critical concern for businesses of all sizes and industries. With the increasing frequency and sophistication of cyber-attacks, organizations must implement preventative risk mitigation measures to protect their assets and data. However, many companies struggle to justify the cost of cybersecurity measures in terms of tangible return on investment (ROI). This blog post will guide how to translate preventative risk management strategies into measurable ROI for your organization.   

It is essential to understand the potential costs of a cyber-attack. These costs can include direct financial losses from stolen or compromised data, lost productivity, operational downtime, and reputation damage. Additionally, organizations may face regulatory fines and legal fees if they are non-compliant with industry standards and regulations.

Let’s first look at what risk mitigation is as a process. It can be divided into two steps:  

• Evaluation of the identified risk and the potential impact on the company:

      – reputation; 

      – regulatory laws and potential penalties/fines; 

      – Contractual obligation;

• Assessment of possible mitigating options:

     – Avoidance: how can the company avoid the risk identified and continue to offer the business solution at what cost?  

     – Minimizing the risk: what controls can we implement to minimize the risk? 

     – Compensating controls: do we have alternative controls to put in place to minimize this risk?   

In determining whether to implement control or continue the business solutions, the company has to evaluate the amount of revenue generated for this solution, the identified risks, and the cost to remediate them based on the potential fines. If it isn’t cost-effective to implement a costly control, the company can decide to accept the risks and deal with the ramifications if the risks were to be exploited. 

How to calculate the ROI of risk mitigation

 Translating risk mitigation to ROI involves calculating the potential return on investment that can be achieved by implementing risk mitigation strategies. Organizations should consider the potential benefits of preventative risk mitigation. These benefits can include reducing the likelihood and severity of a cyber-attack, increasing organizational resilience, and improving compliance with industry standards and regulations. Additionally, organizations may see a reduction in insurance premiums if they demonstrate that they have implemented effective cybersecurity measures.   

It’s also important to note that preventative risk management measures are not one-time expenses but ongoing investments. Organizations should view cybersecurity as a continuous process, with regular updates and improvements to their measures to keep up with the ever-changing threat landscape. This ongoing process should also include frequent testing and monitoring to ensure that the measures are effective.   

The following are the step-by-step calculations involved in the process of translating preventative risk mitigation to ROI you can apply to your company: 

Step 1:

Identify the potential risks. The first step is identifying potential risks that may affect the organization. This can be done by conducting a risk assessment, which involves analyzing the internal and external factors that may impact the organization’s operations. The risks can be categorized based on their likelihood and potential impact. 

Step 2:

Determine the cost of mitigation. The next step is to determine the cost of implementing risk mitigation strategies to minimize the impact of identified risks. This cost can include the cost of implementing new policies, procedures, and technology, as well as the cost of training employees. 

Step 3:

Estimate the potential cost of a risk event. The third step is to estimate the potential cost of a risk event if it were to occur without any risk mitigation measures in place. This can be done by analyzing historical data, industry benchmarks, and expert opinions. 

Step 4:

Calculate the potential cost savings. The fourth step is to calculate the potential cost savings that can be achieved by implementing risk mitigation strategies. This can be done by subtracting the cost of mitigation from the potential cost of a risk event. For example, if the potential cost of a risk event is $500,000 and the cost of mitigation is $100,000, the potential cost savings would be $400,000. 

Step 5:

Determine the ROI. The final step is to determine the ROI of implementing risk mitigation strategies. You can do this by dividing the potential cost savings by the cost of mitigation and multiplying the result by 100 to get a percentage. For example, if the potential cost savings are $400,000 and the cost of mitigation is $100,000, the ROI would be 300% (i.e., $400,000 / $100,000 x 100 = 300%). 

By following these steps, an organization can translate risk mitigation efforts into measurable ROI, which can help justify the investment in risk management and provide a clear picture of the financial benefits of implementing risk mitigation strategies. 

Risk Mitigation: The True Value to Your Company

Once you understand the potential losses and prioritize risks, you can estimate the cost of implementing preventative risk mitigation measures for your organization, such as implementing a firewall, employing security software, advancing a security operation center (SOC), or providing employee security awareness training.   

Another way to maximize the ROI of risk mitigation is by creating a model that can scale with the business, such as an organizational threat model (OTM). The OTM is a 7-stage process inspired by the application threat modeling methodology, PASTA, applied at a corporate level. It intends to have risks proven by various critical contexts – business impact, likelihood, and the effectiveness of native countermeasures (or controls) that help reduce inherent risk levels. The Organizational Threat Model evolves beyond the speculative nature of ERAs and more concretely into evidence-based assessments. You can read more about it here.   

 In conclusion, translating preventative risk management into measurable ROI can be challenging for organizations. However, organizations can clearly understand the potential ROI of their cybersecurity investment by identifying and quantifying potential losses from a cyber-attack and estimating the cost of preventive measures. Additionally, by viewing cybersecurity as a continuous process and regularly testing and monitoring the measures, organizations can ensure that they effectively protect themselves against cyber threats. Cyber risk mitigation is an investment in your business continuity.