What is Cyber Risk?

Cyber risk focuses on how a business leaves itself open to cyber threats. It includes any possible known or unknown vulnerability, such as lack of two-factor authentication, present third-party security faults, and zero-day exploits that could lead to a security breach. The more cyber risks that are present, the more likely it is that they can lead to ransomware attacks or phishing and business email compromises.

For small and medium-sized businesses (SMBs), managing cyber risk is crucial. Cyber risks aren’t just isolated IT issues; they can cause severe harm to your organization, such as damaging your company’s reputation, violating laws and regulations, hefty financial penalties and disruption to your operations.

To protect your business, you need to understand how cyber risk can impact your business and how to build a cybersecurity program that addresses your cyber risk.

How is Cyber Risk Different From Business Risk?

Business risk is a broad term that encompasses all the potential threats that could prevent a company from achieving its goals and objectives. These risks can include everything from market competition and economic downturns to operational issues and compliance failures.

Cyber risk, on the other hand, is a specific type of business risk and refers to the potential damage a business might suffer due to a data breach or cyberattack. Cyber risk can lead to financial losses, reputation damage, loss of intellectual property, regulatory penalties, business disruption, and more.

Today, cyber risk and business risk are tightly connected. A single cyber incident can escalate into a business-wide crisis, affecting everything from your financial stability to your customer trust. Managing cyber risk has become a crucial part of your overall business risk strategy because, in many cases, a cyber event can amplify other business risks—leading to more severe consequences.

To truly protect your organization, cyber risk management must be fully integrated into your broader risk management efforts.

What Kind of Cyberattacks are Caused by Cyber Risk?

Cyber risk opens the door to a range of potential attacks that can have serious consequences for your business. Here are some common cyberattacks that result from unaddressed cyber risks:

Network Breach: Unauthorized intrusion into an organization's network, potentially leading to the theft or corruption of sensitive data. Attackers can gain access through unpatched vulnerabilities, weak passwords, or poor network configurations.

Ransomware Attacks: Malicious software designed to block access to your own systems or data until a ransom is paid. This type of attack can bring your operations to a standstill, and recovery can be costly—both financially and reputationally.

Business Email Compromise (BEC): Scams that typically use email fraud to trick the recipient into revealing sensitive information or transferring funds.

Insider Threats: Employees or contractors with access to your critical data and systems can pose a threat, either intentionally or unintentionally. Whether through malicious actions or careless mistakes, insiders can cause serious damage.

Phishing Attacks: Cybercriminals use deceptive emails or messages to lure individuals into revealing confidential information, such as passwords or financial data. Phishing remains one of the most common entry points for broader attacks.

Cloud Vulnerability: Potential weaknesses in cloud systems that attackers can exploit to cause damage or gain unauthorized access to data. Misconfigurations, insecure APIs, or compromised credentials can lead to unauthorized access to your data in the cloud.

How Do I Quantify Cyber Risk?

Quantifying cyber risk is an important part of understanding how it could impact your business. However, it can be difficult to quantify due to the complex and rapidly changing threat landscape. Here’s a simplified approach to help you break it down:

Risk Assessment: Start by identifying your business’s key digital assets, such as customer data, intellectual property, financial records, or key systems that support operations. Next, identify the specific threats that could harm those assets, and assess the vulnerabilities that could be exploited.

Estimate the Potential Impact: For each risk, estimate the possible impact on your business. This can be measured in terms of financial loss (e.g., how much it would cost to recover from a ransomware attack), operational downtime (e.g., how long critical systems would be down), or reputational damage (e.g., loss of customers or trust).

Calculate the Likelihood: Determine how likely each risk is to occur. This can be based on past incidents in your industry, current threat intelligence, or the perceived intent of potential attackers. For example, if your industry is a common target for phishing attacks, the likelihood would be high.

Risk Quantification: Once you have both the potential impact and the likelihood, you can quantify the risk. One simple method is multiplying the estimated impact by the likelihood to get a risk score. This score helps you prioritize which risks need immediate attention.

Monetize the Risk: Where possible, assign a dollar value to the potential impacts. For example, you can estimate the cost to recover from a data breach, including legal fees, fines, customer compensation, and lost revenue. By putting a monetary figure on each risk, you can make more informed decisions on how much to invest in mitigating that risk.

Continual Review: Your risks will change over time as new vulnerabilities emerge, or as you implement security controls. It's critical to continually review and update your risk assessment to reflect changes in your environment or business operations.

For better accuracy, you may want to consult with professionals who specialize in cyber risk quantification.

What are the Legal Implications of Cyber Risk?

Depending on the nature of the cyber incident, type of data that’s compromised, the compliance regulations impacting your industry, cyber risk can have significant legal implications on your business.

Here are some legal consequences associated with cyber incidents:

Data Privacy Regulations

If a breach exposes personal data, it can trigger data privacy laws like the General Data Protection Regulation (GDPR) in the EU or the California Consumer Privacy Act (CCPA) in the U.S. These regulations require businesses to protect personal data and disclose breaches. Failing to comply can result in hefty fines—for example, under GDPR, fines can reach up to €20 million or 4% of your company’s annual revenue, whichever is higher.

Compliance Violations

Many industries have specific cybersecurity compliance requirements. For instance, the Payment Card Industry Data Security Standard (PCI DSS) applies to companies that handle credit card transactions. Failure to meet standards can lead to penalties, increased oversight, and loss of specific privileges.

Legal Liability

If a cyber incident affects customers, partners, or employees, your company could face lawsuits from affected parties. These lawsuits can lead to significant financial penalties, not to mention the legal costs and the damage to your company’s reputation.

Disclosure Requirements

Many regulations, such as GDPR or HIPAA, require businesses to notify affected individuals, regulators, and sometimes the public if sensitive data is breached. The cost of notifications, legal consultations, and public relations efforts can quickly add up, and failing to notify promptly can result in additional fines.

Regulatory Scrutiny

A serious data breach could result in increased regulatory scrutiny, leading to audits and examinations. Regulators may demand additional reporting, which can disrupt your normal operations.

Contractual Obligations

Breaches can also violate your contractual agreements with partners, vendors, or customers, especially if your contracts contain data security clauses. A breach may be considered a breach of contract, leading to further legal consequences or loss of business relationships.

To minimize these legal risks, it’s critical to develop a cyber risk management program that ensures you comply with relevant regulations, protect sensitive data, and have a clear plan for handling potential breaches.

What is Cyber Risk Management?

Cyber risk management involves identifying, assessing, and taking steps to mitigate risks that can cause cyberattacks or data breaches and harm your business. It aims to organize and prioritize cyber risks based on the potential impacts on your business and the level of vulnerability.

Here are the key steps involved in cyber risk management:

Identify Cyber Risks

Start by identifying the specific cyber risks your business faces. This can include external threats like ransomware or phishing attacks, as well as internal risks such as employee errors or insider threats. Consider vulnerabilities in your systems, software, and third-party services.

Assess and Prioritize the Risks

After identifying potential risks, evaluate their potential impact on your business and the likelihood of them occurring. For example, a phishing attack might be more likely but have a lower impact, whereas a ransomware attack might be less frequent but highly disruptive. This assessment helps you prioritize where to focus your resources.

Implement Cybersecurity Controls
Once you’ve identified and assessed the risks, take steps to mitigate them. Common cybersecurity controls include multi-factor authentication (MFA), security awareness training, vulnerability management programs, and 24/7 Managed Detection and Response (MDR) services.

Align Security Investments with Business Objectives
Ensure that your cybersecurity investments are aligned with your business goals. For example, if your goal is to maintain customer trust, you should prioritize security controls that protect customer data and ensure compliance with data protection regulations like GDPR or CCPA. By aligning security efforts with business objectives, you can justify cybersecurity investments to executives and stakeholders.

Regularly Monitor and Review
Cyber risk management is not a one-time activity. You need to continuously monitor your systems and review your security measures. As your business evolves, new risks may emerge, and your security strategy should adapt accordingly.

By following these steps, businesses can create a robust cybersecurity posture that addresses the most critical risks while staying within budget and resource constraints.

How Do Risk Appetite, Risk Tolerance, and Risk Posture Impact Cyber Risk Management?

Effectively managing cyber risk depends on understanding how much risk your business is willing and able to handle. This is shaped by three key concepts – risk appetite, risk tolerance, and risk posture.

Your risk appetite, risk tolerance, and risk posture play an important role in your overall cyber risk management strategy because they’ll inform how you set your priorities, whether you make certain trade-offs or not, and how your cybersecurity program will turn out:

Risk Appetite

This is the type and amount of risk your business is willing to accept to achieve its goals. Your organization’s risk appetite will determine how conservative or proactive your cyber defense strategies will be.

Your risk appetite helps prioritize which investments you make with your cybersecurity budget. For example, if your business has a low-risk appetite, you’ll likely invest more in preventative measures (e.g., endpoint protection). However, with a higher risk appetite, you may invest in 24/7 threat detection and response solutions.

Risk Tolerance

This is the maximum amount of risk your business is willing to endure before they start to negatively impact operations. Therefore, this is more about the degree of uncertainty or potential disruption your business can handle.

Your risk tolerance informs the decisions you make when you must make a trade-off. For example, if a critical business function needs cloud adoption, which will undoubtedly introduce new risks, your risk tolerance will guide whether you should proceed or invest in added controls like cloud security monitoring.

Risk Posture

This is the combination of risk appetite and risk tolerance, which will determine your overall approach to risk management. It reflects the strategies, policies, and controls you have in place to manage cyber risks.

Your risk posture will influence your long-term cybersecurity strategy, including how you approach compliance, sensitive data protection, and incident response. A proactive risk posture means you'll likely adopt more cutting-edge security technologies, while a conservative posture might focus on regulatory compliance and basic defense-in-depth strategies.

When you align your cybersecurity efforts with your risk appetite, tolerance, and posture, you ensure that your cyber risk management approach supports your broader business goals while staying within acceptable risk limits.

What is the Difference Between a Maturity and Risk-based Approach to Cyber Risk Management?

When it comes to cyber risk management, there are two common approaches: the maturity-based approach and the risk-based approach. Each has its advantages, but they differ in focus and resource allocation.

Maturity-based Approach to Cyber Risk Management

A maturity-based approach to managing cyber risk involves implementing specific capabilities and controls with the goal of achieving a desired level of maturity based on standard industry frameworks, such as the Cybersecurity Maturity Model Certification (CMMC) or the NIST Cybersecurity Framework. The focus is on implementing a wide range of security controls across your organization to meet a predefined benchmark, regardless of your specific risk profile.

Risk-based Approach to Cyber Risk Management

In contrast, a risk-based approach focuses on building appropriate controls for your significant vulnerabilities, allowing you to prioritize your defenses for the most critical areas of your business. Risk-based approaches tend to be significantly more cost-effective than maturity models since you have the option to invest heavily in defenses for the vulnerabilities that affect the business’s most critical areas.

Which Approach is Right for Your Business?

For SMBs, a risk-based approach is often more practical. It allows you to invest in cybersecurity in a way that aligns directly with your business priorities and the most likely threats your organization faces.

While a maturity-based model offers comprehensive protection, it may be more suited for larger enterprises with the resources to invest in security across all areas, regardless of the level of risk.

Why Should You Leverage A Risk-based Approach to Cyber Risk?

By leveraging a risk-based approach, you have the option to invest heavily in your defenses for the vulnerabilities that affect your business’ most critical areas that reduce cyber risk the most.

Therefore, when building a risk-based approach to cybersecurity, you need to align your investments to security outcomes so you can:

• Alleviate resource constraints in your organization
• Build an enterprise-level information security program, policies and procedures
• Meet and exceed compliance requirements
• Align business objectives with your unique risk and exposure

How the MITRE ATT&CK® Framework Can be Used for A Risk-Based Approach

The MITRE ATT&CK framework is a globally accessible knowledge base of tactics, techniques, and procedures (TTPs) used by threat actors based on real-world observations and activity. It contains hundreds of techniques and sub-techniques organized across 14 tactics that provide a foundational guide to help organizations “know thy enemy”.

The MITRE ATT&CK framework breaks down various attack methods used by cybercriminals, helping you identify which threats are most relevant to your industry. By mapping these TTPs to your business, you can build a targeted risk-based cybersecurity strategy that strengthens your defenses against the most pressing risks.

Here are some ways that the MITRE ATT&CK framework can help you take a risk-based approach to cybersecurity:

Assess Your Vulnerabilities: Using the framework, you can pinpoint areas in your environment that are vulnerable to specific attack techniques. For example, if lateral movement techniques (where an attacker moves deeper into your network after initial access) are common in your industry, you can assess whether your systems have the necessary controls to detect and prevent these activities.

Prioritize Risk Mitigation: One of the strengths of MITRE ATT&CK is that it helps you prioritize which attack techniques are most likely to succeed against your current defenses.

Map Controls to Attacks: The framework enables you to map your existing cybersecurity controls to the specific techniques that attackers are using. This allows you to see where your defenses are strong and where there may be gaps.

Demonstrate Risk to Leadership: By leveraging MITRE ATT&CK, you can clearly illustrate the specific risks your business faces to executives and stakeholders. This makes it easier to justify cybersecurity investments by showing how your security program addresses real-world threats.

Adapt to Evolving Threats: As new techniques are identified and added to the MITRE ATT&CK framework, you can update your risk management strategy to adapt to evolving threats. This ensures that your risk-based approach remains current, focusing on the latest and most relevant attacker techniques.

By focusing on specific techniques attackers are likely to use against your business, you can prioritize where to allocate resources and optimize your defenses for maximum impact. For SMBs, this means you can concentrate your efforts on mitigating the risks that pose the greatest threat to your operations, without overextending your budget or resources.

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eSentire Can Help Your Business Address Cyber Risk

eSentire helps with your cyber risk management by proactively identifying gaps in your cybersecurity posture and building comprehensive cybersecurity strategies to minimize your business risk.

We help organizations build resilience against emerging threats and prevent business disruption with:

• eSentire Vulnerability Management Service, which helps you identify, prioritize, and patch vulnerabilities before attackers can exploit them to gain access into your environment.
• eSentire Managed Phishing and Security Awareness Training (PSAT), which trains your employees on real-world phishing scenarios, test user resiliency, and drive behavioral change.
• 24/7 eSentire Managed Detection and Response (MDR), which provides deep visibility into your environment with 24/7 threat detection and response.
• eSentire Digital Forensics and Incident Response (DFIR), which ensures you're ready if there’s an incident and can recover quickly.

To learn how eSentire can help you manage your cyber risks, contact us today!