Cyber Risk quantification as a key factor in organization Investment strategy

Many organization leaderships are busy in the last few weeks reporting 2021 different business aspects in numbers and nice graphs: from financial results, cash flow, cash forecasts, HR recruitment performance, new customer, employees engagement level score, and marketing opportunities, except one: potential cyber risk loss.

Many organizations CIO or CISO are measuring cyber risk with severity heatmaps based on qualitative color-code indicators to interpret a threat matrix. But this must be changed, Executive risk officers or CFO’s should assign numerical values to the identified cyber risk threats (threat and risk quantification) and measure how effectively they allocate resources to mitigate them.

Today, cyber risk quantification is a key factor for making business strategic decisions, whether you are a board member or an individual investor doing due diligence. In the next coming months, executives and investors will have to use cyber risk as a strategic data-point before considering any decision.

Similar to other risk factors, insurers are leading the way on cyber risk standardization to evaluate properly the risk pricing, but securing coverage is already getting more challenging as prices increase, and it will only get harder as practices standardize.

Investing in cyber risk quantification is an indispensable value-add if you are looking to control costs and make wise, analytics-based investment decisions. As with any insurance policy, there are many caveats to consider including investing in a cyber quantification tool as a prerequisite for obtaining insurance coverage. The more a company invests in cyber security controls and tools, the more likely it will get access to insurance products. Understanding the cost-benefit of taking on risk vs. insuring against risk makes for smarter investing.

As investment holdings change over time, so too does cyber risk. We can’t predict the future, but those who are prepared and can measure threats continuously as closely as possible to a value are more prepared down the line when change happens.

Investors include many factors to drive a decision to keep, grow or sell a position or when evaluating a new opportunity. While data-driven tools help simplify these choices, if the cyber risk is still measured qualitatively, those tools can’t work. This is why the push towards standardizing and quantifying cyber risk is so important – measured risk adds another data-point to your diligence stack. Knowing how to size up cyber risk scenarios if data is not available is a handy strategy for investors to make the most informed decisions and ultimately turn risk unknowns into a strategic advantage.