Home > Articles

This chapter is from the book

This chapter is from the book

Risk Assessment

A risk assessment is the process of identifying and prioritizing risks to the business. The assessment is crucial. Without an assessment, it is impossible to design good security policies and procedures that will defend your company’s critical assets. Risk assessment requires individuals to take charge of the risk-management process. These can be either senior management or lower-level employees. If senior management is driving the process, it’s considered top-down security, which is the preferred method. After all, senior management knows the goals and objectives of the company and are ultimately responsible. With senior management’s support, security will gain added importance. Management can also set the tone and direction of the security program and can define what is most critical.

Bottom-up security refers to a process by which lower-ranking individuals or groups of individuals attempt to implement better security-management practices without the active support of senior management. Bottom-up security places these individuals in a situation that’s unlikely to be successful. Without support from senior management, employees typically don’t see risk management and good security practices as being that important. Even if these individuals can successfully determine risks and suggest good controls, they’ll have a hard time procuring the needed funds for implementation.

Risk Management

Risk management is the act of determining what threats your organization faces, analyzing your vulnerabilities to assess the threat level, and determining how you will deal with the risk. Some of the major parts of risk management include developing the risk-management team, identifying threats and vulnerabilities, placing a value on the organization’s assets, and determining how you will deal with the risk you uncover. The following definitions are important to know for risk management:

  • Threat—A natural or man-made event that could have some type of negative impact on the organization.

  • Vulnerability—A flaw, loophole, oversight, or error that can be exploited to violate system security policy.

  • Controls—Mechanisms used to restrain, regulate, or reduce vulnerabilities. Controls can be corrective, detective, preventive, or deterrent.

Before you spend too much time struggling with all these concepts, take a moment to review Figure 3.2, which displays the relationship among threats, vulnerabilities, and controls. Notice that a threat by itself does not represent a danger and is not sufficient for a successful attack. A threat agent is required for an attack to be successful. A threat agent can be described as any circumstance or event that has the potential to cause harm to information assets through destruction, disclosure, or modification. Figure 3.2 uses an example threat of someone hacking a web server. Although it’s true that anyone can attempt to attack a web server, the attacker needs a threat agent to be successful. The threat agent is described in Figure 3.2 as unpatched web server software that the attacker can access.

Figure 3.2  Threats, vulnerabilities, and controls.

Risk-Management Team

Don’t start thinking that this is a job you are going to take on by yourself. Risk management is a big job. You’ll need co-workers and employees from other departments to help. To do an effective job of risk-management analysis, you must involve individuals from all the different departments of the company. Otherwise, you run the risk of not seeing the big picture. It would be hard for any one person to understand the inner workings of all departments.

Sure, as an IT or security administrator, you understand the logical risk the IT infrastructure faces, but do you really have a grasp of the problems HR might have? These might include employee controls, effective termination practices, and control of confidentiality information. Bringing in key employees from other functional areas is required if you expect the risk management process to be successful. Consider employees from the following groups:

  • Information system security

  • IT and operations management

  • System and network administration

  • Internal audit

  • Physical security

  • Business process and information owners

  • Human resources

  • Legal

  • Physical safety

Identifying the Threats and Vulnerabilities

Identifying threats and vulnerabilities is another important part of the risk-management process. Earlier we discussed how a natural or man-made threat can have some type of negative impact on the organization. Now let’s look at where threats can come from. Threats can occur as a result of human or natural factors, and can be caused by internal or external events. Figure 3.3 details some common threats to security. This is not meant to be an all-inclusive list, but it should get you thinking about some of the ways in which the organization can be threatened. Threats can also occur because of many other reasons, such as errors in computer code, accidental buffer overflows, or the unintentional actions of employees.

Figure 3.3  Security threats.

Identifying threats, threat agents, and vulnerabilities is just one step of the process. Knowing the values of the assets that you are trying to protect is also important because it would be foolish to exceed the value of the asset by spending more on the countermeasure than the asset is worth. Organizations have only limited funds and resources, so countermeasures must be effectively deployed to guard what has been deemed most critical.

Without placing dollar values or using some other metric to assess these variables, how can you start to analyze the threats, vulnerabilities, and risks the organization faces? One approach is to develop a table such as the one shown in Table 3.1. This helps demonstrate the relationship among threats, vulnerabilities, and risk. For example, an intruder can represent a threat that exposes the organization to theft of equipment because there is no security guard or controlled entrance.

Table 3.1 Threat, Vulnerability, and Risk

Threat Type

Threat

Exploit/Vulnerability

Exposed Risk

Human factor internal threat

Intruder

No security guard or controlled entrance

Theft

Human factor external threat

Hacker

Misconfigured firewall

Stolen credit card information

Human factor internal threat

Current employee

Poor accountability; no audit policy

Loss of integrity; altered data

Natural

Fire

Insufficient fire control

Damage or loss of life

Natural

Hurricane

Insufficient preparation

Damage or loss of life

Malicious external threat

Virus

Out-of-date antivirus software

Virus infection and loss of productivity

Technical internal threat

Hard drive failure

No data backup

Data loss and unrecoverable downtime

Placing a Value on Assets

Now, before you can really manage risk, you must know what’s most valuable to the organization. You need to put a value on the organization’s assets. You might be thinking that by value, we are discussing dollar amounts. That is one way to assess value, called quantitative assessment. You also have the choice to perform a qualitative assessment. If you choose to perform a qualitative assessment, you won’t be dealing with dollar amounts because this is usually scenario driven. Qualitative and quantitative assessment techniques are described more in the following two sections.

Quantitative Assessment

Quantitative assessment deals with numbers and dollar amounts. It attempts to assign a cost (monetary value) to the elements of risk assessment and to the assets and threats of a risk analysis.

To fully complete a quantitative risk assessment, all elements of the process (asset value, impact, threat frequency, safeguard effectiveness, safeguard costs, uncertainty, and probability) are quantified. Therein lies the problem with purely quantitative risk assessment: It is difficult, if not impossible, to assign dollar values to all elements; therefore, some qualitative measures must be applied to quantitative elements. A quantitative assessment requires substantial time and personnel resources. The quantitative assessment process involves the following three steps:

  1. Estimate potential losses (SLE)—This step involves determining the single loss expectancy (SLE). SLE is calculated as follows:

  2. Single loss expectancy x Asset value = Exposure factor

    Items to consider when calculating the SLE include the physical destruction or theft of assets, the loss of data, the theft of information, and threats that might cause a delay in processing. The exposure factor is the measure or percent of damage that a realized threat would have on a specific asset.

  3. Conduct a threat analysis (ARO)—The purpose of a threat analysis is to determine the likelihood of an unwanted event. The goal is to estimate the annual rate of occurrence (ARO). Simply stated, how many times is this expected to happen in one year?

  4. Determine annual loss expectancy (ALE)—This third and final step of the quantitative assessment seeks to combine the potential loss and rate per year to determine the magnitude of the risk. This is expressed as annual loss expectancy (ALE). ALE is calculated as follows:

  5. Annualized loss expectancy (ALE) x Single loss expectancy (SLE) = Annualized rate of occurrence (ARO)

When performing the calculations discussed in this section, you should include all associated costs, such as these:

  • Lost productivity

  • Cost of repair

  • Value of the damaged equipment or lost data

  • Cost to replace the equipment or reload the data

When these costs are accumulated and specific threats are determined, the annualized loss expectancy can be calculated. This builds a complete picture of the organization’s risk and allows the organization to plan an effective strategy.

Review Table 3.2; we can work through the virus risk example given there. First, you need to calculate the SLE. The SLE requires that you multiply the exposure factor by the asset value:

    $9,450 X .17 = $1,650

The asset value is the value you have determined the asset to be worth. The exposure factor is the amount of damage that the risk poses to the asset. For example, the risk-management team might consult with its experts and determine that 17% of its Word documents and data could be destroyed from a virus.

Next, the ARO is calculated. The ARO is the frequency at which this event is expected to happen within a given period of time. For example, the experts might have determined that there is a 90% chance of this event occurring within a 1-year period.

Finally, the ALE is calculated. The ALE is the SLE multiplied by the ARO:

    $1,650 X .9 = $1,485

This third and final step of the quantitative assessment seeks to combine the potential loss and rate per year to determine the magnitude of the risk. You can interpret this figure to mean that the business should expect to lose an average of $1,485 each year due to computer viruses.

Table 3.2 How SLE, ARO, and ALE Are Used

Asset

Risk

Asset Value

Exposure Factor

SLE

Annualized Frequency

ALE

Customer database

Hacked

$432,000

.74

$320,000

.25

$80,000

Word documents and data files

Virus

$9,450

.17

$ 1,650

.9

$1,485

Domain controller

Server failure

$82,500

.88

$ 72,500

.25

$18,125

E-commerce website

DDoS

$250,000

.44

$110,000

.45

$49,500

Automated tools are available that minimize the effort of the manual process. These programs enable users to rerun the analysis with different parameters to answer "what-ifs." They perform calculations quickly and can be used to estimate future expected losses easier than performing the calculations manually.

Qualitative Assessment

Maybe you are thinking that there has to be another way to perform an assessment. If so, you are right. Qualitative assessment is scenario driven and does not attempt to assign dollar values to components of the risk analysis. Purely quantitative risk assessment is hard to achieve because some items are difficult to tie to fixed dollar amounts. Absolute qualitative risk analysis is possible because it ranks the seriousness of threats and sensitivity of assets into grades or classes, such as low, medium, and high. An example of this can be seen in NIST 800-26, a document that uses confidentiality, integrity, and availability as categories of loss and then ranks each loss based on a scale of low, medium, and high. The ranking is subjective:

  • Low—Minor inconvenience that could be tolerated for a short period of time.

  • Medium—Could result in damage to the organization or cost a moderate amount of money to repair.

  • High—Would result in loss of goodwill between the company and clients or employees. Could result in a legal action or fine, or cause the company to lose revenue or earnings.

Table 3.3 displays an example of how this process is performed. As you can see, no dollar amounts are used. Potential loss is only ranked as high, medium, or low.

Table 3.3 Performing a Qualitative Assessment

Asset

Loss of Confidentiality

Loss of Integrity

Loss of Availability

Customer database

High

High

Medium

Internal documents

Medium

Medium

Low

Advertising literature

Low

Medium

Low

HR records

High

High

Medium

The downside of performing a qualitative assessment is that you are not working with dollar values, so it is sometimes harder to communicate the results of the assessment to management. Another downside is that it is derived from gut feelings or opinions of experts in the company, not always an "exact assessment" that senior management will want to receive from you.

Other types of qualitative assessment techniques include these:

  • The Delphi Technique—A group assessment process that allows individuals to contribute anonymous opinions.

  • Facilitated Risk Assessment Process (FRAP)—A subjective process that obtains results by asking questions. It is designed to be completed in a matter of hours, making it a quick process to perform.

Handling Risk

Now that you have been introduced to some of the ways to determine risk, you are tasked with making a decision on how to deal with what you have found. Risk can be dealt with in four general ways, either individually or in combination.

  • Risk reduction—Implement a countermeasure to alter or reduce the risk.

  • Risk transference—Purchase insurance to transfer a portion or all of the potential cost of a loss to a third party.

  • Risk acceptance—Deal with risk by accepting the potential cost and loss if the risk occurs.

  • Risk rejection—Pretend that the risk doesn’t exist and ignore it. Although this is not a prudent course of action, it is one that some organizations choose to take.

Which is the best way to handle risk? This depends on the cost of the countermeasure, the value of the asset, and the amount by which risk-reduction techniques reduce the total risk. Companies usually choose the one that provides the greatest risk reduction while maintaining the lowest annual cost. These concepts are expressed numerically as the following formulas:

    Threat X Vulnerability X Asset value = Total risk

    Total risk - Countermeasures = Residual risk

No organization can ever be 100% secure. There will always be remaining risk. The residual risk is the amount that is left after safeguards and controls have been put in place.

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020