The Ultimate Guide to Cyber Risk Management

Introduction

Cyberspace today transcends traditional boundaries. Accelerated digital transformation, the exponential proliferation of digital trends including the shift to remote work during the COVID-19 pandemic, and the increasing dependence on third parties are a few of the many drivers that have resulted in expanded cyber ecosystems.

A direct consequence is heightened cyber risk, which is now listed as one of the top five risks identified in the World Economic Forum’s Global Risk Report 2024. The increasing frequency of cyber incidents has proved to be not just costly in terms of loss of sensitive information and regulatory fines and penalties but also disruptive through the paralyzing of critical infrastructure. Cyber attacks also can cause serious reputational damage.

As a result, cyber leaders across the world are seeking to build a stronger “cyber resilience” posture, instead of a “cyber-defensive” posture. A robust cyber risk management program is critical for organizations to strengthen their cyber resilience posture and stay on top of the fast-moving cyber risks.

In this article, we will discuss the cyber risk management process, why it is important for organizations, some of the important frameworks and standards, and more.

Key Takeaways

• Cyber risk management is a systematic approach to identifying, assessing, and mitigating risks related to digital environments. The process includes steps such as identifying, assessing, mitigating, and monitoring cyber risks faced by an organization.
• Organizations can leverage frameworks like NIST CSF, ISO/IEC 27001, etc. to ensure their cyber risk management program is aligned to industry standard and best practices. The continuous nature of cyber risks requires ongoing vigilance and improvement to stay ahead of potential threats and safeguard critical assets.
• Strategies to combat it include threat intelligence gathering, penetration testing, and implementing recognized cybersecurity frameworks.
• Building a robust program involves regular risk assessments, security awareness training, utilization of security tools, establishment of incident response protocols, and regular testing and updating of controls.

What is Cyber Risk Management?

Cyber risk management refers to the continuous and proactive approach to identifying, assessing, and mitigating risks associated with digital environments. It requires understanding the full spectrum of cyber risks an organization faces, their severity and criticality, and systematically managing and mitigating them through proactive measures.

Considering businesses today are girdled with technology, it is pivotal to protect organizations from threat actors and vulnerabilities in cyberspace – which has the potential to jeopardize their operational, financial, and reputational health.

Given the fast-moving nature of cyber risks, the scope of cyber risk management is expanding beyond just managing and mitigating them. Today, it includes everything from technical defenses, including tools to monitor the threat landscape, scan vulnerabilities, etc., to implementing policies and training programs that improve cyber risk awareness of employees, bolstering an organization’s resilience against cyberattacks.

What are the Top Challenges in Managing Cyber Risks?

Cyber risk has increased in complexity: ransomware, phishing and spear-phishing attacks, rapid migration to the cloud, missing security patches, and data breaches due to remote work are just some of the many cyber threats and vulnerabilities that every organization struggles with. Here are some of the top challenges in managing cyber risks faced by organizations:

• Increased dependence on third-party providers: To meet business goals and gain the much-needed competitive advantage, organizations are increasingly relying on IT vendors and third-party suppliers. However, this exposes organizations to third-party cyber risks which can have far-reaching consequences if not addressed in a timely manner. According to Prevalent’s Third-Party Risk Management study, data breaches via third parties rose 49% in 2023
• Cyber regulations remain complex and in need of harmonization: In response to protect individual data privacy and help organizations strengthen their cyber posture, international and local governments and regulatory bodies have mandated several security standards. Regulations such as the General Data Protection Regulation, the California Consumer Privacy Act, the Cybersecurity Law of the People's Republic of China, and many others, while helping ensure digital privacy, have also created a complex and fragmented regulatory environment for organizations. Conflicting regulations and compounded costs can sometimes result in weakened defenses.
• Cyber security expertise and infrastructure deficiency: An acute dearth of cyber security professionals and the necessary infrastructure is another major roadblock to organizations building cyber resilience. In the World Economic Forum’s 2024 Global Cybersecurity Outlook survey, 78% of respondents said that their organizations lack in-house skills to fully achieve their cybersecurity objectives.
• Cyber risk not being treated as a business issue: Several businesses continue to view and thus treat cyber risk as an IT issue. Yet, cyber breaches result in business consequences. The average cost of a data breach continues to increase year on year. Cybercrime costs businesses billions of dollars annually, with data breaches alone averaging a cost of $4.45 million per incident according to IBM's Cost of a Data Breach Report, 2023. Beyond financial losses, organizations suffer from reputational damage, loss of customer trust, and potential regulatory fines.
  As long as cyber risk mitigation is treated as an IT issue, it remains a challenge. Cyber risk has to be understood as a business criticality at the asset level.
• Absence of a corporate cyber risk program: The lack of a formal corporate risk program continues to be a major challenge to cyber GRC. A recent McKinsey survey of 100 organizations across industries found that a mere 10% aimed at reducing cyber risk. Almost 70% tackled cyber security challenges by filling security gaps as and when it was needed.
• Lack of real-time visibility into cyber risks: Visibility into cyber risk constantly changes—each time a device or endpoint leaves or joins the network. A recent Gartner survey reveals that the use of storage/sharing and real-time mobile messaging tools increased by 80% during the pandemic. Multiple systems, tools, siloed processes, third parties, etc., all contribute to the lack of visibility.
• Inability to communicate and measure cyber risk exposure easily: Risks are spread across systems and often measured in vague terms such as high/medium/low that make prioritizing risk mitigation and investments challenging. Additionally, boards and senior leaders want to understand risk exposure in simple, financial terms.

The Cyber Risk Management Process

Proactive cyber risk management is essential for protecting organizations from the ever-evolving landscape of cyber threats. By adopting a comprehensive approach that includes regular risk and control assessments, employee training, advanced security tools, and well-defined incident response protocols, organizations can significantly enhance their cybersecurity defenses.

Implementing an effective cybersecurity risk management process involves several key steps, designed to create a structured approach to identify and mitigate risks as a going concern.

Here is what an ideal process should look like:

• Identify Cybersecurity Risks

  The first step of the process is to identify potential cyber risks. This involves a thorough assessment of the organization's current state of digital technologies deployed and used internally and externally and an assessment of its online environments. This is critical to understanding potential cyber risks and threats and pinpointing vulnerabilities in systems, data, and processes. Organizations can deploy tools like vulnerability scanners, threat intelligence feeds, etc. to proactively identify cyber risks, threats, and vulnerabilities.

• Assess Cybersecurity Risks

  Once risks are identified, the next step is to assess them to understand their likelihood and potential impact. Organizations can leverage both qualitative and quantitative risk assessment methods. While qualitative risk assessments (using a scale of 1 to 5 or high, medium, low, etc.) largely depend on the perception and understanding of the risk assessor and, therefore, can have an element of subjectivity and bias, quantitative risk assessments involve expressing cyber risk exposure in monetary terms and enable organizations to accurately understand their cyber risk posture and prioritize mitigation measures.

  That said, organizations should use a combination of both qualitative and quantitative methods to assess risks for a more comprehensive approach. To understand how quantitative and qualitative risk assessment work together, read this blog by MetricStream expert Patricia McParland.

• Identify Possible Cybersecurity Risk Mitigation Measures

  Once risks have been assessed and prioritized, organizations then need to determine appropriate mitigation measures. This could include implementing security controls such as firewalls, encryption, two-factor/multi-factor authentication, etc. It also helps managers assess which measures are crucial to which classification or type of risk, and how well such a measure could prevent it.

  Additionally, developing and enforcing security policies, conducting regular employee training sessions, establishing protocols for engaging with vendors, and establishing incident response plans are critical components of this phase.

• Ensure Ongoing Monitoring

  Cyber risk management is not a one-off act. It’s a perpetual process. So, continuous monitoring of the organization's security posture and the effectiveness of its control environment is essential to detect and mitigate new risks, threats, and vulnerabilities as they emerge. Therefore, conducting regular security audits, penetration testing, and real-time threat monitoring are vital practices in maintaining robust cyber defenses.

Understanding Cyber Risk Management Frameworks

Cyber risk management frameworks provide standardized approaches to managing cyber risks. They offer structured methodologies and best practices to help organizations systematically address cybersecurity challenges without reinventing the wheel.

NIST Cybersecurity Framework and ISO/IEC 27001 are two of the most widely used frameworks used by organizations:

• NIST Cybersecurity Framework (CSF)

  The National Institute of Standards and Technology (NIST) Cybersecurity Framework (NIST CSF) is widely used for its comprehensive approach to managing and reducing cybersecurity risks. The agency released version 2.0 of the framework in 2024. It consists of six core functions:

  • Govern: Define, document, communicate, and monitor cyber risk management strategy, expectations, and related policies. This is important for integrating an organization’s cyber risk strategy into the overarching enterprise risk management (ERM) program.
  • Identify: Develop an understanding of organizational systems, assets, data, and capabilities. This foundational step is crucial for determining what needs protection.
  • Protect: Implement safeguards to ensure the delivery of critical infrastructure services. This includes access control, data security, and protective technology.
  • Detect: Establish activities to identify the occurrence of cybersecurity events. Effective detection processes enable timely discovery and response to incidents.
  • Respond: Develop and implement appropriate activities to take action regarding detected cybersecurity events. This involves response planning, communications, analysis, and mitigation. 
  • Recover: Implement activities to maintain plans for resilience and to restore any capabilities or services that were impaired due to a cybersecurity event. This ensures continuity and recovery.

• ISO/IEC 27001

  The ISO/IEC 27001 standard offers a framework for managing information security risks. It focuses on establishing, implementing, maintaining, and continually improving an Information Security Management System (ISMS). Key aspects of ISO/IEC 27001 include:

  • Context of the Organization: Understanding internal and external issues, stakeholder expectations, and regulatory requirements that can impact the ISMS.
  • Leadership: Top management must demonstrate leadership and commitment by establishing the ISMS policy and assigning roles and responsibilities.
  • Planning: Identifying risks and opportunities, setting objectives, and planning actions to address these risks.
  • Support: Managing resources, competence, awareness, communication, and documented information necessary for the ISMS. Operation: Planning and controlling processes needed to meet ISMS requirements, including risk assessment and treatment plans.
  • Performance Evaluation: Monitoring, measuring, analyzing, and evaluating the ISMS performance.
  • Improvement: Continually improving the ISMS through corrective actions and ongoing assessments.

Building a Strong Cyber Risk Management Program

To build a robust cyber risk management program, organizations should follow these actionable steps:

• Leverage Cybersecurity Frameworks: Leveraging recognized frameworks and standards such as NIST CSF, ISO/IEC 27001, and others, help organizations ensure that their cyber risk management approach and program are aligned with industry standards and best practices. These frameworks provide comprehensive guidelines to enhance an organization’s security posture.
• Conduct Regular Cybersecurity Audits and Risk Assessments: Regular cybersecurity audits and risk assessments are vital for proactively identifying and evaluating new and existing threats, vulnerabilities, and control gaps and weaknesses. These audits and assessments should be comprehensive, covering all aspects of the organization’s digital ecosystem.
• Implement Security Awareness Training for Employees: Employees are often the weakest link in cybersecurity. Regular training sessions can help raise awareness about common threats like phishing and social engineering attacks. Educated employees are better equipped to recognize and respond to potential security incidents.
• Utilize Security Tools and Technologies: The importance of deploying advanced cybersecurity tools and technologies, such as firewalls, intrusion detection systems (IDS), and endpoint protection platforms (EPP) cannot be overstated. These tools provide multiple layers of defense, strengthening the organization’s ability to detect and respond to threats.
• Establish Clear Incident Response Protocols: Having a well-defined incident response plan ensures that the organization can quickly and effectively respond to security incidents. This plan should outline roles and responsibilities, communication strategies, and steps for containing and mitigating attacks.
• Regularly Test and Update Security Controls: Security controls should be regularly tested to ensure they are functioning as intended. This includes conducting penetration tests, red team exercises, and reviewing security policies and procedures. Continuous improvement is key to maintaining a strong security posture.

Advanced Cyber Risk Management Strategies

For organizations with higher risk profiles, advanced cyber risk management strategies may be necessary. These strategies go beyond basic controls and involve more sophisticated measures to enhance security:

• Threat Intelligence Gathering and Monitoring: Collecting and analyzing threat intelligence allows organizations to stay ahead of potential threats. By understanding the tactics, techniques, and procedures (TTPs) of cyber adversaries, organizations can proactively defend against anticipated attacks.
• Security Penetration Testing and Vulnerability Scanning: Regular penetration testing and vulnerability scanning are crucial for identifying and addressing security weaknesses before they can be exploited by attackers. These activities simulate real-world attacks, helping organizations to uncover and fix vulnerabilities.
• Build a Risk Management Culture: Fostering a culture of risk management within an organization is essential for effective cybersecurity. This involves educating employees about cybersecurity risks, promoting best practices, and encouraging a proactive attitude toward security.
• Monitor Third-Party Cyber Risks: In today’s digital era defined by amplified digital dependencies between organizations, it is essential to understand the cyber risks that stem from third-party relationships. Organizations need to integrate the management of third-party cyber risks into the broader cyber risk strategy for a comprehensive approach.

Why is Cyber Risk Management Important?

The significance of cyber risk management cannot be overstated, given the severe financial and non-financial repercussions that cyberattacks can have on businesses. Real-world examples abound where companies neglected cyber risk management and paid a steep price. For instance, the Equifax data breach in 2017, which exposed sensitive information of 147 million people, resulted in a $700 million settlement.

Such incidents underscore the need for a robust cyber risk management strategy to protect organizational assets, ensure regulatory compliance, and maintain customer trust.

A proactive and comprehensive approach to cyber risk management is critical for organizations for reasons more than one:

• Protect Data “Data is the new oil.” We have all heard this statement before. Data is the most important asset in the current technology-driven economic system. Having robust frameworks and policies for cybersecurity protects sensitive data from theft, manipulation, and misuse. For example, many cyber attackers are using zero-day exploits today to compromise organizational data with recent examples such as the Microsoft Exchange Server data breach of 2021. Zero-day attacks are called so because they appear out of the blue, and not ensuring security in such cases can prove to be very costly.
• Ensure Regulatory Compliance Owing to numerous data breaches in critical sectors such as finance and healthcare, regulatory compliance regarding customer and client data has tightened in recent years. Devising and implementing cyber risk management program in alignment with pertinent regulations helps the organization to create a healthy business environment and prevents legal issues due to lapses in compliance. Indeed, for enterprises operating in the banking and financial services sector, ensuring robust cyber risk management is a basic compliance requirement.
• Minimize Business Disruption and Economic Losses The economic costs of inadequate cyber security coverage are staggering. When direct and indirect financial consequences are examined, organizations lose significant business due to downtime and disruptions caused by cyber breaches. Investing in cyber risk management programs and solutions is mandatory to ensure business continuity and operations. 
• Minimize Reputation Losses Reputation is the holy grail on which businesses thrive. According to a report by Forbes, as many as 46% of organizations were affected in terms of damage to their reputation on account of data breaches. This figure increases when third-party security breaches are also accounted for, highlighting their interconnected nature. Thus, businesses need to consider cyber risk management in terms of upholding reputation and brand image, and the subsequent effect that this has on their revenues. This intangible component is also the most commonly overlooked aspect of cyber risk management today.
• Increase Customer and Client Confidence Robust cyber risk management measures build external as well as internal confidence in the organization. Customer and client data protection along with employee data protection builds the ecosystem of data security which the organization can leverage to build its business. Without investing in these areas, organizations stand to lose out not only on existing business, but business survival as a whole may turn into a difficult ordeal.

How MetricStream Can Help

MetricStream IT and Cyber Risk Management enables a systematic approach to identifying, assessing, mitigating, and managing cyber risks. Centralized IT risk and control libraries help establish consistent risk taxonomies across the enterprise, thereby strengthening risk analysis and reporting. The software enables organizations to conduct cyber risk assessments, quantify cyber risks in monetary terms, implement controls, and determine appropriate mitigation measures. Furthermore, powerful reports and dashboards provide a 360-degree, real-time view of the organization’s cyber risk posture.

To learn more about MetricStream IT and Cyber Risk Management, request a personalized demo today.

Frequently Asked Questions (FAQ)

• What are cyber risks?

  Cyber risk is the possible exposure to harm originating from a firm’s communications or information systems. Data infringements and cyber-attacks are among the most commonly reported cases of cyber risks. However, cyber risks go beyond data or financial loss and comprise intellectual property theft, reputational harm, and productivity loss.

• What is risk management in cybersecurity?

  Risk management in cybersecurity involves identifying, assessing, and mitigating risks associated with digital environments to protect an organization’s data, systems, and operations from cyber threats. It is a broader strategy that encompasses various security measures, policies, and procedures to manage and reduce cyber risks effectively.

  For further reading on cybersecurity frameworks and advisories, you may refer to:
  - Cybersecurity Framework
  - CISA
  - NCSC

• What is the difference between cyber risk management and cybersecurity?

  While cybersecurity typically focuses on the deployment of specific controls and technologies to defend against cyber threats, cyber risk management encompasses a broader strategy. It integrates these measures into an overarching framework that addresses potential vulnerabilities, ensuring ongoing risk assessment and mitigation.

• What is continuous control monitoring (CCM) and how can it help in cyber risk management?

  Continuous control monitoring is an automated technique that enables strong cyber and compliance protection. Controls are put in place to safeguard an organization, often from industry frameworks like NIST and COSO. But these controls need to be checked regularly to ensure they’re operating properly. Continuous control monitoring automates this process, validating high-value controls on a constant basis and alerting in case of issues – providing another layer of risk protection.