Leveraging Externally Verified Data to Determine Cyber Risk Appetite Levels

The Importance of Defining a Risk Appetite

Risk appetite levels serve as the foundation of risk-based decision-making, equipping stakeholders to answer fundamental questions such as "How much are you willing to sacrifice in the pursuit of success?"

Most businesses play it very safe, keeping their appetites relatively low, while others are more hungry.

However, one thing all financially astute enterprises share is that they leverage the external intelligence available to calculate the particular threshold at which this hunger would no longer make sense - at which point the losses become too great to justify.

Of course, there is the risk of having an appetite that is too low, as important opportunities could pass by, but, more often than not, the risk is that it runs too high, exposing the organization to material events that could potentially lead to insolvency.

That's why defining the threshold in the first place, especially when the market is as tight as it is, is crucial for long-term endurance, minimizing the likelihood of either.

Applying Risk Appetite in Cyber Risk Management

In a period where the cost of a single cyber event can cost upwards of $2 billion and affect more than 100 million individuals, applying this guiding principle to cyber risk management is likewise essential.

Until it no longer needs to be said: Cyber risk is business risk. It’s intrinsic. It’s unavoidable unless a company has somehow managed to find a way to survive economically while still using on-premise systems and leveraging other non-digital modes of operations. 

More realistically, everything has moved to the cloud. Every aspect of the supply chain can be found, in some way or shape, in the digital realm. 

Nevertheless, acceptable risk levels are still hard to define, saturated with nuances, replete with interdependencies, and riddled by extra circumstances. 

And yet, this complexity is precisely why a threshold must be calculated.

In times of crisis, when cyber leaders are in a pinch and faced with decisions to be made, they can harness these thresholds to ground themselves and gain back control of the situation.

Starting With Financial Loss to Determine Risk Appetite 

In cyber risk management for business (among aspects of life), these thresholds, or benchmarks, often start with financial loss, serving as a marker of the level of damage that an organization can absorb and remain operating with minimal interruption. 

Of course, it could very well be the case that an enterprise underestimates this appetite, realized only after experiencing losses that well surpass their benchmark and, nevertheless, remaining financially resilient.

As long as these thresholds are based on externally verified data, they can be adapted and scaled as more intelligence rolls in, making them even more accurate and more precise, eventually resulting in ultimate resource optimization. 

Deciding upon risk appetite levels gives stakeholders the ability to not only protect their businesses even after falling victim to a cyber event but to guide them in their day-to-day operations as they allocate the budget, make game-changing decisions, and, ultimately, navigate the ever-turbulent market.

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Reach out to me today if you'd like to continue the discussion on leveraging financial benchmarks to guide risk appetite decisions. I'd be happy to chat.