Risk Assessment Methods Explained [And How to Choose the Right One]

Businesses in the post-COVID era have realized the need to prioritize the security of their critical assets. In 2023 alone, the average cost of a data breach was $4.45 million – a figure that can make or break businesses with bootstrapped budgets and harsh market conditions. This necessitates the development of risk assessment methodologies to reduce the possibility of landing in hot water. 

This article explores the different risk assessment methods and guides you in selecting the right one to protect your business from potential threats

TLDR

Common methods to assess risks are quantitative, qualitative, semi-quantitative, and asset-based. 

The right risk assessment methodology depends on your goal, the type of data in your infrastructure, and the framework you are trying to comply with. 

Rather than conducting risk assessments manually, it is recommended to use an automated system that integrates with your system to identify risks and help you mitigate them.

Top risk assessment methodologies in cybersecurity

Common risk assessment methodologies include quantitative, qualitative, semi-quantitative, and more. While all methods are useful in evaluating your risk posture, each has its own pros and cons. 

Let’s understand these details.

Quantitative

Quantitative risk assessment methodology assigns a numerical value to the financial probability of a risk occurring in a business scenario. This helps to calculate the potential impact the risk event can have on the organization’s assets and goals. 

The quantitative approach works by collecting data on risk using statistical models and analyzing them to forecast the various outcomes. Since a number-based module is based on measurable data, it is highly objective, making it less prone to disagreements between management and board members. 

However, risk teams often face some common challenges while using quantitative methods—the lack of adequate data to analyze and their limitation to specific use cases as not all risks are quantifiable. Some examples of quantitative risk assessment methods include the Heuristic method, Three-point estimate, Decision tree analysis, Conte Carlo analysis, and Sensitivity analysis.

Qualitative

Quantitative risk assessment relies on an individual’s judgment to assign a non-numerical value to risks. Here, teams evaluate impact based on a “what if scenario” using data from various functions in the organization. 

Commonly, two value sets are used to qualify risks – 1. High, medium, low, or a slightly more nuanced system – low, medium-low, medium, medium-high, and high. This helps to paint a more generalized picture of the risk posture and tends to be more subjective compared to the qualitative approach. It can be performed on all business scenarios, rather than specific ones. 

The most common methods used in qualitative risk analysis are:

• Keep It Super Simple (KISS) – Best used in small projects that function on infrastructures with low complexity. It uses the basic low/medium/high scale. 
• Probability/Impact method – This method is best for large projects running on complex infrastructure. Here, the risks are evaluated based on the probability of their occurring and the consequences, rated on a scale of 1 to 10 or 1 to 5 (risk score = probability X impact). 

Semi-quantitative

As evident from the same, the semi-quantitative method combines both qualitative and quantitative measures to evaluate risks. This hybrid approach uses a scoring system to analyze risk impact and severity. The scoring system uses a scale of 1 to 5 or 1 to 10; 1 to 5 indicates low impact while 5 to 10 indicates high. 

A common use case scenario for using this approach is when enough data is not available to undertake a quantitative analysis. The semi quantitative method is not highly subjective and helps to provide a comprehensive picture of the risk posture.

Asset-Based

Asset-based risk analysis methods are gaining popularity among SaaS companies. The goal of an asset-based analysis is to protect assets with high value such as sensitive customer information such as personally identifiable information (PII) or personal health information (PHI). 

Asset-based assessments are helpful if your business has to comply with a security and privacy regulatory framework. 

For example, if you run a healthcare business in the U.S., HIPAA compliance is mandatory, and you need to have the necessary controls to protect patient health records. Similarly, if your business collects any data of European Union residents that can be used to identify an individual, GDPR compliance is mandatory. 

The asset-based risk assessment method generally involves these steps: 

• Creating an inventory of the critical assets
• Identifying the risks and vulnerabilities that can affect the confidentiality, integrity, and availability of critical systems
• Analyzing the likelihood of each risk being exploited by malicious actors
  

Vulnerability-Based

Vulnerability-Based Risk Assessments (abbreviated VBRA) focus on identifying, prioritizing, and mitigating the risks present in your organization’s infrastructure. Given that this method focuses on internal assets, its capabilities are limited to identifying the complete scope of risks in the context of the full picture of the organization. 

In this method, you look for security weaknesses and gaps such as natural disasters, internal threats, and system configuration errors that can be exploited by external threat actors. 

Based on the vulnerabilities you are experiencing by conducting an internal risk assessment, the next step is to implement control measures to minimize the likelihood of these vulnerabilities becoming an incident.

Which is the right assessment method for my organization?

If you are looking for the perfect risk assessment method that fits your organization, it is important to know that none of these methods are flawless. Each has its own set of challenges, pros, and cons. Usually, risk teams use a combination of these approaches to gain a holistic understanding of the risk posture. 

The right risk method also boils down to the requirements of the compliance framework applicable to your business. For example, for ISO 27001 and NIST 800 53, a semi-quantitative method is recommended. For HIPAA and GDPR, an asset-based risk assessment is a better choice. 

Additionally, factors like the complexity of your critical infrastructure, the total budget for conducting the assessment, and the type of data you process. Ultimately, your management or risk management vendor should evaluate and select a method suitable for your needs.

Build true resilience and manage risks with precision

Conducting risk assessment is not easy, especially if you have no prior experience. An automated risk tool like Sprinto is a GRC tool that helps businesses evaluate risk based on any risk model. It continuously monitors your business environment, identifies vulnerabilities, and ensures ongoing security.

The tool seamlessly integrates with cloud environments and apps, enabling it to predict potential future risks, recommend remediation plans, and implement entity-level security controls in real-time. You can:

• Automates risk assessment processes, allowing regular monitoring of risk controls.
• Manage and document vulnerabilities and endpoint security incidents, tracking and addressing potential external threats.
• Choose from various training modules tailored to help your organization become security-first and meet compliance requirements. Build a risk matrix based specific to the company risk profile
• Deploy interoperable security policies, templates, workflows, and framework training modules to reduce duplication of effort and costs while complying with multiple frameworks.

Sprinto can do much more. Connect with our experts today to know how we can help you.

FAQs

What are some of the best practices to quantify cyber security risks?

To quantify cyber security risks, start by conducting risk assessments using standardized frameworks like NIST or ISO. Then, analyze potential financial impact considering historical data and existing vulnerabilities. Prioritize and mitigate based on your budget, highest value asset, security frameworks, and align your risk management efforts with regulatory requirements.

What are the four types of risk management strategies?

The four main types of risk response strategies include mitigation (implementing measures to reduce the impact or likelihood of a risk to an acceptable level), acceptance (acknowledging the risk and preparing to handle its potential consequences without taking action to prevent it), avoid (eliminating the risk by changing plans to reduce exposure), and transfer (shifting the risk to a third party who can handle it efficiently, such as a business partner or through insurance). The response should be based on your risk landscape. 

 Why is cybersecurity risk assessment methodology important?

Cyber security risk assessment process is important because it helps decision makers and stakeholders make informed decisions on how to mitigate critical risks, develop effective controls, minimize operational risks, and reduce potential losses. Additionally, you may suffer severe consequences of non-compliance with regulations.