How a potential threat is dealt with is largely dependent on the choices that are made after identifying the risk. As shown in Figure 5.2, there are a number of options for risk mitigation. The choices available are:
Figure 5.2: Risk Mitigation Options
The risk is accepted and a decision is made to continuing operating or lower the
Limitation The risk is limited by applying safeguards to minimize its impact.
Planning A plan is developed to prioritize, implement, and maintain safeguards.
Transference The risk is transferred to another source, so that any loss can be compensated or the problem becomes that of another party.
The vulnerability is
It is important to realize that risks should be mitigated in order of priority, with those that can cause the greatest harm dealt with first. It is important not to waste time dealing with risks that will
is a mitigation option in which the risk is accepted. In accepting the risk, the organization may choose to do nothing about the potential threat, or make efforts to reduce the likelihood the risk and its consequences will occur. For example, the operating system of a server may have vulnerabilities that could be exploited.
By avoiding a risk, there is no chance that the risk will pose a potential threat to the company. Risk avoidance involves removing the cause or consequences of a risk, so that any possibility of loss is also removed. However, removing risks is not always possible, and to do so means that a company may also lose any potential benefits associated with an asset or risky endeavor. For example, a company could remove the risk of viruses by cutting off Internet access, and removing everyone's ability to add data to the network. While there is now no way for a virus to get on the system, people are unable to do any work and the business is unable to function. Because risks are often an inherent part of normal business practices, the potential benefits of an activity must be weighed against any potential losses before a decision is made.
Risks may have a number of consequences, so limiting the consequences associated with a risk is a
Risk planning is a comprehensive process in which a risk mitigation plan is developed to prioritize, implement, and maintain safeguards. If this option is used, an organization must analyze the risk and determine how to deal with it effectively. As will be discussed later in this chapter, risk planning involves looking at which assets may be affected by a particular risk, determining the likelihood and impact a potential threat may have, and deciding which safeguards should be implemented to minimize the risk.
is an option in which the risk is transferred to another source. With this method, an agreement is made with another party to take responsibility for the risk, thereby shifting the consequences of the risk to the other party. For example,
In some cases, an organization may not know how to properly deal with a risk, and further research is required into the potential problem.
acknowledges this lack of understanding, and involves
Even after mitigation options have been
|Test Day Tip||
To help you remember information, try to arrange the first letter of each word into a new word. For the exam, you will want to remember the six options available for risk mitigation, so just remember the word
. Each letter in this word represents an option:
Another way to remember information is to take the first letter of each word and make a
Risk identification is the process of ascertaining what threats pose risk to your company, so that you can deal with them accordingly. As seen earlier, there are a wide variety of risks that may affect different aspects of an organization. Because there are so many potential threats that an organization may face, the administrator needs to identify which risks need mitigating and prioritize them
Greatest loss expectancy
As discussed in the
Some organizations may also need to protect assets to be compliant with certain regulations. State or federal laws may require an organization (such as a hospital or banking institution) to protect client information. In other cases, the company may have a type of certification (such as ISO 9000) that they want or need to be compliant with and that establishes how the company operates. To
In some cases, risks may need to be mitigated and prioritized based on the need to
To identify risks and prioritize them, it is important to first determine which assets need to be protected. Assets are the property and resources
Network connectivity equipment
Other properties owned by the business (supplies, furniture, and so on)
It is almost impossible to identify risks, their likelihood, and impact without asset identification and valuation. After all, if you do not know that a company owns a server, you cannot identify its risk of being effected by viruses, power failures, and other risks. In the same light, if a company's network were not connected to the Internet, then you would not identify the risk of hackers gaining entry in this way. The assets possessed by a company are the focal points on which risks are identified.
When identifying assets, its value must also be determined. Value refers to the impact the asset will have on a company if it is lost. Determining the value and importance is essential, as it will be used to determine which assets require added protection from risks. To determine the value of an asset, the following factors should be considered:
The market value of the asset
The cost to support the asset
The importance of the asset to the organization
Market value is the price that a buyer would expect to pay or a seller would expect to get for an item for sale on the
The cost of replacing the item can also be used to determine the value of an asset. When considering critical systems that have been in service for a number of years, the depreciated value may have decreased to the point that it has no value under this calculation. For example, an e-commerce business may have been using the same server for the past six years, and the value was depreciated by 25 percent per year. Does this mean that the Web server has no value to the organization and should not be considered in determining objects at risk? Because the server is vital to business operations, it would need to be
The value of an item can also be affected on the cost of supporting it. Many companies have the additional cost of paying support fees to third parties to assist with problems. An example of this would be support costs paid to Novell or Microsoft to provide assistance with issues relating to their operating systems. If a server was not functioning properly, an organization could call a special support line and get assistance with solving the problem. In other cases, fees may be paid to third parties to provide on-site support, where a technician would visit a site and fix the problem.
With some assets, the market value of the item may not be
The importance of data not only applies to properties, but also to people. Personnel are as much of an asset to a company as any of the items used to run the business. For example, if a network administrator were the only one with knowledge of the system, the impact of losing this person would be great. Because of the importance of people within an organization, it is important to identify vital members of the organization, and provide methods of continuing business activities if they are unavailable.
Determining the importance of an asset is often
Assets and risks may come not only in the form of objects, but also in the form of people. Humans are also a resource, and may provide
After gathering all of the data discussed up to this point, the administrator will need to analyze this information to determine the probability of a risk occurring, what is affected, and the costs involved with each risk. Assets will have different risks associated with them, and they will need to correlate different risks with each of the assets inventoried in the company. Some risks will impact all of the assets of a company, such as the risk of a massive fire destroying a building and everything in it, while in other cases, groups of assets will be affected by specific risks.
Assets of a company will generally have multiple risks associated with them. Equipment failure, theft, or misuse can affect hardware, while software may be affected by viruses, upgrade problems, or bugs in the code. By looking at the weight of importance associated with each asset, the administrator should then prioritize which assets will be
There are different methods in which risks can be analyzed to determine which of the risk mitigation options are appropriate. A qualitative analysis will build various scenarios that look at the circumstances relating to possible incidents, and then rank threats and risks associated with them. Quantitative analysis looks at values and equations to analyze risks and their impact on the company. While both methods can be useful for deciding how particular risks will dealt with, they are quite different in how the risk is analyzed.
The primary component of qualitative analysis is the creation of scenarios, which are outlines or models built from anticipated or hypothetical events. The scenario begins with a focal point, such as a particular decision, and then
As with asset valuation, ranking scenarios can be done on
Quantitative analysis uses a more formulated approach to analyzing risks. Equations are used with this method of analysis to calculate how the risk will impact the company, inclusive to providing estimates on the total cost of a risk, how often the risk may occur, and how much it will cost the company on an annual basis. Acquiring this information in the analysis phase of risk management provides an understanding of how and why each risk must be dealt with.
After determining what assets may be affected in a company, and estimating or establishing their value, the administrator then needs to determine the probability of a risk occurring. While there may be numerous threats that could affect a company, not all of them are probable. For example, a
Historical data can provide information on how likely it is that a risk will become reality within a specific period of time. Research must be performed to determine the likelihood of risks within a locality or with certain resources. By determining the likelihood of a risk occurring within a year, you can determine what is known as the Annualized Rate of Occurrence (ARO).
Information for risk assessment can be acquired through a variety of sources. Police departments can provide crime statistics on the area certain facilities are located, allowing a company to determine the probability of vandalism, break-ins, or dangers
Once the ARO has been calculated for a risk, it can be compared to the monetary loss associated with an asset. This is the dollar value that represents how much money would be lost if the risk occurred. This can be calculated by looking at the cost of fixing or replacing the asset. For example, if a router failed on a network, a new router would need to be purchased, and the company would have to pay to have it installed. In addition to this, the company would also have to pay for employees who are not able to perform their jobs because they cannot access the network. This means that the monetary loss would include the price of new equipment, the hourly wage of the person replacing the equipment, and the cost of
To plan for the probable risk, a budget would be needed for the possibility that the risk will happen. To do this, the ARO and the SLE are used to find the Annual Loss Expectancy (ALE). To
ARO x SLE = ALE
When looking at the example of the failed server hosting an e-commerce site, this means the ALE would be:
0.3 x $26,000 = $7,800
To deal with the risk, how much needs to be budgeted to deal with the probability of the event occurring needs to be assessed. The ALE provides this information, leaving a company in a better position to recover from the incident when it occurs. It is also important to determine what the ALE would be after safeguards have been implemented, to see whether the benefits of a particular control outweigh the cost.
Safeguard analysis involves reviewing the various vulnerabilities that may be
When analyzing safeguards, it is important to look at multiple controls, so that there are a number of options to choose from. To use the previous example, simply selecting to transfer the risk is not always the best option. It may be decided that adding a firewall to protect the internal network from hacking attempts through the Web server, and installing bug fixes and service packs may be a more appropriate method of dealing with the threat.
Safeguards can be identified through a variety of sources. Since some vulnerabilities can be identified in multiple companies, an administrator can investigate how others choose to control the risk. Interviewing other companies and acquiring their input will not only provide information on how they dealt with a potential problem, but will also give input to their
Since any project works on a limited budget, safeguard costing is another important part of the risk mitigation process. Safeguard costing requires a company to look at the prices of various controls and determine which will be the most cost-effective method of dealing with a threat. When identifying safeguards available for a particular vulnerability, lists should be compiled on the cost of purchasing a safeguard from various sources, as not every vendor will generally have the same prices. In some cases, such as applying service packs to a server to control software vulnerabilities, there may be no associated costs. In other situations, such as installing a new server, the costs would be comparatively high.
Support costs should also be determined when establishing the cost of implementing a safeguard. Installing certain controls will require additional costs over the initial cost of purchasing it. For example, installing a firewall would require
The monetary benefit of a safeguard can be seen by estimating how much will be saved or lost after it has been implemented. To determine an estimate of this value, the following equation needs to be used as part of the cost benefit analysis:
ALE (before) - ALE (after) - Annual Cost = Value of Safeguard
Earlier in this section we discussed how to calculate the ALE. In this formula, you take the ALE before a safeguard is applied, subtract the ALE after the safeguard is applied, and then subtract the annual cost of implementing and supporting the safeguard. Once a safeguard is applied, the threat should occur less frequently or losses should be less significant, so the ALE after the safeguard should also be less but may have an added cost of support. For example, say a safeguard has an annual cost of $1,000. If the ALE before a safeguard was applied was $7,800, but was $5,000 after applying the safeguard, then we could calculate the value of the safeguard as follows:
$7,800 - $5,000 - $1,000 = $1,800
In this example, the monetary value of the safeguard would be calculated as being $1,800, making it worth implementing for the company. If the calculation had equated to a negative value, then it may not have been worth implementing.
While monetary value is an important motive for deciding whether a safeguard is worth implementing, it should not be the only factor. Some safeguards may be easier to use than others, such as when firewall software makes it easier to create rules for different users that control their ability to access resources from the Internet. Other controls may also provide better audit features, allowing the administrator to view what users are accessing or problems relating to the system itself. In other situations, they may find that the reputation of a particular vendor
Exercise 5.03: Determining the Annual Loss Expected to Occur from Risks
A widget manufacturer has installed new network servers, changing its network from a peer-to-peer network to a client/server-based network. The network consists of 200 users who make an average of $20 an hour, working on 100 workstations. Previously, none of the workstations involved in the network had antivirus software installed on the machines. This was because there was no connection to the Internet, and the workstations did not have floppy disk
What is the ARO for this risk?
Calculate the SLE for this risk.
Using the formula ARO × SLE = ALE, calculate the ALE.
Determine whether it is beneficial in terms of monetary value to purchase the antivirus software by calculating how much money would be saved or lost by purchasing the software.
Answers to Exercise Questions
The ARO is the likelihood of a risk occurring within a year. The scenario states that trade magazines calculate an 80 percent risk of virus infection after connecting to the Internet, so the ARO is 80 percent or 0.8.
The SLE is the dollar value of the loss that equals the total cost of the risk. In the case of this scenario, there are 200 users who make an average of $20 per hour. Multiplying the number of employees who are unable to work due to the system being down by their hourly income, this means that the company is losing $4,000 an hour (200 × $20 = $4,000). Because it may take up to three hours to repair damage from a virus, this amount must be multiplied by three because employees will be unable to perform
The ALE is calculated by multiplying the ARO by the SLE (ARO × SLE = ALE). In this case, you would multiply $12,000 by 80 percent to give you $9,600 (0.8 × $12,000 = $9,600). Therefore, the ALE is $9,600.
Because the ALE is $9,600, and the cost of the software that will minimize this risk is $4,700 per year, this means that the company would save $4,900 per year by purchasing the software ($9,600 - $4,700 = $4,900).