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This chapter is from the book

This chapter is from the book

Risk Assessment

  • Identify or explain examples of risk management fundamentals and the basic tenets of security.

When determining what type of security infrastructure is needed in an organization, you need to answer two questions:

  • What are you trying to protect?

  • What could potentially cause harm to what you are trying to protect?

In many instances, what we are trying to protect is information. In this day and age, information has value. This value could be defined or it could be perceived. The problem is, sometimes the value of information is very subjective. What one person considers being valuable information, is not that valuable to someone else. Value also changes over time. A company that has a secret formula wants to protect this information—it has a high value. However, after the secret is revealed or another company comes out with a similar product, then the value of the information is reduced.

Definition of Risks, Threats, and Vulnerabilities

A risk is simply a potential for loss or harm. However, the definition of a risk varies from person to person. Some organizations are more comfortable with some risks, whereas others are not. Some persons might go to greater lengths to try to reduce or eliminate the risk, whereas others will not care whether something happens.


Risk Analysis The risk analysis you conduct while formulating your security policy is very similar to that performed during the construction and review of disaster recovery and business continuity plan (as discussed in Chapter 6, "Disaster Planning and Recovery"). You may want to work on both policies at the same time.

Before discussing the concept of risks further, we should first address the concept of threats and vulnerabilities. A threat is an activity that could bring some form of adverse response. Threats come from two sources—natural or manmade. A natural threat could be a flood, an earthquake, or a lightning storm. A manmade threat could be hackers, vandals, viruses, or espionage. Regardless of the source, the issue is the same. These threats, if exercised, can cause adverse damage to our systems and to our business operations.

Vulnerability is simply a weakness that allows these threats to happen. Having vulnerability is not always a bad thing. We are all vulnerable to something. The problem comes only if someone can exploit that vulnerability to do harm. Then, it becomes a threat. For instance, imagine you have a really nice house with a really big glass window in the living room. This window has vulnerability—it can be broken if someone throws a brick through it. Now, having this vulnerability is not a problem, as long as no one throws a brick at it. If this house is in the mountains, away from people, the likelihood of someone throwing a brick is practically nonexistent. However, if this house is in the city and in a bad neighborhood, the chances of someone exploiting this vulnerability greatly increases.

So, what is the risk associated with this scenario? The relationship between risk, threat, and vulnerability is

However, in reality, we need to add one more variable to this equation—the value of the asset. The equation now becomes

As any of these variables approaches zero, the risk is reduced. As they get higher, the risk increases.

To continue with the previous example, if the vulnerability is that the glass could be broken by someone throwing a brick, but the likelihood of that happening is low (because the house is in the mountains), the risk is not very high. If the house is located in the city, the threat increases and, therefore, the risk is higher. The concept of the value also comes into play here. If the glass is standard glass and someone breaks it, the cost to replace it might not be that high. However, if it is a nice stained glass from the 18th century, replacing this glass becomes very expensive and, therefore, the risk also increases.

This example is overly simplified to explain the concepts of risks, threats, and vulnerabilities. In the real world, assigning values becomes much harder, because it is a subjective process.

Determining the Impact of a Risk

The impact of the risk depends on what value we place on the damage caused if the threat occurs. If the risk occurs, the damage could be anything from a nuisance to catastrophic. The more valuable the information or assets we are trying to protect, the higher the impact of the risk. The risk of an exploit on a Web server that is used only to display static Web pages may not be as high as an exploit to a Web server that is used for e-commerce. If a vulnerability is exploited on a Web server that is used for e-commerce, the impact of such an exploit could be catastrophic to the company. If this vulnerability renders the Web site inoperable, the company could lose several thousands of dollars for every hour during which the site is inoperable.

The damage is not necessarily limited just to financial damages. There is also the loss of customer confidence, loss of new clients, or damage to the company's reputation.

There are four options for handling risks:

  • Eliminate the risk.

  • Minimize the risk.

  • Accept the risk.

  • Transfer the risk.

Eliminating the Risk

Eliminating a risk means getting rid of the cause of that risk. This is not always an option, because in many situations, you cannot eliminate the risk completely. In the example of the glass window and the brick, the vulnerability is the fragile glass and the threat is the brick. If we want to eliminate the risk completely, we have to get rid of the glass entirely. That is, eliminate the vulnerability by getting rid of the asset. The other option is to collect every brick in the world (not a very reasonable approach).

Minimizing the Risk

In most cases, the best we can do is to minimize the risk. This means reducing the risk to an acceptable level we can live with. Again, this is a subjective measurement, because everyone has a different threshold for risk. In the computing environment, minimizing the risk means reducing it to a level that is acceptable, but also allows for the continuation of business operations.

Accepting the Risk

The next thing we can do is to just accept the risk. Sometimes, threats are unavoidable and we can live with their consequences. If our Web server has a known vulnerability, but the chances of someone exploiting it are small to nonexistent, perhaps we will just accept the risk. Or, perhaps this Web server does not have any valuable information, so if the server goes down, it does not affect the overall business operations. In that case, we may choose to accept the associated risks.

Transferring the Risk

The last course of action is to transfer the risk to someone else. This is why we have insurance. Most of us have car insurance, which means, that if something happens to the car, the insurance company takes care of it. It is interesting to note that insurance companies have to do the same calculations mentioned previously. For instance, if we want to insure an old car, we live in a nice or maybe secluded neighborhood, and our driving record is clean, the insurance premiums might not be that high. This is because the value of the asset is not that high, and although the vulnerability is that the car could get stolen, the car is kept in a garage in a nice area. On the flipside, if we wanted to insure a new car, but we lived in a city with the highest rate of car theft in the country, the insurance premiums increase.

Understanding Risk Analysis

Risk analysis is the process of reviewing all the aspects of the resource that we are trying to protect, and determining the possible risks. This process also involves the development of any countermeasures to eliminate or reduce the risks.

There are two methods for performing a risk analysis: quantitative analysis and qualitative analysis.

Quantitative and Qualitative Risk Analysis

Quantitative analysis involves measuring the risk to a system in numerical terms. This means placing a hard value on something. If you purchase something for a particular value, that is the hard money cost if you need to have it replaced. Management likes to use quantitative analysis, because it is easy to understand.

Qualitative analysis, on the other hand, looks at the value of an asset from a more subjective point of view. This method is used when hard figures cannot be derived. For instance, if you own an expensive piece of jewelry, you might use a quantitative approach to determine its value in terms of replacement cost. However, what if that jewelry were a family heirloom? Now it has more value—not only monetary, but also sentimental value. What price can you put on it now? This intangible value calls for a qualitative approach.

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