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# Risk Analysis

Good, effective security planning includes a careful risk analysis. A risk is a potential problem that the system or its users may experience.

Risk Analysis

Good, effective security planning includes a careful risk analysis. A risk is a potential problem that the system or its users may experience. We distinguish a risk from other project events by looking for three things, as suggested by Rook [ROO93]:

A loss associated with an event. The event must generate a negative effect: compromised security, lost time, diminished quality, lost money, lost control, lost understanding, and so on. This loss is called the risk impact.

The likelihood that the event will occur. The probability of occurrence associated with each risk is measured from 0 (impossible) to 1 (certain). When the risk probability is 1, we say we have a problem.

The degree to which we can change the outcome. We must determine what, if anything, we can do to avoid the impact or at least reduce its effects. Risk control involves a set of actions to reduce or eliminate the risk. Many of the security controls we describe in this book are examples of risk control.

We usually want to weigh the pros and cons of different actions we can take to address each risk. To that end, we can quantify the effects of a risk by multiplying the risk impact by the risk probability, yielding the risk exposure. For example, if the likelihood of virus attack is 0.3 and the cost to clean up the affected files is \$10,000, then the risk exposure is \$3,000. So we can use a calculation like this one to decide that a virus checker is worth an investment of \$100, since it will prevent a much larger potential loss. Clearly, risk probabilities can change over time, so it is important to track them and plan for events accordingly.

Risk is inevitable in life: Crossing the street is risky but that does not keep us from doing it. We can identify, limit, avoid, or transfer risk but we can seldom eliminate it. In general, we have three strategies for dealing with risk:

avoiding the risk, by changing requirements for security or other system characteristics

transferring the risk, by allocating the risk to other systems, people, organizations, or assets; or by buying insurance to cover any financial loss should the risk become a reality

assuming the risk, by accepting it, controlling it with available resources, and preparing to deal with the loss if it occurs

Thus, costs are associated not only with the risk's potential impact but also with reducing it. Risk leverage is the difference in risk exposure divided by the cost of reducing the risk. In other words, risk leverage is If the leverage value of a proposed action is not high enough, then we look for alternative but less costly actions or more effective reduction techniques.

Risk analysis is the process of examining a system and its operational context to determine possible exposures and the potential harm they can cause. Thus, the first step in a risk analysis is to identify and list all exposures in the computing system of interest. Then, for each exposure, we identify possible controls and their costs. The last step is a costbenefit analysis: Does it cost less to implement a control or to accept the expected cost of the loss? In the remainder of this section, we describe risk analysis, present examples of risk analysis methods, and discuss some of the drawbacks to performing risk analysis.

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Security in Computing : Administering Security : Risk Analysis |