# Part 8 - Risk Analysis

Video Activity

This unit covers risk analysis and focuses on the following types: • Qualitative: subjective analysis to help prioritize probability and impact of risk events • Quantitative: provides a monetary amount to a particular risk event

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Time

5 hours 54 minutes

Difficulty

Intermediate

CEU/CPE

6

Video Description

This unit covers risk analysis and focuses on the following types: • Qualitative: subjective analysis to help prioritize probability and impact of risk events • Quantitative: provides a monetary amount to a particular risk event

Video Transcription

00:04

now, after we're complete with our risk assessment. We understand the value of what we're protecting, and we have an idea of the threats and the vulnerabilities. Now what we want is a value and value can come in two ways. It can be a qualitative value or quantitative value. Now the qualitative value

00:24

is all about, um, subjective sort of line of thought, gut feeling.

00:30

Ah, prioritization off the risks. So, for instance, if I'm throwing a picnic in two weeks, what's a threat?

00:38

Uh, weather.

00:40

All right. How big a potential for weather

00:42

to disrupt my picnic in the month of December?

00:46

Well, that's pretty high,

00:47

right? That's qualitative analysis that's based on my gut feeling that's based on my experience. What I expect

00:54

that means I'm doing the qualitative analysis. So when we're talking about high medium, low probability, that's qualitative.

01:03

Um, the Delphi technique, which is mentioned in the slide, means that as someone that's involved with risk analysis, I don't work alone. I have to talk to my subject matter expert experts, other members of my team, and I want their input,

01:19

and a good way to get input from other team members is to allow them to input information anonymously and when we're doing anonymous are asking for anonymous input. We're using the Delphi technique with the idea that people would be more honest if they can creep contribute anonymously

01:37

so that qualitative means of analyzing analysing risks. We talk with our team members are subject experts. We allow them to contribute anonymously, if possible.

01:49

And what we come up with is high, medium and low rankings of our risk.

01:53

Now that doesn't tell me how much money to spend, but it does help me prioritize. Ah, lot of times when we're using qualitative analysis will come up with something called the Probability and Impact Matrix or this severity and likelihood again, likelihoods Just like probability. Severity is like impact.

02:13

And when we do this, what we're gonna do is indicate certain risks have a very high severity and a high likelihood,

02:19

some less of a severity, but still a relatively high likelihood. Some have a very low severity, but a very high likelihood. We're just kind of reading this chart, but the bottom line is this is really a, um,

02:32

a subjective chart. Your organization is gonna create this chart. Ah, based on your internal structure. So nothing's written in stone about this sharp. But very frequently we do have a diagram or some sort of visual clue that will help us understand, which are the risks we need to focus our money on.

02:52

So if you were to look at this screen and you see that we have a risk here that has a high severity

02:57

and a high likelihood, that's a risk. We better focus on quickly because that risk is gonna have the highest potential for damage and create a lot of damage so very important. Whereas if we have something with a very low potential likelihood and the low severity, we may choose not spend this much money on that risk.

03:16

So the qualitative analysis will

03:19

guide us to what we really want to get, too, which is the quantitative analysis. This requires more expertise. It requires more time. We're gonna use calculations we're gonna use math to determine I'm an English major. So using math is not always the greatest joy of my life. But

03:38

we're gonna use math. We're gonna get the numbers, and we're gonna do some fact

03:40

based analysis that will give us the numeric ideally the dollar value of a risk

03:46

that will then drive us into how much money will spin.

03:51

So when we're doing quantitative analysis, we've gotta figure out some pieces of information.

03:57

Remember from earlier we said the very first step, when we're doing risk management,

04:01

is to identify and then evaluate our assets. So I'm gonna look at an asset value as my first means of beginning quantitative analysis. I'm protecting a building that's $300,000. That's the value of the asset. Hey, just what's the asset worth?

04:20

And when we come up with the asset value, remember, we don't just

04:25

estimate hardware calls. We've got to think about all the things that go into giving an asset without

04:30

okay, which would be many untangles

04:34

intangibles now, the next element exposure factor.

04:39

How much of that asset am I gonna lose if the risk does materialize?

04:46

So I've spent $10,000 on this picnic.

04:48

If it rains, it'll be in the 80% loss

04:53

because 80% of the staff won't show up. We've determined that

04:56

Hey, that's my exposure factor.

04:59

If we have $100,000 worth of data and 50% of it will be lost if a virus attacks. Well, that's a $50,000. I'm sure that's a 50% exposure factor.

05:11

Hey,

05:12

now, single loss expectancy.

05:15

How much money will I lose each time this event happens? So we have $100,000 worth of Dad. I have a 50% exposure factor. My single loss expectancy is $50,000.

05:27

Every time we have this compromise, I'll lose $50,000.

05:31

But I'm probably not gonna have this event happened every year. Or maybe I will. Who knows What's the type of threat?

05:39

Annual rate of occurrence tells me how frequently

05:42

per year this event will happen.

05:45

Annual. Ah, rate of occurrence. So that's the probability. How likely is this toe happen? Exposure factor, really is the impact, right? How much am I gonna lose? Annual rate of occurrence is the probability.

05:59

Ultimately, then we want an annual loss expectancy.

06:02

How much do I spend on this particular risk per year?

06:09

All right, so we've already set up a $100,000 worth of data

06:12

and I'll lose 50% of that data. There's a compromise,

06:15

so that gives me a single loss expectancy. $50,000

06:20

But if this loss happens three times per year,

06:24

well, now I've got an annual loss expectancy of 150,000. We'll lose $50,000.3 times a year, so that's an annual loss expectancy of 1 50

06:34

Okay, so that's kind of how this works. I doubt you'll really have to do calculations, but you will need to understand the principles off quantitative analysis you'll probably have to on this test. Answer a couple of questions. What is this term mean? Because again, I cannot stress enough. This is one of the most important concerns

06:55

going into developing. Our software

06:57

is understanding thehe, pro prion amount of security,

07:00

and I don't know what the appropriate amount of security is unless I truly understand the potential for laws. Remember, security will always cost me something.

07:11

How much will it cost? Comes from quantitative analysis.

07:15

All right now, total cost of ownership when we implement controls, how much money does it cost us to implement a control over its life span so we might implement any virus software that has an up front cost of $5000 but we have a maintenance fee of $1000 every year.

07:33

So we've gotta figure that into the total cost of ownership.

07:36

And then ultimately, when we look at how much this safeguard has saved us, how much money it saved us, that's the return on investment.

07:46

So for every dollar I spend, what did I get back? What did I say?

07:50

So that's return on investment in all of thes air, very important when it comes to really understanding lost potential.

08:00

So just, ah, little bit of an overview again to get my single walls expectancy, take the asset value times exposure factor. And again, this could pop up on the test. So I would take a few minutes to memorize thes terms and then these formulas. But

08:16

ultimately, if you don't get so caught up in memorizing the formulas and you just think it

08:20

through, you know, every time this happens, it cost me $10,000. It happens four times a year. What's my annual loss? $40,000. You don't have to get so tangled up in memorizing formula for that

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