Data leaks and cyberattacks are an increasingly common hazard in today’s digitally interconnected world. As organizations become increasingly dependent on technology to run their operations, it is critical to manage cyber risk. The Factor Analysis of Information Risk (FAIR) framework is a potent and novel tool that enables organizations to comprehend better, evaluate, and manage cyber hazards.
The FAIR model analyzes scoped risk scenarios, aggregates them to determine the possible monetary exposure to loss, and uses this information to convert the impact of these risks into a quantitative risk estimate. The objective is to assist organizations in interpreting complicated risk scenarios so they can ascertain where they are most vulnerable to a cyberattack and the likely amount of money they could lose. The FAIR Institute created, maintains, and promotes FAIR, which is accepted as an international standard for calculating cyber risk by the Open Group. Understanding and putting FAIR into practice can help you, as a business leader, risk manager, or cybersecurity expert, better safeguard your company’s vital assets in an ever-unpredictable digital landscape.
In this blog, we will dive into the FAIR cyber risk management framework in detail and enlighten you about how it works, how to use it for cyber risk quantification, and the challenges and benefits of this methodology.
What is the FAIR Methodology?
The FAIR methodology provides a taxonomy and methodology for cyber risk assessments across all business functions provided by the FAIR standard. The FAIR architecture connects cybersecurity professionals, business managers, and general management through financially defined risk scenarios.
This method of analyzing cyber risk first suggests a taxonomy of the various components that make up risk, along with definitions that clarify terms like risk, threat, danger, asset, control, and audit. The FAIR technique illustrates how these aspects are related, providing a corporation with some food for thought.
The FAIR standard also provides a methodology for decomposing risk into discrete, quantifiable components and quantitatively estimating risk using statistics and probability. Understanding the interdependencies between risk components, identifying critical data for quantification, and analyzing complicated hazards are the goals.
This enables you to provide future loss projections (in USD, GBP, EUR, or other currencies) to decision-makers based on rational, understandable, repeatable, and defendable scenarios.
What Questions Does the FAIR Methodology Answer?
Businesses all over the world rely on this strategy because it gives management the ability to make knowledgeable cybersecurity decisions. Thus, the FAIR standard responds to the following queries:
- In what amount of time is it possible for a tragedy to occur more than once?
- What cyber threats are the most serious?
- What assets are in danger?
- How much can each disaster cost the company?
- How much money should be invested to protect the business against risks?
- Which of the two control strategies would most successfully lower the risk?
- Which risks require insurance, and how much coverage is necessary?
- Which insurance plan best addresses the risks facing the business?
Therefore, the FAIR analysis approach helps to decide and fine-tune your cybersecurity budget. Selecting the appropriate risk reduction strategy that will maximize your return on investment is another benefit. This also makes regulatory compliance easier.
How Does the FAIR Model Work?
Users discover important information or risk variables related to specific cyber-risk scenarios using the FAIR methodology. They subsequently input those numbers into the mathematical algorithms of the FAIR model, which compute and quantify cyber-risk in terms of likely financial losses.
In the fundamental sense, the FAIR model determines risk by multiplying as they relate to a specific asset such as a system, device, data, etc., a value known as loss event magnitude by a value known as loss event frequency.
The magnitude of a loss event indicates the extent and significance of the incident. It is predicated on the subsequent elements:
- Primary Loss. Costs associated with operations and finances are specifically brought on by the threat actor or the organization’s reaction. Examples include asset replacement and repair, ransomware payments, lost productivity, and incident response expenditures.
- Secondary Loss: Operational and monetary expenses brought on by the experiences and responses of third-party stakeholders to the adverse event. These include regulatory fines, data exposure notices, revenue loss due to reputational harm, etc.
The term “loss event frequency” refers to how frequently an event is expected to happen during a given time frame. In turn, it is dependent upon the subsequent elements:
- Frequency of threat events: indicates how frequently a given threat is expected to materialize; and,
- Sensitivity of threat events: indicates the possibility that the danger might result in loss, given its capabilities and the asset’s defenses.
The frequency of loss events is expressed mathematically, either as a percentage or another way. The amount of a loss occurrence is expressed in dollars.
Certain risk variables can be measured objectively, but others necessitate that practitioners estimate them with care using professional judgment, available data, and statistical ideas and techniques like calibration. Senior corporate executives, for instance, cannot objectively determine the financial impact of reputational harm on an organization in a given situation; they can only make an educated guess.
In this section, we will delve into how the FAIR model can be used for cyber risk quantification.
How To Use The FAIR Model for Cyber Risk Quantification?
When applying the FAIR model, practitioners have many alternatives, from basic to advanced. Here are some of the options:
- FAIR DIY: You only need spreadsheets to do a DIY FAIR analysis, according to the FAIR Institute. This strategy might be very basic or rather substantial, depending on the practitioner’s background and abilities.
- FAIR-U: The FAIR Institute provides a free online training tool that walks users through entering and analyzing data for one risk scenario at a time. In addition to professional accreditation, technical documentation, and training programs, the FAIR Institute also provides a range of free educational resources on its website.
- Open FAIR: FAIR is an open, international standard for quantitative risk management endorsed by the Open Group, a vendor-neutral security and risk organization. The two primary components of Open FAIR are the Risk Taxonomy Standard and the Risk Analysis Standard. The Open Group offers a professional certification program, the free Open FAIR Risk Analysis Tool, and a wealth of extra material and training.
Stages of a FAIR Risk Analysis
No matter if it is a DIY, free, or paid version, a FAIR analysis always follows these four steps:
Step 1: Determining the risk situations
This involves identifying the asset that is in jeopardy and the potential threat to it.
Step 2: Calculating the frequency of loss events
This involves seeking the advice of subject matter experts, as appropriate, to determine ranges of likely values for the danger event frequency and vulnerability variables. You must also determine the probability that a cyber event, such as a successful ransomware attack, will occur.
Step 3: Assessing the size of the loss occurrence
This involves establishing ranges of likely values and consulting subject matter experts, when necessary, for the primary and secondary loss variables. You should also determine the likely financial impact if the cyber event happened.
Step 4: Identifying and expressing risk
This involves multiplying the frequency of loss events by the magnitude of the loss events to determine the total risk value.
Drawbacks of the FAIR Model
There are a number of issues with using the FAIR four-step process to quantify cyber risk.
In stage 1 of FAIR, a group of individuals evaluate a set of dangers and estimate the damage they could cause. Then, using their qualitative knowledge, they fill out a questionnaire in a FAIR tool. The challenges at this stage are that the process is:
- time-consuming, money-consuming, and resource-consuming;
- requires manual data gathering;
- Uses arbitrary data that may contain errors;
- demands a thorough comprehension of the FAIR risk ontology, and,
- Requires advice from consultants or specialists with experience in relevant scenarios.
In stages 2 and 3 of the FAIR methodology, data is gathered based on risk scenarios that have been defined, and the estimated frequency and magnitude of losses are then estimated. The challenge at this point is that the process frequently produces useless data and instills a false sense of assurance because it depends too much on probability estimation.
Stage 4 focuses on using a simulation model to analyze, articulate, and derive the likely financial impact of risk. The challenges at this stage are that the process:
- does not list vulnerabilities in order of severity or offer concrete actions that an organization may take to strengthen its cybersecurity defenses;
- makes it difficult to operationalize continuous and repeatable cyber threat mitigation and remediation; and,
- does not offer remediation guidelines that security teams may employ to quickly and efficiently handle attacks inside their whole network since security controls are targeted at individual risks.
Benefits of the FAIR Model
Business concepts are used to translate cybersecurity risk using the FAIR approach. Even better, corporate users and leaders may get concise, useful explanations of cybersecurity risk from the FAIR taxonomy. Through FAIR, institutions get:
- Business Adaptability: FAIR is a framework that is adaptable and provides users with information about attack protection techniques.
- Growth Facilitation: Quickly expanding companies can respond to cyber threats at any point thanks to the FAIR architecture.
- Threat Protection: Complex cyber threat scenarios can be modeled and analyzed using FAIR threat modeling for simulation purposes.
- Cost-Effectiveness: By analyzing the financial impact and return on investment (ROI) of each indicator, businesses may use FAIR to make cost-effective decisions.
Security, Compliance, and Risk Management with Akitra!
Establishing trust is a crucial competitive differentiator when courting new SaaS businesses in today’s era of data breaches and compromised privacy. Customers and partners want assurances that their organizations are doing everything possible to prevent disclosing sensitive data and putting them at risk, and compliance certification fills that need.
Akitra offers an industry-leading, AI-powered Compliance Automation platform for SaaS companies. Using automated evidence collection and continuous monitoring, together with a full suite of customizable policies and controls as a compliance foundation, our compliance automation platform and services help our customers become compliance-ready for security standards like SOC 1, SOC 2, HIPAA, GDPR, PCI DSS, ISO 27001, ISO 27701, ISO 27017, ISO 27018, NIST CSF, NIST 800-53, NIST 800-171, FedRAMP, CCPA, CMMC, SOX ITGC, and more such as CIS AWS Foundations Benchmark, Australian ISM and Essential Eight etc. In addition, companies can use Akitra’s Risk Management product for overall risk management using quantitative methodologies such as Factorial Analysis of Information Risks (FAIR) and qualitative methods, including NIST-based for your company, Vulnerability Assessment and Pen Testing services, Trust Center, and AI-based Automated Questionnaire Response product to streamline and expedite security questionnaire response processes, delivering huge cost savings. Our compliance and security experts will provide customized guidance to navigate the end-to-end compliance process confidently. Akitra Academy provides easy-to-learn short video courses on security, compliance, and related topics of immense significance for today’s fast-growing companies.
The benefits of our solution include enormous savings in time, human resources, and cost savings, including discounted audit fees with our audit firm partners. Customers achieve compliance certification fast and cost-effectively, stay continuously compliant as they grow, and can become certified under additional frameworks using a single compliance automation platform.
Build customer trust. Choose Akitra TODAY!
To book your FREE DEMO, contact us right here.