Cyber Risk Quantification: How It Can Help Protect Your Digital Assets

  • July 20, 2023

Anna Fitzgerald

Senior Content Marketing Manager at Secureframe


Rob Gutierrez

Senior Compliance Manager at Secureframe

41% of organizations attacked in the past year say their risk exposure has increased. That means they’re more vulnerable to data breaches, disruptions in business operations, and reputational damage.

One way to help mitigate these risks is cyber risk quantification. This type of risk management methodology provides organizations with a quantifiable understanding of their cyber risks.

We’ll explain this concept and its benefits in more depth below.

What is cyber risk quantification?

Cyber risk quantification is the process of assessing, measuring, and prioritizing risks based on their potential financial impact.

Unlike qualitative risk assessments, cyber risk quantification assigns monetary values to cyber risks so that organizations can prioritize the most impactful risks and allocate resources to manage them. This helps organizations more clearly align their cybersecurity strategy with business objectives.

There are a few factors that organizations can use to quantify cyber risks including:

  • the likelihood of a cyber event occurring
  • the vulnerability of their systems
  • the potential impact on business operations
  • the cost of recovery

Below let’s walk through the set of factors you might consider when quantifying a risk.

How to quantify risk

One way to quantify cyber risk is by determining the expected loss resulting from a cyberattack. You can calculate this on a per asset and per vulnerability basis by multiplying the likelihood of the attack times its impact.

formula for quantifying cyber risk is multiplying likelihood of cyber attack by its impact in dollars

To calculate the likelihood, you can use the following factors:

  • vulnerability severity
  • threat level
  • asset exposure
  • security controls

To calculate the impact, you can use the following factors: 

  • detection and escalation costs
  • notification costs
  • response costs
  • lost business cost

Using some statistical modeling, you can calculate possible loss ranges.

There are standard quantitative models for defining and quantifying security and operational risk. Let’s take a look at two examples of such models. 

Cyber risk quantification models

The cyber risk quantification models below can help your organization get a clearer understanding of your cyber risk landscape.

The Factor Analysis of Information Risk (FAIR™)

The FAIR model is a risk management methodology developed by the FAIR Institute that quantifies cyber risk exposure as a dollar value.

This model has been developed to supplement existing risk management frameworks so that organizations understand what security controls they need to implement as well as the potential financial impacts of different cyberattack scenarios if they do not implement them.

Each cyber risk is assigned a unique dollar value based on the probable magnitude of financial loss and the probable frequency of financial loss in a given scenario. 

To quantify risks using this model, you’ll need to: 

  • take inventory of all your assets, vendors, and suppliers
  • identify and document all potential threats
  • evaluate your controls
  • categorize risks into impact levels
  • calculate potential impacts across a variety of scenarios

While performing a FAIR assessment is highly manual and time-consuming, automation can help simplify and streamline much of the process. 


DREAD is another risk management methodology created by Microsoft that offers a more in-depth analysis of the potential impact a cyber risk may have beyond a financial one. Microsoft has since abandoned the model, but it is still used by small businesses, Fortune 500 companies, and the military today.

The DREAD threat model quantifies cyber risks based on the following five criteria:

  • Damage potential: How much damage could the cyberattack cause?
  • Reproducibility: How easy is it to reproduce the cyberattack?
  • Exploitability: What’s required to launch the cyberattack?
  • Affected users: How many people will be impacted by the cyberattack?
  • Discoverability: How much work is required to discover the vulnerability?

Each risk is assigned a rating between 0 and 10 based on the answers to the questions above. They are then categorized into the following tiers based on their scores:

Points Threat rating Priority
40-50 Critical Address immediately
25-39 High Consider for review and resolution soon
11-24 Medium Review after addressing several and critical risks
1-10 Low Review after addressing all other risks

Benefits of cyber risk quantification

Cyber risk quantification can solve a number of pain points that security and risk management leaders typically face, including data and communication silos around risk, lack of a common language for evaluating risk among organizational leadership, and misalignment between cybersecurity strategy and business strategy.

Let’s take a closer look at the benefits of cyber risk quantification below. 

1. Reduce data breach costs

Risk quantification is associated with significant cost savings of breaches. In IBM's 2022 Cost of a Data Breach report, organizations that prioritized risks, threats and impacts based on risk quantification techniques had an average breach cost of  $3.30 million, which was $2.10 million less than those that didn’t use risk quantification. This represents a costs savings of 48.3%.

2. Get consensus on top risks

With cyber risk quantification, you can get a clear consensus on the top risks your organization faces among risk owners, C-level executives, board members, and other stakeholders based on quantitative data rather than subjectivity. This means you can quickly shift focus to establishing a clear strategy and roadmap for both security teams and business leaders to manage these top risks.

3. Prioritize mitigation efforts

By understanding the potential financial impact of different cyber risks, organizations can focus on the most significant risks to their operations and assets and prioritize their mitigation efforts accordingly. This can help prevent risks events that could cause the most significant financial losses.

4. Justify cybersecurity budgeting

By quantifying the potential financial impact of cyber events, cyber risk quantification helps determine the resource allocation — both in terms of budget and headcount — required to address potential risks effectively. This helps ensure that the cybersecurity budget aligns with the organization's risk appetite.

5. Communicate risk more effectively

Cyber risk quantification enables organizations to present cyber risks in monetary terms. Using quantifiable metrics makes it easier for executives and board members to grasp the potential consequences of poor risk management and, conversely, understand the return on investment of cybersecurity budgets and initiatives.

6. Get the right cyber insurance coverage

If your organization is interested in purchasing cyber insurance, you’ll need reliable information about your cyber risk profile to determine the appropriate coverage and premiums. Cyber risk quantification helps provide insurers with accurate data so that you can get the most appropriate coverage at the best possible price.

How Secureframe can help your organization manage risk

Secureframe can help provide a complete view of risks across your organization so you can more easily quantify them and build and maintain robust risk management processes.

  • Monitor risks 24/7: Continuous monitoring across your tech stack provides complete visibility into critical security and privacy issues. Track and update risk likelihood and impact as well as risk treatment plans. 
  • Track risks in a single place: Maintain an up-to-date risk register as you introduce new products and services, respond to changes in the business or technological environment, and incorporate findings from internal or external audits. 
  • Record risk information: Track and update the details of potential risks as well as their impact on your business and mitigation steps. 
  • Assign risk owners: Notification reminders to review and update risks on a regular basis ensure accountability. 

Learn more about how Secureframe can help enhance risk management at your organization by scheduling a demo today.