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December 2013 Vol. 15 / No. 10

Return on security investment: The risky business of probability

As most of us know, return on security investment is basically the amount of risk reduced, less the amount spent, divided by the amount spent on controls. Net amount of risk per amount of control is the essential formula for any "return on" ratio -- return on investment, equity, assets and so on. (It isn't like this stuff is just made up; there's history and an interest in consistency here.) The challenge for technology risk management professionals is really a gut check: Are we really, truly reducing risk by the amount we are spending on security? As I noted in my November column, first, realize that you are making that assertion every time you allocate resources to some function. So take a step back and verify that the costs of your recent actions -- salaries, operating expenses, capital investments -- meet these criteria. But breakeven is never good enough, and we really haven't gotten to the bottom of the individual values of probability and impact (the elements of risk). It's useful -- perhaps even crucial -- to have an ...

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