Science of Risk Management

Near misses are very valuable signals regarding future losses. If we ignore them in our cost metrics, we might make some very poor decisions. This example shows that there is a qualitative difference between “ground truth data” (in this case, historical cash flow for data breach events) and overall security metrics, which need to reflect our estimates about the future, a.k.a. risk.

Read More The Cost of a Near-Miss Data Breach

Luther Martin, blogger with Voltage Security, has advised caution about using of risk risk management methods for information security, saying it’s “too complicated and subtle” and may lead decision-makers astray. To backup his point, he uses the example of the Two Envelopes Problem in Bayesian (subjectivist) probability, which can lead to paradoxes. Then he posed an analogous problem in information security, with the claim that probabilistic analysis would show that new security investments are unjustified. However, Luther made some mistakes in formulating the InfoSec problem and thus the lessons from Two Envelopes Problem don’t apply. Either way, a reframing into a “possible worlds” analysis resolves the paradoxes and accurately evaluates the decision alternatives for both problems. Conclusion: risk management for InfoSec is complicated and subtle, but that only means it should be done with care and with the appropriate tools, methods, and frameworks. Unsolved research problems remain, but the Two Envelopes Problem and similar are not among them.

Read More Is risk management too complicated and subtle for InfoSec?