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02-Risk-Management.md

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Risk Management

  • assess the impact if an adverse event were to happen decide what could be done to control that impact as deemed necessary

Well formed risk statement includes:

  1. asset
  2. threat
  3. vulnerability
  4. mitigation
  5. impact
  6. probability

Risk

Systematic risk

  • fire, theft, software bugs - mitigated through diversification
  • predictable under stable circumstances Unsystematic risk
  • recession, epidemics, protocol design errors
  • come from sources that are difficult to predict

Business risk

  • operation of a business as a business

Examples:

  • Treasury management (financial risk)
    • holdings in bonds, futures, currencies, etc
  • Revenue management
  • Contract management
  • Fraud
    • deliberate deception
  • Regulatory
  • Business continuity
  • Technology

Technology risk

  • technology used in development process as well as software functionality

Examples:

  • Security - protective attributes
  • Privacy - attributes that define access/sharing
  • Project risk management
  • Change management

Risk controls

  • 📝 best method for managing risk in software
  • 📝 Understanding environment and risk and applying controls should be owned by development team

Three classes:

  1. Administrative
  2. Technical
  3. Physical

For each class, there are four types of controls

  1. Preventative
  2. Detective
  3. Corrective
  4. Compensating

Preventative

  • primary control
  • proactive
  • best mitigation
  • goal: stop attack

Examples:

  • separation of duties
  • adequate documentation
  • physical control over assets
  • authorization mechanisms

Detective

  • reactive
  • goal: detect presence of attack

Examples:

  • logs
  • audits
  • inventories

Corrective

  • after a vulnerability is exploited
  • goal: reduce total impact

Compensating

  • when primary controls fail
  • reactive
  • defense in depth

Example: separation of duties is a preventitve control to prevent fraud, financial review of reports is an after the fact compensating control

Controls framework

  • managing risk as part of a complete system

Qualitative

  • Subjectively determine impact of an event - involves experts and group consensus

Two aspects: impact and probability

Qualitative matrix

Failure mode effects analysis (FMEA)

  • assess failures and effects on the system
  • for each issue, elements are defined
  • severity of risk is defined (1-10)
  • probability (1-10)
  • detectability (1-10)
  • calculate product (over 200 / 1000 worth looking at)

Quantitative

  • Objectively determine impact of an event - involves use of metrics and models

  • use historical loss and trends to predict future loss

  • highly dependent on historical loss data

  • assuming constant risk rate is not an agreed upon concept

key info:

  • important to come to consensus on values being used
  • use consistent values
  • models can never replace judgement and experience, but can enhance decision making

Single loss expectancy (SLE)

📝 SLE = asset value * (exposure factor or duration)

Annualized rate of occurrence (ARO)

📝 ARO = number of events / number of years covered

Annualized loss expectancy (ALE)

📝 ALE = SLE * ARO

Residual Risk Model

  • Absolute security is not achievable

Example:

  • potential loss of $100k
  • firewall blocks 95%
  • IDS (intrustion detection system) is 80% effective
  • IRT (incident response team) is 50% effective
  • 100k * 95% + (5k * 80% * 50%) = 97k with 3k residual

ROI

  • 📝 ROI % = (avoided loss - control cost) / control cost * 100
  • 📝 ROI time = avoided annual loss / annual control cost

Governance, Risk, and Compliance

  • Governance: sum of exective actions that manage risk
  • need to comply with laws and regulations, so GRC terms are used synonomously
  • Compliance: activities associated with external requirements (contractual, policy, strategic, industry, regulations, laws)
  • Conformance: activities associated with internal requirements (org policies/standards)
  • Compliance gets priority over conformance
  • many reasons, primary being penalties

Legal

Two key legal issues with significant risk

  1. intellectual property
    1. legal action provides some protection but not against unknown criminals
  2. data breach

Standards

  • established norms
  • goal: define rules to ensure specified level of quality

Risk Management Models

General Risk Management Model

  1. Asset identification
    1. includes classification
  2. Threat assessment
    1. threats and vulnerabilities for each asset
    2. likelihood of occurrence
  3. Impact determination and quantification
    1. Tangible: financial loss, physical damage
    2. Intangible: reputation
  4. Control design and evaluation
    1. Decide which controls to implement
  5. Residual Risk Management
    1. Identify additional controls needed to reduce residual risk

Software Engineering Institute Model

  1. Identify - list potential risks
  2. Analyze - impact, probability - classify and prioritize risks
  3. Plan - Decide actions to take and implement mitigation
  4. Track - Monitor and review risks and mitigations
  5. Control - make corrections as needed