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Quantitative risk assessments use monetary values to measure risk. It focuses on hard values and percentages, utilizing mathematical formulas to calculate the value of expected losses associated with a particular risk, based on many variables.
The quality of the data used in a quantitative assessment determines the quality of the results. Assuming it’s of a high standard, this type of assessment can be employed to discover crucial factors regarding your risk posture.
For example, this data can help anticipate the potential outcome of events or the impact a risk occurring will have on assets.
A quantitative risk assessment is generally accomplished by determining the following values:
Create an asset inventory and use Asset Valuation to determine the value of your assets
Identify your threats including the likelihood of risk occurrence, probability of associated loss, and what the impact will be if the risk occurs
Determine the Exposure Factor for each IT asset in relation to each threat. Exposure Factors are usually in the form of a percentage of an asset’s value that is likely to be destroyed by a particular risk
Following these results, you can calculate several key variables:
Single Loss Expectancy, which can be described as the expected monetary value loss from the occurrence of a risk on an asset
Annual Rate of Occurrence, which is the result of quantitative risk analysis that represents the estimated frequency of a specific threat or risk that will take place in any given year
And the Annual Loss Expectancy, which is the annual expected financial loss to an organization’s IT asset because of a particular threat occurring.
The ALE is usually the metric needed to determine the priority and threat potential of a risk situation.
Aside from quantifying risk, there is an additional method known as Qualitative Risk.
The key difference between qualitative and quantitative risk analysis is the basis for evaluating risks.
Qualitative risk analysis is subjective and based on the assessor. Risks are usually categorized through a scale that estimates probability, such as low, medium, and high, and generally, they are determined based on their source or on the impact on the business.
Qualitative risk assessments use descriptive and categorical information treatments rather than numerical calculations.
Quantitative risk analysis is based on verified and specific data, while Qualitative risk analysis is based on a person’s perception or judgment. Many risk assessments incorporate some elements from both, which provides you with a more comprehensive perspective.
The purpose of quantitative risk analysis is to help prevent spending time and resources on mitigating insignificant risks.
Using quantitative risk management techniques can provide more reliable information. It gives you the information needed to strengthen your risk management strategy and keep it moving forward by accurately communicating the controls you need to implement to properly mitigate a risk to your satisfaction.
Quantitative risk management gives you an edge by basing the results on numerical, objective, and measurable data. The window of uncertainty that comes with qualitative assessments is not a factor here. This will increase your organization’s confidence in the results of the assessments.
As long as the information you have is dependable, using a data-driven approach yields more accurate, usable information.
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