Cybersecurity ROI refers to the measure of financial benefits gained from investing in cybersecurity compared to the costs incurred.
Organizations worldwide spend an average of 12% of their IT budgets on cybersecurity. Part of a CISO’s role is to justify the cybersecurity ROI of investments during board meetings. Without proper cyber risk quantification, an organization might not understand the full extent of the value gained or lost from those investments, or even how to properly calculate them.
Calculating cybersecurity ROI without employing the essential business KPIs extends beyond the loss column of a balance sheet when considering the potential costs accumulated in the event of a breach.
How to Effectively Measure ROI in Cybersecurity
Here are six key business metrics that any organization should implement to measure the true ROI of cybersecurity investments. To obtain a clear picture, it’s important to implement all six.
Return on Security Investment (ROSI)
The ROSI calculation compares the total financial benefits derived from reducing cybersecurity risks to the total investment made in security controls.
Percentage of Security Incidents Resolved
This metric tracks the proportion of security incidents that are effectively resolved within a specified timeframe, offering insight into the organization’s efficiency in incident response.
Cost Per Incident
This metric calculates the total cost of a security incident for the organization and provides a quantitative measure of the financial impact of individual security incidents on the organization.
Reduction in Downtime
Calculate the downtime reduction by comparing the downtime experienced before and after implementing security measures. Just as a benchmark, the cost of IT downtime can range from $5,600 per minute to $9,000 per minute based on industry vertical and company size.
Percentage of Critical Assets Protected
This metric provides insight into the organization’s overall security posture and risk exposure. Are your security measures effective in preventing potential cyber threats? Do you know which critical assets pose the highest financial risks to your business?
Reduction in Insurance Premiums
Implementing proactive security and risk management measures demonstrates an organization’s capability to effectively mitigate threats. This can lead to lower insurance premiums from cybersecurity insurers.
These key metrics can tell you whether your cybersecurity investments are yielding net gains or contributing to losses, and if so, what you can do to overcome them. In order to address those concerns, an organization must conduct a proper cost-benefit analysis.
ROI Calculations and Cost-Benefit Analysis
Return on Security Investment (ROSI) is a key metric that can shift the entire mindset of the C-suite. Let’s look at a potential scenario.
Suppose a company invests $100,000 in upgrading its cybersecurity technology. Over the next year, the company experienced a significant reduction in security incidents, resulting in $250,000 in costs saved from potential data breaches, incident response efforts, and regulatory compliance penalties.
The ROSI for this example is 150%, as it signifies that for every dollar allocated, the company avoided an equal amount in costs linked to security incidents. Of course, ROSI could also yield a negative number if, for example, the company invests in cybersecurity tools that do not effectively reduce cyber risk.
ROSI is an efficient way to perform an ROI cost-benefit analysis as it not only validates the importance of cybersecurity investments but highlights the organization’s overall risk mitigation efforts. Cyber risk quantification, on the other hand, provides contextual insights into the most critical assets that are the highest risk to a business and prioritizes mitigation efforts accordingly.
CISOs can benefit tremendously from cyber risk quantification to improve communication with the board and make better business decisions that contribute directly to the ROI of the organization.
Here are 4 Key Tips for CISOs on Planning a 2024 Cybersecurity Budget.
Challenges of Quantifying Cybersecurity ROI
- Complexity of Cybersecurity Incidents: As of 2023, over 72% of businesses worldwide were affected by ransomware attacks. Ransomware only represents one type of attack that organizations face regularly. Cybersecurity incidents encompass a wide range of threats that are becoming more sophisticated. Each type of incident presents unique challenges in terms of detection, mitigation, and impact assessment. Accurately quantifying the financial costs and benefits associated with addressing these incidents is an extremely difficult task.
- Difficulty of Quantifying Adequate Protection: Calculating cybersecurity ROI is not only based on what could happen, but also what does not happen. In other words, it’s important to quantify the value of not being breached. To do this, one must consider the complexity of existing environments, possible security solutions, the human factor, and more.
- Risk Management without Contextualized Prioritization: Failure to prioritize cybersecurity risks according to business context can lead to an inefficient allocation of resources. This results in missed opportunities to mitigate high-impact risks that directly affect profitability. Cybersecurity investments may also be reduced, compromising the organization’s ability to effectively protect its most critical assets. CISOs may encounter difficulty in securing the necessary support from the board for future cybersecurity initiatives as demonstrating a positive ROI becomes challenging without contextualized risk prioritization.
- Third-Party Risk Exposure: Research from the Ponemon Institute found that third-party attacks have increased from 44% to 49% year over year (YoY). Quantifying the financial impact of third-party risk exposure requires assessing the potential costs associated with security incidents originating from external parties. If a third party experiences a security breach, it can have a ripple effect on the organization, leading to major financial backlash and severe reputational damages.
- Regulatory Compliance: Compliance frameworks are constantly changing. Even the smallest of changes in regulatory requirements can impact the organization’s ability to achieve its full business objectives. Another setback is that certain compliance standards may not integrate with others, making it exceptionally difficult to budget in advance. Audits, while necessary for regulatory compliance, represent a substantial financial burden for organizations. The resources required for audit preparation, potential disruptions to operational efficiency, and the costs associated with non-compliance findings further exacerbate this challenge. When factoring in these complexities, the costs of maintaining compliance escalate rapidly, ultimately hindering the achievement of a positive cybersecurity ROI.
Achieve Positive Cybersecurity ROI with CYE
CYE’s cybersecurity optimization platform, Hyver, gives you a clear understanding of your cybersecurity investments.
With Hyver’s ROI analysis capability, you can effectively plan your cybersecurity budget and understand the financial impact of mitigation activities. Hyver provides built-in calculators to assess potential savings and compare them against annualized costs.
Hyver’s cyber risk quantification also helps organizations improve security investments and prioritize cyber risk remediation according to business KPIs. Focus on what matters most to your organization.
Want to learn how you can maximize your cybersecurity ROI? Contact us.
