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Reducing Informational Disadvantages to Improve Cyber Risk Management†

Author

Listed:
  • Sachin Shetty

    (Old Dominion University)

  • Michael McShane

    (Old Dominion University)

  • Linfeng Zhang

    (University of Illinois at Urbana-Champaign)

  • Jay P. Kesan

    (University of Illinois at Urbana-Champaign)

  • Charles A. Kamhoua

    (Air Force Research Lab)

  • Kevin Kwiat

    (Air Force Research Lab)

  • Laurent L. Njilla

    (Air Force Research Lab)

Abstract

Effective cyber risk management should include the use of insurance not only to transfer cyber risk but also to provide incentives for insured enterprises to invest in cyber self-protection. Research indicates that asymmetric information, correlated loss, and interdependent security issues make this difficult if insurers cannot monitor the cybersecurity efforts of the insured enterprises. To address this problem, this paper proposes the Cyber Risk Scoring and Mitigation (CRISM) tool, which estimates cyberattack probabilities by directly monitoring and scoring cyber risk based on assets at risk and continuously updated software vulnerabilities. CRISM also produces risk scores that allow organisations to optimally choose mitigation policies that can potentially reduce insurance premiums.

Suggested Citation

  • Sachin Shetty & Michael McShane & Linfeng Zhang & Jay P. Kesan & Charles A. Kamhoua & Kevin Kwiat & Laurent L. Njilla, 2018. "Reducing Informational Disadvantages to Improve Cyber Risk Management†," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(2), pages 224-238, April.
    • Handle: RePEc:pal:gpprii:v:43:y:2018:i:2:d:10.1057_s41288-018-0078-3
    DOI: 10.1057/s41288-018-0078-3
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    References listed on IDEAS

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    1. Jay Kesan & Rupterto Majuca & William Yurcik, "undated". "The Economic Case for Cyberinsurance," University of Illinois Legal Working Paper Series uiuclwps-1001, University of Illinois College of Law.
    2. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    3. Christian Biener & Martin Eling & Jan Hendrik Wirfs, 2015. "Insurability of Cyber Risk: An Empirical Analysis†," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(1), pages 131-158, January.
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    Cited by:

    1. Zängerle, Daniel & Schiereck, Dirk, 2022. "Modelling and predicting enterprise‑level cyber risks in the context of sparse data availability," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 136276, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    2. Moti Zwilling, 2022. "Trends and Challenges Regarding Cyber Risk Mitigation by CISOs—A Systematic Literature and Experts’ Opinion Review Based on Text Analytics," Sustainability, MDPI, vol. 14(3), pages 1-29, January.

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