Cyber Risk Assessment for Capital Management

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ID: 282197
2022
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Abstract
This paper introduces a two-pillar cyber risk management framework to address the pervasive challenges in managing cyber risk. The first pillar, cyber risk assessment, combines insurance frequency-severity models with cybersecurity cascade models to capture the unique nature of cyber risk. The second pillar, cyber capital management, facilitates informed allocation of capital for a balanced cyber risk management strategy, including cybersecurity investments, insurance coverage, and reserves. A case study, based on historical cyber incident data and realistic assumptions, demonstrates the necessity of comprehensive cost-benefit analysis for budget-constrained companies with competing objectives in cyber risk management. In addition, sensitivity analysis highlights the dependence of the optimal strategy on factors such as the price of cybersecurity controls and their effectiveness. The framework's implementation across a diverse range of companies yields general insights on cyber risk management.
Reference Key
zhang2022cyber Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Wing Fung Chong; Runhuan Feng; Hins Hu; Linfeng Zhang
Journal arXiv
Year 2022
DOI
DOI not found
URL
http://arxiv.org/abs/2205.08435v4
Keywords
math.oc cs.cr q-fin.rm

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