The True Value of Cybersecurity: How to Measure and Maximize ROI
We’ve all heard this: Over the last decade, investments in cybersecurity have skyrocketed. Gartner predicts that information security spending will reach $212 billion by 2025. However, despite this surge, many organizations face growing pressure to justify these budgets. CISOs and security teams are often tasked with doing more with less, reducing cyber risk and bolstering security measures while adhering to leaner budgets.
So how do you justify cybersecurity investments while ensuring your business remains resilient against evolving cyber threats? In this article, we’ll explore how to calculate, quantify, and create cybersecurity return on investment (ROI) in ways that resonate with business leaders.
Key takeaways
- Understanding Cybersecurity ROI: Cybersecurity ROI evaluates the value of a cybersecurity investment compared to its cost. While often simplified as:
ROI = (Revenue – Costs) / Cost, the true calculation often requires a more nuanced approach. - Maximizing ROI: ROI can be enhanced by understanding risk levels, assessing the likelihood of incidents, rationalizing tools, adopting a risk-based approach, and exploring other strategic avenues.
- Beyond Cost Avoidance: Cybersecurity is not just about preventing losses, it’s about fostering business resilience, enabling growth, and creating long-term value.
What is cybersecurity ROI?
At its core, cybersecurity ROI measures the value of a cybersecurity investment relative to its cost. While it’s tempting to think of ROI as a straightforward equation, the reality is more nuanced. Cybersecurity ROI spans two categories:
- Hard ROI: Clear, measurable, and tied to financial metrics (e.g., cost savings, avoided losses).
- Soft ROI: Intangible benefits like brand reputation, customer trust, and long-term resilience.
Think of it as a spectrum, where hard ROI focuses on immediate, measurable returns, while soft ROI requires interpreting less tangible, but equally critical, benefits.
The importance of accurate assumptions
Throughout this spectrum of identifying ROI, you have to calculate and quantify your organization’s cyber risk. To do this, you need to make assumptions, be it based on data and experience, but some assumptions will be made. But, in order to ensure your ROI correctly aligns with your cyber risk, you need to constantly review the assumptions as you grow, change, and gain a better understanding of how a potential security breach will affect the company. Failing to adjust assumptions as your company evolves can lead to decisions based on outdated or inaccurate inputs, diminishing the effectiveness of your cybersecurity strategy.
By aligning your ROI calculations with updated insights into your cyber risk, you can enhance your brand and build customer trust through a demonstrated commitment to security.
Calculating cybersecurity ROI – “Hard ROI”:
Calculating cybersecurity ROI, or “hard” ROI, involves measurable, data-driven metrics that directly tie your cybersecurity investment to outcomes. This is the CFO’s comfort zone: numbers and quantifiable results.
Example: Spending $26,000 on enhanced security measures reduced our cyber insurance premium by $100,000.
However, not all cybersecurity measures lend themselves to straightforward calculations. This is where quantifying ROI comes in.
Quantifying cybersecurity ROI – “Soft ROI”:
At first glance, calculating and quantifying ROI might seem like the same thing. They’re not. Quantifying cybersecurity ROI evaluates the less tangible benefits that are crucial to long-term success but harder to assign a dollar value.
For example, how do you measure the total impact of preventing a security breach that never happened or the money saved through improved data protection? You might not have data on what would have occurred. So what can you do?
You need to understand the likelihood, impact of any potential risk (infrastructure impact, financial impact, reputation impact, loss of customer trust, etc.), and what the potential financial costs would be:
- Likelihood: The probability of a breach, influenced by factors such as emerging threats, threat actor motivations, system vulnerabilities, asset value and the organization’s industry.
- Impact: The potential consequences of a breach, from financial losses to reputational damage.
- Financial Risk: Notification costs, ransom, IR firm costs, legal costs and liability, etc.
With these three factors in mind, you can use this formula:
Formula: Likelihood (%) × Impact ($) = Financial Risk
What could this formula look like in action?
- Brand and Reputation Consequences: Although the likelihood of a breach at Meta may be higher as it is a well-known target, the impact has historically been much lower due to its escalated market presence. This means the financial risk as it pertains to brand reputation is not as high as a less established or credible organization.
- Operational Disruption: Breaches can significantly disrupt a company’s 3-5 year strategic growth plans. A scaling company for instance is at greater risk as it might face halted operations or lose potential clients due to a security incident. The likelihood of such disruption may vary, but the financial impact, measured in lost revenue and stalled progress, can be substantial, resulting in a high financial risk.
Quantifying these scenarios requires thoughtful interpretation and alignment with business goals. While challenging, it underscores the strategic importance of proactive cybersecurity measures.
Creating cybersecurity ROI:
When you can’t calculate or quantify ROI directly, you can create value by demonstrating cost-effectiveness and strategic alignment.
1. Tool Rationalization
Tool rationalization is when you evaluate your security stack to identify redundancies, optimize configurations, and ensure tools align with business needs.
Example: Removing overlapping tools might free up $50,000 annually, which can be reinvested into your cybersecurity budget for higher-priority initiatives like threat detection.
This process helps answer:
- “What are we spending on cybersecurity?”
- “Are we maximizing the capabilities of our tools?”
- “Where can we reduce overhead without sacrificing security?”
2. Risk-Based Security Approach
Not all risks carry the same weight. Focus resources on protecting high-value assets and critical systems.
In simpler terms: Don’t put a bank vault door on your broom closet. Focus your efforts on areas with the highest potential impact.
Example: Instead of over-securing low-impact assets, prioritize customer data stored in critical databases to mitigate potential legal and reputational consequences.
By aligning investments with business priorities, you create a cybersecurity program that delivers value beyond immediate cost savings.
The Value of Cybersecurity: Beyond Cost Savings
Cybersecurity isn’t just about avoiding costs, it’s about enabling resilience, trust, and growth. Here are three additional areas where ROI shines:
Risk Avoidance
With the global average cost of a data breach at $4.88 million (IBM), demonstrating proactive risk management helps justify investments for the current cyber threat landscape. Risk avoidance includes dodging costly data breaches, ransomware attacks, and other security incidents.
To make this meaningful for business leaders, reframe it as:
- “How much risk have we mitigated?”
- “What’s the business value of this risk reduction?”
Example: Deploying endpoint protection on all devices might cost $X but can reduce the likelihood of a breach by Y%, representing a significant value.
Competitive Advantage
With 68% of consumers concerned about data collection and 40% don’t trust companies to handle their data ethically (KPMG), strong cybersecurity measures have become a selling point. By prioritizing data protection in your security operations, you position yourself as a trustworthy brand.
Regulatory Compliance
Data protection laws and regulations like GDPR, HIPAA, and others aren’t optional – they’re requirements. Being in violation of a law like HIPAA carries hefty financial penalties ranging from $141 to $2,134,831 per violation (The HIPAA Journal). And with additional layers of penalties for failing to fix existing compliance gaps, your organization could quickly deteriorate under the financial impact. Not to mention the impact of not meeting expectations of your customers and partners.
The upside of a heavily regulated environment is the opportunity for certifications like SOC 2 among others. Obtaining certifications, specifically as it relates to cybersecurity, can increase your customer and partner satisfaction and belief in your organization as well as possibly increase revenue.
Making the case for cybersecurity investments
In today’s dynamic threat landscape and ever increasing regulatory environments (including customer and consumer expectations), investing in cybersecurity is a non-negotiable. By effectively calculating, quantifying, and creating ROI, security leaders can secure buy-in for the tools and strategies that safeguard their organizations.
Cybersecurity isn’t just a cost center; it’s a business enabler. Whether it’s preventing multimillion-dollar security breaches, earning customer trust, strengthening the value prop of products or services or meeting regulatory compliance demands, the ROI of cybersecurity is clear – it’s an investment in your organization’s future.
Ready to build a resilient cybersecurity strategy?
At Cyber Defense Group, we help organizations enhance their security posture while providing ROI to stakeholders. With boutique consulting services from cybersecurity professionals at predictable, fixed costs, we’re your partner in achieving cyber resilience.