The 2 Types of Risk Assessment Methodology

Every company handles sensitive information — customer data, proprietary information, information assets, and employees’ personal information — all of these records come with risk attached to them.

How can your organization understand exactly how much risk it faces regarding the information it stores and its cybersecurity controls? How can it prepare for that risk before a breach happens?

Cybersecurity risk assessments are a vital part of any company’s information security management program — they help you understand which security risks your critical assets face, how you should protect those assets, and how much you should budget to protect them.

To go a step further, many organizations also look to frameworks like the NIST cybersecurity framework and ISO/IEC 27001 to structure their assessments and ensure best practices when securing information systems. These internationally recognized standards help teams evaluate internal and third-party information systems effectively, using consistent controls and processes.

What is Risk Assessment?

Risk assessment is the process of identifying and analyzing potential future events that may negatively impact your organization, how likely each sort of risk is, and how much of an impact a risk might have on your business. A risk assessment can also help you decide how much of each type of risk your organization is able to tolerate.

Risk assessment is part of a broader risk assessment process that includes identifying potential threats, assessing risk exposure, estimating potential losses, and implementing control measures to reduce vulnerabilities and align with your risk management framework and business objectives.

An essential part of this process is outlining and prioritizing appropriate mitigation strategies. These measures and plans reduce the likelihood or severity of adverse security events. Effective mitigation is not one-size-fits-all. It requires evaluating your specific risk posture and aligning with your compliance obligations.

Organizations conduct risk assessments in many areas of their businesses — from security to finance. Cybersecurity risk assessments deal exclusively with digital assets and data.

There are two main types of risk assessment methodologies: quantitative and qualitative.

What is a Quantitative Risk Assessment?

Quantitative risk assessments focus on numbers and statistical data. To perform a quantitative risk assessment, a team uses measurable data points to assess and quantify risk.

To perform a quantitative risk assessment, your organization will start by compiling two lists: a list of possible risks and a list of your most important digital assets. The second list might include items such as valuable information, your IT infrastructure, and other key assets. Once you’ve made your list of assets, you’ll assign a dollar value to each item, which can be tricky for line items such as customer data or other valuable information for which there is no set financial value.

The next step is to look at your list of risks. Which asset would be affected by the risk at the top of your list? How much would be lost? Multiply the loss percentage by the asset’s dollar value to get a financial amount for that risk. Then move on to the next risk on your list.

This quantitative approach allows security leaders to calculate the level of risk associated with each scenario. It also supports the prioritization of risk management strategies by comparing the financial potential impacts of each scenario.

This process is often referred to as quantitative risk analysis. It introduces a structured way to assign numerical values to potential losses and helps improve decision-making by turning abstract risks into tangible figures. This is especially important when communicating risks and priorities to senior leadership or stakeholders who require business-aligned reasoning.

You can see why quantitative risk assessments might be attractive to boards and business leaders. This sort of assessment is used to answer questions that need to be answered in numbers, such as “How many records will be exposed if we experience a breach?” or “How will this risk impact our bottom line?” It allows boards to compare the costs of security controls to the data those controls protect.

However, it doesn’t answer all of the questions related to risk—like what happens to productivity if there’s a cyber attack? That’s where qualitative risk assessment comes in.

What is Qualitative Risk Assessment?

Qualitative risk assessment is less about numbers and more about what would actually happen, day to day, if one of the risks on your list were to occur.

While a quantitative risk assessment is straightforward and numbers-based, a qualitative security risk assessment methodology involves talking to members of different departments or units and asking them questions about how an attack or a breach would impact their operations. 

Specifically, you might ask how a team’s productivity would be affected if they couldn’t access specific platforms, applications, or data. These interviews will show an assessor which systems and platforms are mission-critical for specific teams and which aren’t. You might also ask customer-facing teams how a breach will affect service delivery or those who manage vendors about how an attack will interfere with supply lines.

This qualitative approach leverages interviews, scenarios, and observations — commonly known as qualitative methods — to better understand potential hazards and reputational risks, especially those resulting from human error or operational failures.

Qualitative assessments aren’t as precise as quantitative assessments, but they provide important information. An attack is about more than its financial ramifications. It can also throw business operations into chaos. 

If you know ahead of time how risk might impact each part of your organization, balanced use of qualitative assessments and the quantitative approach ensures effective risk management. It also gives organizations a well-rounded view of their risk posture and risk level — from the boardroom to the server room.

This type of assessment also contributes to building a strong risk profile for the organization and supports regulatory compliance by identifying gaps in policies and procedures.

One of the biggest advantages of qualitative assessments is how they incorporate perspectives from across the organization and give stakeholders a voice in identifying critical dependencies and operational risks that might otherwise be overlooked in a purely numerical model.

Why You Need Both, and How SecurityScorecard Can Help

When developing your company’s information security management program, it’s important to understand that you’ll need to incorporate both types of risk assessments to effectively assess risk. Your leadership must be prepared for the financial effects of a breach and the impact an attack could have on business operations. By identifying risk and knowing how it will impact your business, you’ll be better prepared to mitigate the impact of a risk should it occur.

SecurityScorecard can help you identify and prioritize cyber risks by providing continuous visibility into your organization’s external attack surface. Our platform analyzes key risk factors across your digital ecosystem and delivers insights that empower teams to take proactive steps to strengthen defenses, reduce exposure, and protect sensitive data across your enterprise, customers, and third parties.

Whether you’re building an internal audit program aligned to ISO 27001 or working toward NIST compliance, SecurityScorecard’s platform provides data-driven insight to support technical analysis and executive-level decision-making.

 Explore how SecurityScorecard’s platform brings your risk assessment methodology to life.