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Infosec Management Tip: Business Is About Taking Risks

August 23, 2012

Business is About Taking Risks

One of the fundamental things that drives our economy is risk-taking. That’s the natural inclination of the most successful business people I’ve met. There’s risk in both going in a new direction – what you might call “venture risk” – that separates the promising businesses from the failing.

Let’s look at an example to better illustrate the point. Suppose we have two otherwise identical chair makers, making identical chairs. One day they overhear someone mentioning that having a cup holder built into the chair would be a good thing. That’s never been done before, so there’s a risk in making something different. Now one maker takes a venture risk and builds his next line of chairs with a cup holder and it’s a hit, selling twice as many as before and even commanding a premium. The risk-averse chair maker sticks with the old design and sees a drop off in sales. The venture risk-seeking businessman wins. Enough of these successful venture risk decisions and he drives the other chair maker out of business.

(By the way, this is a principal criticism of  the labor theory of value popularized by Karl Marx and which underpins Socialism. Also for more on risk-averse behavior check out the awesome TED presentation where Laurie Santos shows our behavior can be just as irrational as Capuchin monkeys.)

But thinking back on the same situation, it’s possible to see that the risk-averse chair maker is also taking a risk. His risk is that failure to innovate will drive his company out of business. Now, his is actually what we would see traditionally as the safer bet. But expanding on the scenario just a little bit it’s possible to show that the status-quo is actually riskier. All you have to do is assume that some day a better chair will be created and put into production. This virtual certainty also virtually guarantees that the risk-averse chair maker will eventually go broke.

Most businesses today are a far cry from this idealized chair maker – even the chair making industry. But the vignette translates well to the highly risk-averse attitudes of many CISOs and other information security professionals today. They try to eliminate all security risk, but in doing so they virtually doom the enterprise to certain failure. That’s why they’re often perceived as ineffective. Instead, CISOs should help their companies make smart decisions and help protect against security, privacy and compliance threats when taking venture risks.

Hat tip to Andy Ellis, CISO of Akamai, whose keynote at Hack In The Box Amsterdam partially inspired this post. You’re a smart man, Andy.

This is part of a series of short tips for Information Security Managers, where Stratigos Security will provide you with some of the benefits of our experience working with others like you. If you like what you read, come back for more!