The Black Hat Tax

Auren Hoffman at Summation has an interesting post on the “black hat tax.”  Essentially, how much do hackers and other online criminals actually cost us?  He estimates it at 25% of time and resources, after taking into account not just hackers but also scammers, phishers, and responding to law enforcement requests.  According to James Currier (who founded a good number of social-networking type sites, some of which are quite substantial), this “tax” is 25-40% for consumer Internet companies, with it being especially high in unexpected places (like online dating sites.)

That’s a lot of money.  More importantly, it’s a lot more money than most managers think we’re spending on security.

Now, the accuracy of these statistics is obviously dubious — even a respected and experienced person’s ad hoc estimate is still just an ad hoc estimate.  But it’s worth thinking about this for your company.  How much time and effort gets spent on problems that are, if not strictly security problems, problems you wouldn’t have were it not for malicious users?  This includes not just the things you do to defend your sites (firewalls, IDS, code reviews, etc.), incident response, and responding to subpoenas.  It also includes having to carefully write & test your emails to make sure they don’t get caught in spam filters, and setting up logging & auditing on your sites so you’ll be capable of responding to a subpoena if you get one in the future, and planning for regulatory compliance, and some of your disaster recovery & backup costs.  Consider not just purchases of security hardware & software and the hours of work by the security team, but also all the time consumed by product development and IT teams planning for or responding to security threats.

This “black hat tax” is your real security budget.  And importantly for security managers, this is a genuine, demonstrated cost, as opposed to the “risk” we spend most of our time talking about.  It’s one thing to say the company might suffer a $10 million loss in the case of a data breach, so we need to spend more on security.  Managers can go on believing that “it won’t happen to us.”  It’s quite another to say that the company already does lose $500,000 every year due to the cost of dealing with malicious users, and that we should spend that same money proactively, on planned security measures, rather than spending it reactively.  Don’t just think of your security budget as simply mitigating risk — think about what your company is already spending, just not on the security team.  Can you prevent some of that cost from being incurred?  Can you centralize some of these effors?  Security spending as a way to reduce cost, rather than as a cost center, may be a lot more appealing to your CIO.

industry, risk, statistics

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