# Risk Analysis

## Risk Analysis

The risk that remains after the implementation of controls is called the residual risk. All systems will have residual risk because it is virtually impossible to completely eliminate risk to an IT system.

In other words, we can say that there are two main parts of the security risk analysis known as Quantitative risk analysis and the Qualitative risk analysis.

### Quantitative Risk Analysis

It is the process of the risk analysis in which the risk analysis is performed with the application of the numerical measures. All the values of the resources in this case are defined in amounts, and the frequency of the threat occurrence is defined in number of cases and susceptibility by the probability of its loss. The quantitative risk analysis is given by the formula:

R = P * W and P = F * V

Where, R = Risk Value

P = Probability or predicated number of incident occurrence causing loss of assets value in defined period

W = Value of loss – predicted medium loss of assets value, as a result of single incident occurrence

F = Frequency of threat occurrence

V = Susceptibility of information system on (or its element) a threat; it is the measure of probability of usage of specified susceptibility by a given threat.

The most common of all the methods used for quantitative risk analysis is ALE (Annual Loss Expected). The formula is-

ALE = (Probability of Event) * (Value of losses)

### Qualitative Risk Analysis

Qualitative risk analysis is different from quantitative risk analysis it does not present the risk in terms of the numerical values instead it presents the risks in terms of the descriptions and recommendations. In the case of the qualitative risk analysis model risk assessment is connected with;

The determination of the qualitative scales for the frequency of the threat occurrence and the susceptibility for a given threat. It also deals with the qualitative description of the asset’s values.

The description of the scenarios by using the process of the prediction of the main risk factors.

Some of the most common examples of the qualitative risk assessment models are FMEA / FMECA, The Microsoft Corporate Security Group Risk Management Framework, NIST SP 800-30 and CRAMM.

The major part and the theme of the FMEA / FMECA is the analysis of the impact of each and every potential defect on the functionality of the whole system and it also calculates the level of severity of the potential defects in the information system.

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