<p>The purpose of this thesis is to present an approach for good practice with regards to using cost benefit analysis (CBA) as a value-adding activity in the information security investment process for large enterprises. The approach is supported by empirical data.</p><p>From a MIO model perspective, this report is focused on the phase of strategic choices regarding organization, i.e. trying to find optimal investments for efficient operations. To assess, improve and monitor the operational effectiveness and management’s internal control environment is essential in today’s business execution. Executive management and boards are increasingly looking for an information security governance framework that encompasses information technology and information security: a single framework through which all information assets and activities within the organisation can be governed, to provide the optimum capability for meeting the organisation’s objectives, in terms of functionality and security.</p><p>The investment decision is one of the most visible and controversial key decisions in an enterprise. Some projects are approved, others are bounced, and the rest enter the organisational equivalent of suspended animation with the dreaded request from the decision makers to “redo the business case” or “provide more information.”</p><p>The concept of cost benefit analyses of information security helps management to make decisions on which initiatives to fund with how much, as there needs to be an approach for measuring and comparing different alternatives and how they meet business objectives of the enterprise. Non-financial metrics are identified using different approaches: governance effectiveness, risk analysis, business case analysis or game theory. The financial performance metrics are driven by the main value disciplines of an enterprise. These lead to the use of formulas enabling the measurement of asset utilisation, profit or growth: ROI (ROIC), NPV, IRR (MIRR), FCF, DCF, Payback Period, TCO, TBO, EVA, and ROSI.</p><p>The author shows research in the field of good corporate governance and the investment approval process, as well as case studies from two multinational enterprises. The case from Motorola demonstrates how IT governance principles are equally applicable to information security governance, while the case from Ericsson demonstrates how an information security investment decision can be supported by performing a cost benefit analysis using traditional marketing approaches of business case analysis (BCA) and standard financial calculations.</p><p>The suggested good practice presented in this thesis is summarised in four steps:</p><p>1. Understand main rationale for the security investment</p><p>2. Identify stakeholders and strategic goals</p><p>3. Perform Cost Benefit Analysis (non-financial and financial performance metrics)</p><p>4. Validate that the results are relevant to stakeholders and strategic goals</p><p>DISCLAIMER</p><p>This report is intended for academic training only and should not be used for any other purposes. The contents are not to be considered legal or otherwise professional advice. No liability is taken, whatsoever, by the author.</p>

The purpose of this thesis is to present an approach for good practice with regards to using cost benefit analysis (CBA) as a value-adding activity in the information security investment process for large enterprises. The approach is supported by empirical data. From a MIO model perspective, this report is focused on the phase of strategic choices regarding organization, i.e. trying to find optimal investments for efficient operations. To assess, improve and monitor the operational effectiveness and management’s internal control environment is essential in today’s business execution. Executive management and boards are increasingly looking for an information security governance framework that encompasses information technology and information security: a single framework through which all information assets and activities within the organisation can be governed, to provide the optimum capability for meeting the organisation’s objectives, in terms of functionality and security. The investment decision is one of the most visible and controversial key decisions in an enterprise. Some projects are approved, others are bounced, and the rest enter the organisational equivalent of suspended animation with the dreaded request from the decision makers to “redo the business case” or “provide more information.” The concept of cost benefit analyses of information security helps management to make decisions on which initiatives to fund with how much, as there needs to be an approach for measuring and comparing different alternatives and how they meet business objectives of the enterprise. Non-financial metrics are identified using different approaches: governance effectiveness, risk analysis, business case analysis or game theory. The financial performance metrics are driven by the main value disciplines of an enterprise. These lead to the use of formulas enabling the measurement of asset utilisation, profit or growth: ROI (ROIC), NPV, IRR (MIRR), FCF, DCF, Payback Period, TCO, TBO, EVA, and ROSI. The author shows research in the field of good corporate governance and the investment approval process, as well as case studies from two multinational enterprises. The case from Motorola demonstrates how IT governance principles are equally applicable to information security governance, while the case from Ericsson demonstrates how an information security investment decision can be supported by performing a cost benefit analysis using traditional marketing approaches of business case analysis (BCA) and standard financial calculations. The suggested good practice presented in this thesis is summarised in four steps: 1. Understand main rationale for the security investment 2. Identify stakeholders and strategic goals 3. Perform Cost Benefit Analysis (non-financial and financial performance metrics) 4. Validate that the results are relevant to stakeholders and strategic goals DISCLAIMER This report is intended for academic training only and should not be used for any other purposes. The contents are not to be considered legal or otherwise professional advice. No liability is taken, whatsoever, by the author.

In the year 2008, world markets suffered a huge economic crisis. The extent of the economic crisis has been so severe and has had a global impact. As a contingency strategy, governments of wealthy nations have resorted to extensive bailouts and rescue packages to stop organisations from going bankrupt. A skyrocketing amount of money has been spent on rescue packages and bailouts for the tumbling organisations. However, this could not stop some of the world’s wealthiest financial institutions e.g. Lehman Brothers, Northern Rock, etc from collapsing. Most of the surviving organisations froze their expenditure, implemented cost-cutting measures and in the process, numerous employees lost their jobs. Executives were compelled to ‘achieve more with less’ in order to save their organisations from going bankrupt. It is on this premise that this research proposed the BC3I (Broad Control Category Cost Indicators) model, which is a step towards ‘achieving more with less’ within information security budgeting. The tumbling world markets and increased requirements for legal and regulatory compliance have made this a timely and relevant research that addressed a current, spot-on and global problem. The BC3I model as the main outcome of this research has indeed come at the right time. The BC3I model as proposed in this research makes a real contribution towards assisting information security managers as they make informed decisions regarding the optimal and cost-effective allocation of financial resources to information security activities. The proposed model can be argued to be a good start towards the selection of appropriate controls to optimally and cost-effectively protect organisations’ information assets and simultaneously achieve compliance with legal and regulatory mandates. As a proof of concept, the practicality of the BC3I model has been demonstrated in three different scenarios. The model has been illustrated for an organisation chosen from the financial sector; being the hardest hit by the economic crisis. Furthermore, the financial sector is chosen because of its high reliance on information security for the most obvious reasons that of dealing with money and confidential customer information. Finally and for acceptance purposes, the model has been discussed and reviewed by industry experts from the financial sector. Copyright / Dissertation (MSc)--University of Pretoria, 2010. / Computer Science / unrestricted