Security Budget Planning: Balancing Protection and Profitability

 

With the average cost of a security breach being $4.88 million in 2024 alone, a security breach is an expense your business cannot afford. As a business owner or executive, you may view security as a frustrating cost center. However, considering the evolving threat landscape, protecting your business is a necessary investment.

Discover how to frame your security spending as a strategic protective measure and create a step-by-step, data-driven budget with this security budget planning guide.

Why the Cost of Inaction Is Your Most Important Metric

Keeping security efforts within your budget may seem like a monthly cash burn, especially if your business has experienced minimal breach attempts. However, the true cost of a security incident far exceeds your security spend. Should an attack succeed, costs you may have on your hands include:

• Operational paralysis: Security breaches often usher in downtime. Days off for your business may mean idle sales teams, no customer support and, at times, suspended payment processing.
• Regulatory and legal penalties: Hefty fines from regulatory bodies often follow security breaches, particularly when sensitive customer data is exposed. These organizations, like the Federal Trade Commission (FTC), demand that companies safeguard consumer data. Failure, whether resulting from a cyber or physical breach, often results in heavy fines.
• Compromise of brand reputation and customer trust: Probably the most expensive result of a security breach is its effect on your company’s image. It can take both time and considerable effort to recover customer trust and re-establish your brand within the communities you serve.

Advantages of a Mature Security Program

A couple of benefits of having a mature security program:

• Faster digital transformation: Having a secure environment makes it easier for companies to adopt newer technologies without the fear of introducing risk.
• Marketable differentiator: In a space where numerous security breaches occur each year, being a secure company is a powerful selling proposition that builds trust. This advantage is particularly true for companies that handle consumer data.
• Protecting uptime and revenue: A security program can safeguard your systems, reducing the likelihood of downtime and enhancing business continuity.

A 3-Step Framework for Building Your Security Budget

When approaching your security budget, follow these steps:

Step 1: Conduct a Business-First Risk Assessment

The first step to creating an effective security budget is understanding your system’s vulnerabilities. You will need to conduct a comprehensive review of operations to identify areas that might allow easier access for attackers. Depending on your business, you may need to run a multilayered assessment:

• Physical assessment: A physical security assessment evaluates your office or place of business. Are you based in a secure neighborhood? Are the entry points controlled, or can anyone access your office at any time? Determining the likelihood of physical break-ins can help you decide which physical commercial security measures you need.
• IT assessment: Your IT risk assessment involves reviewing your existing IT infrastructure. Ask yourself if your applications and servers are secure. Examine both internal and external communication pathways and assess their chances of being compromised. Remember that your IT assessment shouldn’t be limited to software and network. It should also include a hardware review.
• Data assessment: A narrower branch of IT security, data security assessment reveals the likelihood of suffering a data-related attack. It evaluates your systems to determine pathways through which you can lose company and client data.

Step 2: Quantify the Financial Impact of Your Risks

Beyond understanding that there are risks, you need to quantify the possible outcomes associated with those risks. What would it mean if an attack were successful? Understanding the financial impacts can help you separate the fat from the meat, identifying risks that can actually affect your business.

To determine the probable cost of the risk, add the estimated cost of downtime to the cost of customer notification and the potential fine you would be liable for. Remember that this is simply an estimate of the likely cost of the breach on your business, not an absolute estimate.

Step 3: Align Spend With Risks

Finally, you need to determine how to categorize each risk to make your accounting easier. If you need to make a large, up-front payment, you can categorize it as a capital expenditure (CapEx). CapEx refers to funds required for long-term investments, like servers or a firewall.

However, if risk mitigation involves a monthly spend, you will need to categorize it as an operating expense (OpEx). Items that you can include in your OpEx include managed security services, which provide 24/7 surveillance monitoring.

Justifying Your Budget

Whether you are an executive with a board of directors at the helm, a manager who reports to the founder or the business owner, justifying your IT budget can help you ensure that the money you spend aligns with the company’s strategic outcomes. The best way to justify your spend is through projected return on investment (ROI). Understanding the return on investment on security can help make it easier to garner budget approval.

To determine the ROI on your security spend, use a normal ROI formula where:

• The cost of investment refers to the total expenditure for the program, including anticipated ongoing expenses.
• Net return or gain on investment is the amount of money your business will save from successfully blocked incidents.

Let’s say you invest $10,000 in a new advanced surveillance system backed by AI. This system requires monthly monitoring at $5,000, and it will save your company $45,000 annually. Here is how you would calculate the ROI:

• ROI = (Net return/cost of investment) x 100
• ROI = [45000/(10,000 + 5000)] x 100 = 300

You would have a 300% return, meaning every $1 you invest in the system would yield $3.

Top 3 Budgeting Mistakes That Expose Businesses to Risk

There are several mistakes businesses make when creating a budget that affect both their security and finances:

• Set it and forget it: The threat landscape is becoming increasingly complicated, and that means you cannot afford to set a budget and then forget it. Eighty-one percent of cybersecurity professionals cited the complex landscape as the primary reason for workplace stress. Your budget must adapt to the changing business risks.
• Investing in tools and not outcomes: Most businesses invest in expensive software and equipment without backing it up with the right skills. If you purchase motion detection software, ensure that your team has the necessary expertise to operate the program effectively.
• Relying solely on your security office: With every technological advancement, security has become increasingly specialized. From advanced cybercrimes to break-ins, you need an expert team. Unburden your security personnel by partnering with an external team that will bring a wealth of information to your business.

Balance Safety and Profitability With Security Monster

Security budget planning to balance safety and profitability can help you reduce risks while protecting your company’s resilience and reputation. At Security Monster, we are your partners in commercial security. Our team offers advanced security solutions at competitive rates. Get a quote today and let our experts help you design an effective security program with a clear, cost-justified roadmap.

 

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