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Security risk assessment: How to protect your small business from cybercrime
Cybercrimes aren’t just a threat to big corporations — small businesses are prime targets, too. Ransomware, phishing scams, and data breaches can all lead to lost revenue, stolen data, or even the end of a business altogether.
Not only do experts predict that the global cost of cybercrime will reach $10.29 trillion this year,1 but for small and medium-sized businesses, the cost of a single cyberattack can range from $120,000 to $1.24 million.2 Cybersecurity statistics like these make one thing clear: ignoring cybersecurity isn’t an option.
Read on as we explore how small businesses can conduct security risk assessments and take proactive security measures against cybercrime without breaking the bank.
What is a security risk assessment?
A security risk assessment (SRA) is a process that helps a business identify vulnerabilities, assess potential risks, and put security measures in place before cybercriminals can take advantage.
This form of security risk management isn’t just a best practice — it’s a cybersecurity compliance requirement for major standards like:
- PCI DSS, meaning Payment Card Industry Data Security Standard, which governs payment security
- ISO, a global security framework
- HIPAA, which protects healthcare data
A security risk assessment should be done at least once a year to stay ahead of evolving threats. And if a security incident does happen, you should conduct an evaluation immediately to pinpoint what went wrong while protecting your valuable data and maintaining your reputation.
Benefits of conducting an SRA
A security risk assessment might seem like just another item on a never-ending to-do list, but cybercrime prevention is one of the smartest investments a business can make. Here’s why:
- Lower costs in the long run: Cyberattacks aren’t just disruptive; they’re expensive. The cost of a data breach can include ransom payments to hackers, regulatory fines, legal fees, lost revenue from downtime, post-hack investigations, and reactive security measures. Businesses that proactively address security gaps can avoid the financial and operational nightmare of scrambling to recover from an attack.
- Stronger defenses against cyber threats: Hackers are constantly scanning for vulnerabilities, and small businesses are often prime targets. A proactive security risk assessment helps identify weak points before they can be exploited.
- Regulatory compliance: Meeting industry regulations isn’t optional. Businesses that handle payments must conduct an annual SRA to comply with PCI DSS, while healthcare organizations must assess their systems to stay compliant with HIPAA. Many other industries have similar requirements, and failing to meet them can lead to heavy fines and reputational damage.
- Enhanced customer trust: A strong customer security strategy reassures customers that their trust isn’t misplaced. Meeting recognized cybersecurity compliance standards allows businesses to display official security badges on their websites. These act like a digital seal of approval, showing customers that their payment details and personal information are in good hands.
Key steps in conducting an SRA
A cyberattack can cost a business millions, but a security risk assessment costs a fraction of that — and could mean the difference between smooth operations and a full-blown crisis. The goal isn’t to eliminate every risk, but to make your business a much harder target for cybercriminals.
Identify assets and resources
To protect itself, a business needs to know exactly what it’s protecting. Asset identification is the first step in a risk assessment, helping you pinpoint valuable resources — like data, physical technology, and intellectual property — and determine where they’re stored.
This process doesn’t only entail making a list. You’re classifying data sets, understanding their level of risk, and making sure the right security measures are in place. Plus, knowing who’s responsible for each asset can prevent security gaps and accountability issues down the line.
Threat identification
The next step is figuring out what you’re protecting assets against. Threat identification is a major part of a security risk assessment, helping businesses map out potential vulnerabilities and the many ways cybercriminals could try to break in.
This isn’t just about digital threats — business security also includes risks to physical infrastructure, internal data leaks, and even insider threats. A strong cyber threat protection strategy considers both external hackers and internal risks, ensuring security gaps are addressed before they can be exploited.
Some industries are bigger targets than others. For the last few years, cyberattacks have affected manufacturing and finance companies more than any other sector.1 Similarly, the cost of security damage can also be higher for some industries — one report found that breaches affecting healthcare businesses are the most expensive, costing an average of $10.93 million per business.3
Vulnerability assessment
Cybersecurity vulnerabilities make it easy for cybercriminals to exploit weaknesses in a business’s defenses. But a vulnerability assessment helps businesses get ahead of these risks by systematically identifying and evaluating weak points in their security infrastructure.
Common vulnerabilities include:
- Outdated or unpatched software: Older systems and applications often contain well-known security flaws that hackers can easily exploit.
- Weak passwords and lack of multi-factor authentication (MFA): Simple or reused passwords make it easy for attackers to gain unauthorized access.
- Unsecured networks: Poorly configured Wi-Fi, exposed cloud environments, and open remote access ports can create entry points for cybercriminals.
- Misconfigured firewalls and security settings: Gaps in firewall rules or improperly set access controls can leave systems vulnerable.
- Lack of employee security training: Human error remains one of the biggest cybersecurity threats. Small businesses are especially at risk here — they account for 43% of cyberattacks each year, and those with fewer than 250 employees are especially vulnerable to email threats like phishing, spam, and malware.4
- Overly broad user access permissions: Employees with unnecessary access to sensitive data increase the risk of accidental leaks or insider threats.
- Unmonitored third-party integrations: External vendors and software tools can introduce vulnerabilities if not properly vetted or secured.
Risk analysis
Not all security threats are created equal. Some vulnerabilities pose a small inconvenience, while others could shut down operations entirely. Here’s where risk analysis comes in — it’s a step where you determine which threats are the most dangerous, how often they’re likely to occur, and what kind of damage they could cause.
A thorough risk analysis outlines various threat scenarios, evaluating the probability, severity, and impact of each one. For example, a ransomware attack could lead to financial losses and downtime, while a data breach could result in regulatory fines and the loss of customer trust.
By breaking down these risks in a risk assessment matrix, businesses can prioritize the most pressing threats and allocate resources to where they’re most needed.
Risk mitigation strategies
Once businesses complete a risk analysis, the next step is implementing risk mitigation strategies to minimize threats. Each threat should be paired with appropriate security controls to improve data protection. This might include:
- Strengthening network security: Firewalls, MFA, and encryption are cybersecurity basics, but businesses can take it further by using intrusion detection systems (IDS) to spot suspicious activity before it becomes a full-blown attack.
- Implementing security controls: Not every employee needs access to sensitive data. Role-based access control (RBAC) ensures that only the right people can view or modify critical information, making it much harder for hackers (or careless mistakes) to compromise security.
- Training staff on cyber threats: Phishing attacks are the easiest way for hackers to break in — just one employee clicking a bad link can lead to a disaster. Running phishing simulations teaches staff to recognize fake emails before they fall for them.
- Regularly patching software: Hackers love outdated software because it’s full of known vulnerabilities. Businesses should turn on automatic security updates and regularly patch systems to stay ahead of potential exploits.
- Developing an incident response plan: When a breach happens, every second counts. Assigning response roles, setting up emergency communication channels, and running tabletop drills help teams react fast and minimize damage.
PayPal Business offers risk assessment tools powered by risk intelligence and machine learning to help small businesses detect and prevent payment fraud. Using these resources can add an extra layer of security against common cyber threats.
Documentation and reporting
Keeping thorough risk assessment documentation ensures that businesses refine their security strategies year after year.
That said, a well-structured security report should go beyond listing risks. It should outline exactly how you plan to protect yourself from cyber threats, including specific risk mitigation steps, a timeline for implementation, and assigned stakeholders.
The result of robust cybersecurity reporting? Businesses stay accountable, secure budgets for security improvements, and demonstrate compliance with industry regulations.
Peace of mind with security risk assessments
Cyber threats aren’t going away, but that doesn’t mean businesses have to live in fear. A security risk assessment is more than just a compliance checkbox — it’s a proactive strategy that strengthens defenses, protects valuable data, and helps businesses stay ahead of evolving threats.
With the right risk assessment documentation, regular evaluations, and security controls in place, you can rest easy knowing you’re prepared for whatever comes next.
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