ABC analysis in inventory is a useful classification system businesses use to rank stock items based on how essential they are to the organization. Utilizing this model can benefit companies greatly.
The same principles can apply to the cybersecurity sector. Learn how businesses can use ABC analysis for cybersecurity risk management to make their operations even more secure.
Understanding ABC Analysis in Inventory Management
In inventory management, a beneficial classification many companies utilize is ABC analysis. The principles of this system can work for several different applications. This type of analysis is based on the popular 80/20 rule but takes it a bit further.
In general, it refers to classifying different stock items based on the value they provide the company. In other words, some inventory has a larger associated value or a more significant impact on the organization. Based on the value the items have, they will fall into one of the three categories — A, B or C.
Products in the A group would have the most benefit for the company, whereas goods in group C would have the lowest. For example, an organization would put an item that results in most company sales in classification A. The same applies to goods that have high volume but little sales — they would go to section C.
Following this classification model can provide many benefits. Knowing what items carry the most weight can allow leaders to prioritize them more effectively.
Explaining the Classification Model
ABC analysis helps make inventory management more efficient, providing several benefits for organizations, such as saving money and preventing overstocking. Here is a quick look at the three classifications ABC inventory management follows:
- Stock item A: These are inventory items that result in the most sales for the company and have the biggest impact on business profit. A company typically stores less of them and requires frequent orders to restock them.
- Stock item B: This is an important category to pay attention to as some of this section’s products can frequently change to group A. These items bring in medium-sized profits and compared to section A, a company has more of them stored away.
- Stock item C: Section C has the most associated stock but generates little sales and profit.
It is worth mentioning that depending on the organization’s business model, they would adapt ABC analysis to match its needs. For example, they could group inventory differently and assign more classification categories — A, B, C, D and E. This also holds true for ABC analysis in cybersecurity risk management.
Translating ABC Analysis to Cybersecurity
As mentioned, companies can apply the same principles of ABC analysis to risk management in cybersecurity. Risk management refers to identifying security risks, prioritizing them and implementing solutions to adequately protect an organization’s digital assets. One aspect essential in risk management and prioritization is company resources.
For example, cyber teams don’t want to use a significant portion of business resources for low-level threats that would have little impact on the company. Instead, they want to effectively manage and utilize it wisely on the dangers that matter the most. This is where ABC analysis can massively benefit cybersecurity professionals.
It can allow them to identify which risks carry the most weight and what actions they should take when encountering these threats. In cyberspace, there are a few risks companies must look out for. According to research, the amount of malware types continues to change and has risen from 28.84 million to almost 678 million in ten years.
Here is a quick summary of some of the digital threats an organization could experience:
- Phishing scams
- Insider threats
- Various malware, such as viruses and ransomware
- Data breaches
The first step in incorporating ABC analysis in cybersecurity is identifying a company’s most critical assets. These systems are the most valuable to the organization and have top priority.
Next, the company would need to look at potential vulnerabilities and their impact on the business. One important thing to note is that not every threat carries the same level of risk. It is essential companies factor this in when creating their ABC analysis model.
They also need to pay close attention to the impact these threats will have. Based on these components, they can create their ABC classification model.
Prioritizing Cybersecurity Efforts with ABC Analysis
Prioritization plays an important role in risk management. Knowing what threats a company can face is not enough. The organization also needs to prioritize what dangers carry the most risk.
Setting priorities helps businesses adequately prepare and identify the critical steps necessary to overcome digital threats. ABC analysis can help to enhance these efforts. It provides businesses with a model to assess which threats require immediate action and which are low risk. While this method of analysis could take some time to implement, it can aid in increasing a company’s ability to secure threats.
The Power of ABC Analysis in Risk Management
ABC analysis is a robust inventory management tool and could provide the same valuable insight for cyberteams. It categorizes threats based on company critical systems, impact and the type of vulnerability.
In a nutshell, ABC analysis allows for better prioritization, decision making and knowing how dangerous the threat is to the company. While this model is not currently widely adopted, it could become a game-changer for the sector in years to come.
As the Features Editor at ReHack, Zac Amos writes about cybersecurity, artificial intelligence, and other tech topics. He is a frequent contributor to Brilliance Security Magazine.