Fixed Costs, Investment Rigidities, and Risk Aversion in Information Security: A Utility-theoretic Approach

  • Ioannidis C
  • Pym D
  • Williams J
  • 22

    Readers

    Mendeley users who have this article in their library.
  • N/A

    Citations

    Citations of this article.

Abstract

This paper addresses the question of determining the optimal timing of interventions in information security management. Using utility theory, we derive the limiting condition under which, given a potential or realized risk, a decision to invest, delay, or abandon can be justified. Our primary focus is on the decision to defer costly deterministic investments, such as the removal of a service or implementation of a security patch, when the costs associated with future security vulnerabilities are uncertain. We outline an investment function with irreversible fixed costs that introduces a rigidity into the investment decision-making profile. This rigidity introduces delay in the implementation of security measures, resulting in cyclical investments in information security, as the decision-maker determines the optimal investment horizon. We therefore show that cycles emerge endogenously given the policy-maker’s chosen trade-offs between investment and the deterioration of the system attributes.

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

  • Christos Ioannidis

  • David Pym

  • Julian Williams

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free