Managing Interdependent Information Security Risks: Cyberinsurance, Managed Security Services, and Risk Pooling Arrangements

• 成果类型: Article
• 署名作者: Zhao, Xia; Xue, Ling; Whinston, Andrew B.
• 署名单位: University of North Carolina; University of North Carolina Greensboro; University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF MANAGEMENT INFORMATION SYSTEMS
• ISSN/ISSBN: 0742-1222
• DOI: 10.2753/MIS0742-1222300104
• 发表日期: 2013
• 页码: 123-152
• 关键词: Moral hazard; organizational form; insurance; SYSTEM; ECONOMICS; MARKETS

摘要

The interdependency of information security risks often induces firms to invest inefficiently in information technology security management. Cyberinsurance has been proposed as a promising solution to help firms optimize security spending. However, cyberinsurance is ineffective in addressing the investment inefficiency caused by risk interdependency. In this paper, we examine two alternative risk management approaches: risk pooling arrangements (RPAs) and managed security services (MSSs). We show that firms can use an RPA as a complement to cyberinsurance to address the overinvestment issue caused by negative externalities of security investments; however, the adoption of an RPA is not incentive-compatible for firms when the security investments generate positive externalities. We then show that the MSS provider serving multiple firms can internalize the externalities of security investments and mitigate the security investment inefficiency. As a result of risk interdependency, collective outsourcing arises as an equilibrium only when the total number of firms is small.