Martin P. Loeb
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Deloitte & Touche Faculty Fellow
Van Munching Hall 3351
Robert H. Smith School of Business
The University of Maryland
College Park, MD 20742, USA
Phone: (301) 405-2209

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Book

Managing Cybersecurity Resources: A Cost-Benefit Analysis

SECURITY EXPENDITURES & REAL OPTIONS

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  • Gordon, Lawrence A., Martin P. Loeb, and William Lucyshyn, ˇ§Information Security Expenditures and Real Options: A Wait-and-See Approach,ˇ¨ Computer Security Journal, Vol 19, No. 2, 2003, pp. 1-7.

Empirical evidence suggests that security breaches are an important driver of actual expenditures on information security activities. Although this wait-and-see approach toward information security expenditures may seem unwise on the surface, there is a rational economic explanation for such an approach under the appropriate conditions. Indeed, as shown in this paper, this approach toward information security expenditures may be consistent with the real option (in particular, the deferment option) view of capital budgeting.

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