Hacking into cars is not a future concern. It is possible now, and the potential danger will increase as carmakers continue to enhance connectivity features in automobiles.
But even that threat pales against the potential damage cyber attacks could wreak when driverless cars take to the roads for real.
One common perceived threat here and now comes from the ease of access that manufacturers have built in for drivers. If a driver can unlock a car door and start the engine using a cell phone, an unauthorized person can turn off that engine and lock the doors from a cell phone.
Taking a drive into the near future, could someone arrange for all of the cars on a Los Angeles freeway to have their engines turned off at the exact same time?
Even now, the ability to hack into and remotely control a car is a clear and present danger.
Video: Behind the wheel of a car, you may be able to text, watch a movie or even sleep — if it’s a computer-controlled, driverless car. The WSJ’s Michael Kofsky heads to the test track to show how it works and safety questions it raises.
A pair of security engineers — doing their research with an $80,000 grant from the Pentagon — were able to hack into the systems of Toyota and Ford cars, and override a driver’s braking attempts, according to an account of the scenario in Forbes.
The pair was able to “demonstrate a range of nasty surprises: everything from annoyances like uncontrollably blasting the horn to serious hazards like slamming on the Prius’ brakes at high speeds. They sent commands from their laptops that killed power steering, spoofed the GPS and made pathological liars out of speedometers and odometers,” according to Forbes.
Expanding such abilities simultaneously to a fleet of cars is a feat yet to be accomplished.
“It could be possible to hack into one or another vehicle, but there is nothing that can stop the whole fleet at the same time,” said Mark Brooks, senior research engineer at the Southwest Research Institute (SwRI) in San Antonio. “Current levels of connectivity are not seen as major threats because they are not continuous.”
No One at the Wheel
“Even when a driver is using a navigation system, that is just a single download. The industry is much more concerned about continuous streaming back and forth, as with driverless cars,” he said.
Driverless cars rely on a number of sensors to operate, and are definitely vulnerable to attack, according to one of the hackers at the Def Con Hacking Conference in August.
“I’m a huge fan of unmanned vehicles,” said a hacker who goes by the name of Zoz to Venture Beat, a blog that focuses on technology. “I love robots. I think they’re the future. But, like everything else humans ever made, it’s going to get hacked.”
Google’s driverless car’s primary system is a “laser range finder mounted on the roof of the car,” which generates a 3D map of the area, according to IEEE, a technology professional organization.
“The vehicle also carries other sensors, which include: four radars, mounted on the front and rear bumpers, that allow the car to ‘see’ far enough to be able to deal with fast traffic on freeways; a camera, positioned near the rear-view mirror, that detects traffic lights; and a GPS, inertial measurement unit, and wheel encoder, that determine the vehicle’s location and keep track of its movements.”
Zoz told Venture Beat that it would not require sophistication to attack and derail those sensors, and he pointed out that engineers in Iran were able to hack and capture a U.S. drone by “spoofing” the GPS and feeding it incorrect location information.
Death and destruction are always a worry when hackers can subvert an operating system, but apportioning liability is also a major concern, SwRI’s Brooks said.
“If there were any problems, whose fault would it be? The carmaker? The navigation OEM? The software company? The driver? These are the discussions everyone is starting to have.”
Those initial conversations can be difficult, said Dave Wasson, professional and cyber liability practice leader at brokerage Hays Cos. in Chicago.
“The issues are known. People are aware of the risks. But at the moment there is kind of a paralysis because it is unclear how to quantify these risks, and also because even if we could quantify them, there are very limited options yet in how to deal with them.”
A Flawed System
Wasson added that a reordering of the current liability structure is both necessary and inevitable. “Right now, you have a pull market, with small OEMs seeking coverage because the first-tier OEMs and carmakers demand that they be indemnified. But that is not sustainable. A client might demand a $15 million cover from a small supplier, but that cover could cost the supplier $50,000 when he only grosses $100,000 on the contract.”
It is a situation where bigger companies are offloading their risk management onto smaller ones, and that, Wasson said, is flawed.
“Even when the suppliers comply, often the package does not work the way either the supplier or the OEM client thinks it will,” he said.
“Eventually the large firms will realize that they need to take this as primary,” Wasson said. “They have the assets, the skills, the risk managers, and the brokerage relationships to get it done properly.
“Besides, they are the ones who are going to get sued. They can turn to their indemnification contracts, but if the small supplier with few assets goes bankrupt, then what? It’s the company with the badge on the car that people are going to go after.”
As those issues percolate, commercial vehicle operators have other challenges as well.
“One really big cyber issue for a logistics company or express delivery service would be to have the GPS signals for their vehicles scrambled, or the electronic shipment documents tampered with,” said Steve Surber, area vice president for Arthur J. Gallagher in Irvine, Calif.
A cyber attack could be used to divert a shipment, cover theft, tamper with cargo, or even just to delay a shipment that is time sensitive. And the theft could be of the truck or trailer itself, some of which are worth up to $60,000, he said.
On another level, hacking can be used to disrupt the loss control systems of trucking lines, many of which use GPS and electronic reporting to track their fleet performance, Surber said.
Cyber alterations of such reporting could hide potential liability issues such as speeding, sleeping, unauthorized stops, fuel diversion, or many other misdeeds by shippers, loaders, drivers or consignees.
“Companies already rely heavily on computer systems and networks to help with loss control,” he said.
Among insurers, coverage is still evolving, he added. “There is some coverage from cyber policies, but mostly we are still seeing claims handled through general liability.”
Wasson, at Hays Cos., said that while the cyber risk and liability markets are pull markets at present, with owners seeking to transfer risk, the business is not without push.
“We are energetic about working with our carriers,” he said. “There is coverage and there is capacity.”
Cyber Security Efforts
In April, an automotive consortium started revving up its efforts to enhance cyber security.
The Automobile Consortium for Embedded Security — a part of SwRI — includes automakers, original equipment manufacturers, other suppliers, and cyber security experts.
The program aims to provide “pre-competitive and non-competitive research in automotive embedded systems security to protect the safety, reliability, brand image, trade secrets and privacy of client members’ future products,” according to the organization.
“As soon as they start claiming their vehicles are secure, they would paint a target on themselves. It’s not like safety or fuel economy. With security, there are bad guys and you don’t want to attract their attention.”
The consortium, Brooks said, “is looking at emerging research both in new technologies and new protections for embedded security for the automotive world.”
“There are lots of theoretical threats,” he said, “but we want to be sure we are focusing our efforts on the most relevant ones.”
The unique challenge is that automakers want to enhance the protections in their vehicles, but ironically, it is not something they want to advertise.
“As soon as they start claiming their vehicles are secure, they would paint a target on themselves.
“It’s not like safety or fuel economy. With security, there are bad guys and you don’t want to attract their attention.”
He said that automakers also are hesitant to unilaterally invest in cyber security efforts.
“As we started talking to automakers, we found them eager to be part of developing security, but it’s tough for them to take the lead or commit a lot of money to something that will not help them sell cars,” Brooks said.
“They also don’t want to reinvent the wheel,” he said. “They are very interested in solving common problems with peer-reviewed research and applications.”
Complete coverage on the inevitable cyber threat:
Risk managers are waking up to the reality that the cyber risk landscape has changed.
Cyber: The New CAT. It’s not a matter of if, but when. Cyber risk is a foundation-level exposure that must be viewed with the same gravity as a company’s property, liability or workers’ comp risks.
Critical Condition. The proliferation of medical devices creates a host of scary risks for the beleaguered health care industry.
Unmanned Risk. The dark side of remote-controlled drones, which have already been hacked — by students.
An Electrifying Threat. There is a very real possibility hackers could devastate the nation’s power grids — for a potentially extended period of time.
Risk Technology: Risk Managers Lead from Within
This year marks my twentieth in the risk management field. Now I would never call myself a risk manager. Far from it: I’m a computer geek, and proud of it. Today we refer to the Internet, Cloud, Mobile and Big Data, but I’ve been working with technology my entire life. So much has changed in those twenty years. Networking computers together was rudimentary and extremely limited when I started. Now everything, and everyone, is interconnected, and that has changed everything.
That interconnectivity has allowed organizations to move away from the isolated, siloed processes of the past, and produced dramatic changes in the way we conduct our business and our lives. I’ve watched risk management evolve from a department called upon primarily when things go wrong, to a pervasive philosophy for running a successful business. Fewer and fewer risk managers I speak to work in isolation, reacting to claims as they come in. Rather they are a collaborative lynchpin to manage risk. They don’t wait for bad things to happen. They proactively put safety programs in place, analyze loss data and make their organizations more risk-aware. They know an enormous amount about the inner workings of their organization, its suppliers, distributors, vendors and team members. This is a fundamental transition from a middle management, administrative function, to an executive level function that is key to the organization’s success.
But risk managers are increasingly finding that email and spreadsheets are clumsy, inefficient, and ultimately create obstacles to managing risk throughout their company. With the speed and global reach of business, when even ‘local’ businesses rely on a far-flung supply chain, yesterday’s technology introduces risk, inefficiencies and increased levels of error. Today’s business demands technology that facilitates decisions for tomorrow’s business challenges. Organizations need a platform – a platform that provides secure, efficient and consistent methods of communicating risk-related events and data. Fortunately this need comes at a time when we have a convergence of technologies that can make this vision a reality.
This is a fundamental transition from a middle management, administrative function, to an executive level function that is key to the organization’s success.
Just imagine running your business on technology of twenty years ago. Sending paper memos (when CC referred to a literal ‘carbon copy’), using a phone tethered to your desk, taking delivery of policy documents in hard copy – oh wait, they still do that. Would that put your business at a competitive disadvantage? Of course it would – and risk management would suffer too.
Risk management no longer has to take a back seat to other parts of the organization. Quite the opposite. By leveraging commercial cloud platforms, the pervasiveness of the Internet and the interconnectivity of everyone and everything, the risk management team can be the most modern, forward-looking part of the company. Risk management has become the bellwether of change – actually bearing the standard for technology-enabled collaboration and productivity across the organization. Imagine that.
Pathogens, Allergens and Globalization – Oh My!
In 2014, a particular brand of cumin was used by dozens of food manufacturers to produce everything from spice mixes, hummus and bread crumbs to seasoned beef, poultry and pork products.
Yet, unbeknownst to these manufacturers, a potentially deadly contaminant was lurking…
What followed was the largest allergy-related recall since the U.S. Food Allergen Labeling and Consumer Protection Act became law in 2006. Retailers pulled 600,000 pounds of meat off the market, as well as hundreds of other products. As of May 2015, reports of peanut contaminated cumin were still being posted by FDA.
Food manufacturing executives have long known that a product contamination event is a looming risk to their business. While pathogens remain a threat, the dramatic increase in food allergen recalls coupled with distant, global supply chains creates an even more unpredictable and perilous exposure.
Recently peanut, an allergen in cumin, has joined the increasing list of unlikely contaminants, taking its place among a growing list that includes melamine, mineral oil, Sudan red and others.
“I have seen bacterial contaminations that are more damaging to a company’s finances than if a fire burnt down the entire plant.”
— Nicky Alexandru, global head of Crisis Management at AIG
“An event such as the cumin contamination has a domino effect in the supply chain,” said Nicky Alexandru, global head of Crisis Management at AIG, which was the first company to provide contaminated product coverage almost 30 years ago. “With an ingredient like the cumin being used in hundreds of products, the third party damages add up quickly and may bankrupt the supplier. This leaves manufacturers with no ability to recoup their losses.”
“The result is that a single contaminated ingredient may cause damage on a global scale,” added Robert Nevin, vice president at Lexington Insurance Company, an AIG company.
Quality and food safety professionals are able to drive product safety in their own manufacturing operations utilizing processes like kill steps and foreign material detection. But such measures are ineffective against an unexpected contaminant. “Food and beverage manufacturers are constantly challenged to anticipate and foresee unlikely sources of potential contamination leading to product recall,” said Alexandru. “They understandably have more control over their own manufacturing environment but can’t always predict a distant supply chain failure.”
And while companies of various sizes are impacted by a contamination, small to medium size manufacturers are at particular risk. With less of a capital cushion, many of these companies could be forced out of business.
Historically, manufacturing executives were hindered in their risk mitigation efforts by a perceived inability to quantify the exposure. After all, one can’t manage what one can’t measure. But AIG has developed a new approach to calculate the monetary exposure for the individual analysis of the three major elements of a product contamination event: product recall and replacement, restoring a safe manufacturing environment and loss of market. With this more precise cost calculation in hand, risk managers and brokers can pursue more successful risk mitigation and management strategies.
Product Recall and Replacement
Whether the contamination is a microorganism or an allergen, the immediate steps are always the same. The affected products are identified, recalled and destroyed. New product has to be manufactured and shipped to fill the void created by the recall.
The recall and replacement element can be estimated using company data or models, such as NOVI. Most companies can estimate the maximum amount of product available in the stream of commerce at any point in time. NOVI, a free online tool provided by AIG, estimates the recall exposures associated with a contamination event.
Restore a Safe Manufacturing Environment
Once the recall is underway, concurrent resources are focused on removing the contamination from the manufacturing process, and restarting production.
“Unfortunately, this phase often results in shell-shocked managers,” said Nevin. “Most contingency planning focuses on the costs associated with the recall but fail to adequately plan for cleanup and downtime.”
“The losses associated with this phase can be similar to a fire or other property loss that causes the operation to shut down. The consequential financial loss is the same whether the plant is shut down due to a fire or a pathogen contamination.” added Alexandru. “And then you have to factor in the clean-up costs.”
Locating the source of pathogen contamination can make disinfecting a plant after a contamination event more difficult. A single microorganism living in a pipe or in a crevice can create an ongoing contamination.
“I have seen microbial contaminations that are more damaging to a company’s finances than if a fire burnt down the entire plant,” observed Alexandru.
Handling an allergen contamination can be more straightforward because it may be restricted to a single batch. That is, unless there is ingredient used across multiple batches and products that contains an unknown allergen, like peanut residual in cumin.
Supply chain investigation and testing associated with identifying a cross-contaminated ingredient is complicated, costly and time consuming. Again, the supplier can be rendered bankrupt leaving them unable to provide financial reimbursement to client manufacturers.
“Until companies recognize the true magnitude of the financial risk and account for each of three components of a contamination, they can’t effectively protect their balance sheet. Businesses can end up buying too little or no coverage at all, and before they know it, their business is gone.”
— Robert Nevin, vice president at Lexington Insurance, an AIG company
Loss of Market
While the manufacturer is focused on recall and cleanup, the world of commerce continues without them. Customers shift to new suppliers or brands, often resulting in permanent damage to the manufacturer’s market share.
For manufacturers providing private label products to large retailers or grocers, the loss of a single client can be catastrophic.
“Often the customer will deem continuing the relationship as too risky and will switch to another supplier, or redistribute the business to existing suppliers” said Alexandru. “The manufacturer simply cannot find a replacement client; after all, there are a limited number of national retailers.”
On the consumer front, buyers may decide to switch brands based on the negative publicity or simply shift allegiance to another product. Given the competitiveness of the food business, it’s very difficult and costly to get consumers to come back.
“It’s a sad fact that by the time a manufacturer completes a recall, cleans up the plant and gets the product back on the shelf, some people may be hesitant to buy it.” said Nevin.
A complicating factor not always planned for by small and mid-sized companies, is publicity.
The recent incident surrounding a serious ice cream contamination forced both regulatory agencies and the manufacturer to be aggressive in remedial actions. The details of this incident and other contamination events were swiftly and highly publicized. This can be as damaging as the contamination itself and may exacerbate any or all of the three elements discussed above.
Estimating the Financial Risk May Save Your Company
“In our experience, most companies retain product contamination losses within their own balance sheet.” Nevin said. “But in reality, they rarely do a thorough evaluation of the financial risk and sometimes the company simply cannot absorb the financial consequences of a contamination. Potential for loss is much greater when factoring in all three components of a contamination event.”
This brief video provides a concise overview of the three elements of the product contamination event and the NOVI tool and benefits:
“Until companies recognize the true magnitude of the financial risk and account for each of three components of a contamination, they can’t effectively protect their balance sheet,” he said. “Businesses can end up buying too little or no coverage at all, and before they know it, their business is gone.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Lexington Insurance. The editorial staff of Risk & Insurance had no role in its preparation.