Heading Off ‘Cybergeddon’
In April’s R&I cover story, Cyber: The New CAT, experts called catastrophic cyber attacks “inevitable” and the prevailing attitude in the C-Suite “denial.”
Jason Healey, director, Atlantic Council’s Cyber Statecraft Initiative, says that in order for organizations to weather the inevitable attacks, the key will be resiliency. “The organizations that fare best,” he said, “will be those that have the size, agility and resilience to bounce back as quickly as possible.” Healey is also author of Beyond Data Breaches: Global Interconnections of Cyber Risk, commissioned by Zurich Insurance Company Ltd. and published in April 2014.
Developing resilience would include conducting exercises, developing response playbooks, increasing funding and grants for large-scale crisis management and developing redundant data storage in case one is compromised.
The tangle of Internet information that companies and countries depend on to function is now so complex, Healey said, that companies and governments can’t manage the risk from within their own four walls. Beyond Data Breaches notes that Internet failures could cascade directly to Internet-connected banks, water systems, cars, medical devices, hydroelectric dams, transformers and power stations.
Like superstorms such as Hurricane Sandy, cyber risks are inevitable and unstoppable, and like the financial crisis of 2008, they can’t be contained, because of organizations’ interconnection and interdependency. The worst-case scenario, stemming from the principle that everything is connected to the Internet and everything connected to the Internet can be hacked, is “Cybergeddon,” where attackers have an overwhelming, dominant and lasting advantage over defenders.
Even now, Healey said, attackers have the advantage. The Internet’s original weakness — that it was built for trust, not security — perpetuates defenders’ vulnerability. “Some ‘serious’ thinkers suggest we should start over” rather than try to retrofit an Internet so flawed by weak security as to threaten every user, he said, despite the impracticality of a do-over.
Second, Healey said, defenders have to be right every time, and attackers have to be right only once.
Third, technology evolves very quickly, and most people don’t understand it well enough to lock out intruders. “Every time we figure out what we’re supposed to be doing right, the technology has moved on and once again we don’t know how to properly secure our data,” Healey said.
Software is still poorly written and so insecure that “a couple of kids in a garage” can hack into corporate and government systems just for a naughty thrill. “Bad guys” with theft or sabotage on their minds can work their mischief behind a veil of anonymity. “The Internet almost encourages bad behavior because of the anonymity involved,” Healey said.
Companies, governments and risk managers should shift the drumbeat from resistance to resilience, and to expand cyber risk management from individual organizations to a resilient and responsive Internet system, Healey said. For systemic risk management, Beyond Data Breaches recommends:
- Putting the private sector at the center, not the periphery, of cyber risk efforts, since they have the advantage in agility and subject matter expertise.
- Using monetary or in-kind grants to fund effective but underfunded non-government groups already involved in minimizing the frequency and intensity of attacks. Governments and others with system-wide concerns (such as internet service providers and software and hardware vendors) should advocate for this research.
- Borrowing ideas from the finance sector. This could include examination of “too big to fail” issues of governance and recognition of global significantly important internet organizations.
Will the New European Data Protection Reform Affect Us?
The European Commission voted in March, 2014, to strengthen privacy rights promised by the European Union’s 1995 Data Protection Directive. The reform will change the law from a Directive to a Regulation, meaning it will be directly applicable in all of Europe without the need to wait for national implementing legislation.
The regulation will apply to any personal data handled abroad by companies that are working with the European Union (EU) market and/or offer their services to EU citizens. That means companies need to be aware of this new update, as well as the risk of non-compliance and harsher penalties potentially imposed under law.
The reform will change the law from a Directive to a Regulation, meaning it will be directly applicable in all of Europe without the need to wait for national implementing legislation.
U.S. companies that conduct business in Europe need to ensure that they have a legitimate reason for transferring personal information within or outside of the EU. Personal information is any data concerning a person’s private, professional or public life. It may be a name, a photo, an email address, bank details; posts on social networks, medical information or even a computer’s IP address.
Assuming your company has a legitimate basis for processing and using personal data, the EU Data Protection Reform regulation sets out three avenues to make your data transfers legal:
- Certify compliance through the U.S. Department of Commerce Safe Harbor registration. The European Union still recognizes that Safe Harbor registration is compliant with the EU law. For more information, consult: http://www.export.gov/safeharbor/
- Have appropriate safeguards in place to protect personal data within your company, including for example binding corporate rules approved by EU data protection authorities.
- Complete data transfers in clearly defined, specific situations which necessitate the transfer; for example as part of a legal, tax or competition investigation.
To comply, companies will need to show that their data processing is legitimate, and that they consistently monitor, review and assess the data processing procedures in place. The aim is to minimize the retention of data and build in safeguards for processing activities.
Company leaders should ask themselves these questions:
- What information is to be collected and where?
- Why the information is being collected?
- What is the intended use of the information?
- With whom the information will be shared? Is it shared with Europe?
- Is there a collection of information IT system affecting people’s data in Europe?
- How will the information be secured? What security controls or auditing processes exist?
- Do individuals in the EU have an opportunity to decline to provide information or give consent?
And if that is not scary enough, penalties under the reform for data protection violations will rise significantly depending on the seriousness of the offense, whether it is a repeat offense, if it is intentional, and whether the violator is a company with processing data as its primary activity. Sanctions may involve:
- A simple warning for a first non-intentional offenses when only engaging in processing as an ancillary activity.
- Regular data protection audits.
- A fine of 5% percent of annual worldwide turnover for certain serious acts committed intentionally or negligently.
5 & 5: Rewards and Risks of Cloud Computing
Cloud computing lowers costs, increases capacity and provides security that companies would be hard-pressed to deliver on their own. Utilizing the cloud allows companies to “rent” hardware and software as a service and store data on a series of servers with unlimited availability and space. But the risks loom large, such as unforgiving contracts, hidden fees and sophisticated criminal attacks.
ACE’s recently published whitepaper, “Cloud Computing: Is Your Company Weighing Both Benefits and Risks?”, focuses on educating risk managers about the risks and rewards of this ever-evolving technology. Key issues raised in the paper include:
5 benefits of cloud computing
1. Lower infrastructure costs
The days of investing in standalone servers are over. For far less investment, a company can store data in the cloud with much greater capacity. Cloud technology reduces or eliminates management costs associated with IT personnel, data storage and real estate. Cloud providers can also absorb the expenses of software upgrades, hardware upgrades and the replacement of obsolete network and security devices.
2. Capacity when you need it … not when you don’t
Cloud computing enables businesses to ramp up their capacity during peak times, then ramp back down during the year, rather than wastefully buying capacity they don’t need. Take the retail sector, for example. During the holiday season, online traffic increases substantially as consumers shop for gifts. Now, companies in the retail sector can pay for the capacity they need only when they need it.
3. Security and speed increase
Cloud providers invest big dollars in securing data with the latest technology — striving for cutting-edge speed and security. In fact, they provide redundancy data that’s replicated and encrypted so it can be delivered quickly and securely. Companies that utilize the cloud would find it difficult to get such results on their own.
4. Anything, anytime, anywhere
With cloud technology, companies can access data from anywhere, at any time. Take Dropbox for example. Its popularity has grown because people want to share large files that exceed the capacity of their email inboxes. Now it’s expanded the way we share data. As time goes on, other cloud companies will surely be looking to improve upon that technology.
5. Regulatory compliance comes more easily
The data security and technology that regulators require typically come standard from cloud providers. They routinely test their networks and systems. They provide data backups and power redundancy. Some even overtly assist customers with regulatory compliance such as the Health Insurance Portability and Accountability Act (HIPAA) or Payment Card Industry Data Security Standard (PCI DSS).
1. Cloud contracts are unforgiving
Typically, risk managers and legal departments create contracts that mitigate losses caused by service providers. But cloud providers decline such stringent contracts, saying they hinder their ability to keep prices down. Instead, cloud contracts don’t include traditional indemnification or limitations of liability, particularly pertaining to privacy and data security. If a cloud provider suffers a data breach of customer information or sustains a network outage, risk managers are less likely to have the same contractual protection they are accustomed to seeing from traditional service providers.
2. Control is lost
In the cloud, companies are often forced to give up control of data and network availability. This can make staying compliant with regulations a challenge. For example cloud providers use data warehouses located in multiple jurisdictions, often transferring data across servers globally. While a company would be compliant in one location, it could be non-compliant when that data is transferred to a different location — and worst of all, the company may have no idea that it even happened.
3. High-level security threats loom
Higher levels of security attract sophisticated hackers. While a data thief may not be interested in your company’s information by itself, a large collection of data is a prime target. Advanced Persistent Threat (APT) attacks by highly skilled criminals continue to increase — putting your data at increased risk.
4. Hidden costs can hurt
Nobody can dispute the up-front cost savings provided by the cloud. But moving from one cloud to another can be expensive. Plus, one cloud is often not enough because of congestion and outages. More cloud providers equals more cost. Also, regulatory compliance again becomes a challenge since you can never outsource the risk to a third party. That leaves the burden of conducting vendor due diligence in a company’s hands.
5. Data security is actually your responsibility
Yes, security in the cloud is often more sophisticated than what a company can provide on its own. However, many organizations fail to realize that it’s their responsibility to secure their data before sending it to the cloud. In fact, cloud providers often won’t ensure the security of the data in their clouds and, legally, most jurisdictions hold the data owner accountable for security.
Risk managers can’t just take cloud computing at face value. Yes, it’s a great alternative for cost, speed and security, but hidden fees and unexpected threats can make utilization much riskier than anticipated.
Managing the risks requires a deeper understanding of the technology, careful due diligence and constant vigilance — and ACE can help guide an organization through the process.
To learn more about how to manage cloud risks, read the ACE whitepaper: Cloud Computing: Is Your Company Weighing Both Benefits and Risks?