We’re not surprised. In most cases, management still reports on cybersecurity with imprecise scorecards like red-yellow-green “heat maps,” security “maturity ratings,” and highly technical data that are out of step with the metric-based reporting that is common for other enterprise reporting disciplines.
Boards deserve better. We recognize that cybersecurity is a relatively young discipline, compared to others under the umbrella of enterprise risk management (ERM). But it’s not a special snowflake. Management can and should deliver reports that are:
Transparent about performance, with economically-focused results based on easily understood methods.
Benchmarked, so directors can see metrics in context to peer companies or the industry.
Decision-oriented, so the board can provide oversight of management’s decisions, including resource allocation, security controls, and cyber insurance.
While that level of reporting may still be aspirational for some companies, directors can drive their organizations forward by asking the following five questions, and demanding answers backed by the sorts of metrics and reports that we suggest below.
Before we get to the questions, there’s an over-arching prerequisite for sensible reporting: Every key performance and risk indicator should be tracked against a target performance or risk appetite, respectively.
That means defining risk tolerances in an objective, clear, and measurable way—for instance, “our critical systems downtime should always be less than one percent”—so that an analyst’s gut feelings aren’t determining results.
1. What is the threat environment that we face?
The chief information security officer or chief risk officer should paint a picture of the threat environment (cybercriminals, nation-states, malicious insiders, etc.) that describes what’s going on globally, in our industry, and within the organization. Examples of good metrics and reports include:
Global cyber-related financial and data losses
New cyber breaches and lessons learned
Trends in ransomware, zero-day attacks, and new attack patterns
Cyber threat trends from ISACs (information sharing and analysis centers)
2. What is our cyber-risk profile as defined from the outside looking in?
Boards should get cyber-risk assessments from independent sources. Useful sources of information include:
Independent security ratings of the company, benchmarked against peers
Third-party and fourth-party risk indicators
Independent security assessments (e.g., external consultants and auditors)
3. What is our cyber-risk profile as defined by internal leadership?
Management should provide assessments with tangible performance and risk metrics on the company’s cybersecurity program, which may include:
NIST-based program maturity assessment
Compliance metrics on basic cyber hygiene (the five Ps): passwords, privileged access, patching, phishing, and penetration testing
Percentage of critical systems downtime and time to recover
Mean time to detect and remediate cyber breaches
4. What is our cyber-risk exposure in economic terms? Based on the company’s cyber-risk profile, the central question is: What is the company’s potential loss?
In the past 30 years, we have seen that question answered in economic terms in each and every risk discipline in ERM: interest rate risk, market risk, credit risk, operational risk, and strategic risk. Now we need to address that question for cyber risk. This expectation can also be found in the U.S. Securities and Exchange Commission’s new guidance on cybersecurity disclosures and its focus on quantitative risk factors.
The Factor Analysis of Information Risk (FAIR) methodology is a widely-accepted standard for quantifying cyber value-at-risk. The FAIR model provides an analytical approach to quantify cyber-risk exposure and meet the heightened expectations of key stakeholders.
In the current environment, directors should demand more robust reporting on metrics such as:
Value of enterprise digital assets, especially the company’s crown jewels
Probability of occurrence and potential loss magnitude
Potential reputational damage and impact on shareholder value
Costs of developing and maintaining the cybersecurity program
Costs of compliance with regulatory requirements (e.g., the EU’s General Data Protection Regulation)
5. Are we making the right business and operational decisions?
Cyber is not simply a technology, security, or even risk issue. Rather, it is a business issue and a “cost of doing business” in the digital economy. On the opportunity side, advanced technologies and digital innovations can help companies offer new products and services, delight their customers, and streamline or disrupt the supply chain. As a top strategic issue, management should provide the board with risk and return metrics that can support effective oversight of business and operational decisions, such as:
Risk-adjusted profitability of digital businesses and strategies
Return on investment of cybersecurity controls
Cyber insurance versus self-insured
We believe the number should be zero when it comes to the percentage of directors dissatisfied with the cybersecurity information provided by management. Based on our own observations of board reports on the quality of cybersecurity reporting, there remains significant gaps. We hope our article will serve as a framework for directors and executives to discuss ways to close those gaps.
Aligning with your company’s new chief information security officer (CISO) is a great opportunity to provide better protection for your organization, ensure regulatory compliance, and align previously siloed teams to gain clarity on how your business will respond in the event of a cybersecurity crisis. That’s why I urge board members to initiate early communication with those directly in charge of maintaining the enterprise’s vision for security by asking questions and collaborating on cybersecurity strategies.
According to a new study from the Enterprise Strategy Group and the Information Systems Security Association a lack of alignment between the security leader and the business can contribute to high CISO turnover. This is especially true if the CISO doesn’t feel welcome to participate in the boardroom meetings with executives.
This is a two-way street, of course. Board members often lack the knowledge they need to converse with information technology (IT) and cybersecurity professionals. They also tend to lack an understanding of how these groups contribute to effective enterprise risk management. Below we go through a few tips that will help put you on the right track and align these critical parties.
Understanding Your Company’s Risk Tolerance
First, in order for the board to understand the company’s cybersecurity posture, its members need to understand what level of risk is appropriate for your company. Each company’s individual strategy for growth, innovation, and safety should determine the extent to which it manages various types of risk, be it safety risks, operational risks, environmental risks, or technology risks (keeping in mind that technology plays a role in just about every category of risk).
Cybersecurity programs need to address an expansive and ever-changing threat landscape. They should include strategies to identify how vulnerable the organization is, determine whether or not they are compromised, and enhance operational efficiencies. During the first 90 days of his or her tenure, directors should be sure to get input from the new CISO on all of these areas, as well as a documented approach to how they will monitor the overall risk to the business based on these elements.
Understanding the risk tolerance of the business is the first step, but in order to properly determine this the CISO must be able to answer several questions. And knowing which questions to ask, and how these questions relate to managing risk within the company, will go a long way toward effective cyber risk management. To get a full understanding of your company’s cybersecurity posture, and ensure your security team is focused on the right things, ask your new CISO to answer the following questions in his or her first 90-day board report.
Does our security team have a full, well-informed view of our organization’s vulnerabilities? What are our top three cyber threats? How do we identify and deal with emerging threats?
What have we learned from past cybersecurity incidents?
Does management have a clear vision of the cyber risks to our organization? Can you provide any past examples of C-suite executives supporting the cybersecurity objectives of the company?
Are we managing cyber risks in alignment with the appropriate level of risk for our company and industry?
What steps are we taking to ensure compliance with all requirements for our industry? Do we follow any cybersecurity industry best practices such as the Center for Internet Security’s Critical Controls?
What is our cybersecurity incident response plan? Do we maintain an internal and external communications plan as a component of that? Has a tabletop exercise been completed to test the effectiveness of the plan?
How is our security team collaborating with our IT and development operations teams? Look for examples of a strong security operations (SecOps) practice, such as shared data and integrated processes, helping to make security inherent within all business operations and innovation.
How are we ensuring that our partners take appropriate security measures? For example, when engaging outside firms for services, are those other companies protecting sensitive information such as our marketing strategies and customer information? How is this being enforced? This could include signing agreements and performing regular assessments of vendor security practices.
How do you measure the effectiveness of our cybersecurity program and initiatives?
What investments can we make to further reduce our risk? What do we need and why?
Encourage your board as they review the information provided by the CISO to ask for relevant specific examples and documentation. While your fellow board members might not know the underpinnings of cybersecurity, they will have a fresh point of view around the resources and implementation of these processes. For instance, a comprehensive incident response plan should be thoroughly documented and readable for all involved parties so that they are aware of their role during a security incident.
By asking the CISO these probing questions, verifying the responses, having a knowledgeable senior executive or board member sponsors, and partnering with a trusted cybersecurity advisor, your organization will have a defined understanding of its cyber risks and will be prepared to make informed investment decisions.
Only 44 percent of cybersecurity professionals surveyed by the Enterprise Strategy Group and the Information Systems Security Association believe that CISO participation with executive management and boards of directors is at the right level. Clearly, more needs to be done to inform risk-based cybersecurity decision making as well as deeper integration of SecOps into core IT and development responsibilities. How can you buck that trend?
After the 90-day report from the CISO is a perfect time to discuss the answers to these questions. Follow up with your CISO to identify areas of concern and where more support from the board or executives might be needed for them to succeed. An ongoing dialog is critical, and will fine-tune cyber-risk management. It will also allow management to make informed technology investments, identify what training needs to happen, and provide ongoing cybersecurity governance aligned to risk tolerance and business goals.
The time is now for boards to improve the quality of dialogue with CISOs. Initial conversations and expectation-setting will minimize the possibility of overlooking cyber risk that could be detrimental to the corporation and its shareholders, while also making sure that everyone involved in the oversight of security gets on the same page.
Corey E. Thomas is CEO of Rapid7. Read more of his insights here.
Who can forget the famous lyrics to the 1968 Noel Harrison song “The Windmills of your Mind”? Mirroring many other facets of life, cybersecurity is “[L]ike a circle in a spiral, like a wheel within a wheel, never ending nor beginning.” As the threat landscape changes, as risk appetites shift, and as new regulations come into being, your organization’s approach to cyber risk also must continually adapt. Throw in the new European General Data Protection Regulation and it’s clear now is the time to be discussing these issues.
Oversight responsibility for cybersecurity has become a board-level responsibility. However, what cybersecurity actually means for a business is often still something of a mystery to some in this position.
Some corporate directors struggle to answer questions such as:
What is our ability to prevent, detect, contain and respond to a cyberattack?
How should our internal departments, such as information technology, legal, and communications—work together when an incident occurs?
What is our overall risk tolerance?
How does our level of preparedness compare to our competitors?
What is the potential impact of a cyber incident to our balance sheet?
What is the return on investment for additional security controls compared to the cost of obtaining cyber insurance coverage?
After last year’s major ransomware attacks, business interruption has become a topic for discussion in many corporate boardrooms. Total economic losses associated with WannaCry are estimated at $8 billion, with half a billion dollars attributed to business, or network, disruption. But there seems to be a lack of ideas on how to mitigate that exposure, how to assess and measure a potential business interruption risk, and how to evaluate this issue with suppliers.
One element of a mature cybersecurity program is cybersecurity insurance. While this is an important spoke in the wheel, it’s also important to understand that it is only one part of the whole.
There is a misconception about what cyber insurance actually is, and almost more importantly, what it is not. Recently, I talked with a medium-sized business about cyber insurance, and their thoughts before our meeting were along the lines of, “if we purchase cyber insurance, we do not need to invest in a cyber security program any longer. After all, we will be insured.”
Even though such a statement is issued infrequently, and would surely not come from any organization that has reached some degree of cyber maturity, it took me by surprise. Yes, risk transfer is important, but only as part of a broader approach to cyber resilience. In a world where systemic cyberattacks are becoming more frequent, nobody wants to be the low-hanging fruit.
In a nutshell, traditional cyber insurance is aimed at dealing with the financial impacts associated with a security or privacy event, including direct costs with managing the event, loss of income, paying extortion demands, as well as liability, including regulatory fines and penalties in jurisdictions where such costs are insurable.
Cyber insurance itself is not a single coverage. It can be packaged in a number of different ways to match an individual client’s insurance buying strategy and evolving cyber threats, risks, and emerging impacts. It can be a combination of first- and third-party offerings, responding to the direct losses of a cyber event as well as claims asserted by third parties.
It’s also important to say what this type of insurance does not address. Cyber insurance does not replace a cybersecurity program and does not negate the need for good security controls. In fact, some policies may require demonstration of certain best practices in cybersecurity in order to provide indemnification. In order for organizations to effectively manage cyber risk, they should have both an effective security program and insurance in place for when defenses fail.
Like all other risks, it is important to look at cyber risks as a continuous cycle of management, not just a one-time risk mitigation exercise. The cycle is one of determining the current risk posture, by looking at the likelihood of cyber threats and the impacts, as well as the current security controls in place.
Based on the internally-determined risk appetite, if certain risks are considered to be above the threshold, they need to be mitigated by additional controls. Once completed, this cycle will be carried out continuously, as the lyrics to “The Windmills of Your Mind” suggest.
As is the nature of risk, it is almost impossible to eradicate it completely, and there is always a residual risk. It is this residual risk that is picked up by cyber insurance, a necessity even for the most resilient among us.