Category: Risk Management

Hacking Back Will Hold Companies Back

Published by

Corey E. Thomas

Undergraduate, graduate, and professional students of cybersecurity from around the world gathered earlier this year to participate in a cybersecurity competition that simulated the international policy challenges associated with a global cyberattack. While the goal was to practice sound policy decisions, the majority of competing teams unintentionally led the U.S. into starting an international war. Given a variety of diplomatic and other means of responding to cyberattacks, participants largely took the aggressive approach of hacking back in response to cyberattacks from China, and to disastrous consequences.

While the competition’s participants are all students today, they may well go on to be corporate directors and government leaders of tomorrow. Based on current debate about how organizations in the private sector should respond to cyberattacks, it seems the actions taken by these students may well be representative of a broader trend. In fact, there is enough of a push for organizations to be legally authorized to “hack back” that earlier this year a member of Congress proposed a bill to empower people “to defend themselves online, just as they have the legal authority to do during a physical assault.”

As a business leader, I believe this measure would do more harm than good.

What Is Hack Back?

Hack back, which is sometimes called counterstrike, is a term used to refer to an organization taking offensive action to pursue, and potentially subdue, cyberattackers that have targeted them. For the purposes of this article, I am specifically talking about action taken by private sector organizations that affects computers external to their own network. We are not discussing government actions, which tend to occur within existing legal frameworks and are subject to government oversight.

Hack back activities go beyond defensive measures that organizations may put in place to protect their environments. It is generally understood that hack back activities extend beyond the victim’s own network, systems, and assets, and may involve accessing, modifying, or damaging computers or networks that do not belong to the victim. Directors should note that today it is illegal under the Computer Fraud and Abuse Act for private parties to access or damage computer systems without authorization from the technology owners or an appropriate government entity, even if these systems are being used to attack you. That is what proponents of hack back want to change, and the proposed bill goes some way towards doing this.

The Case for “Self Defense”

In response to the legal restriction, proponents of a law to legalize hacking back at cyberattackers often argue that the same principle should apply as that which allows US citizens to defend themselves against intruders in their homes—even with violent force. While it may sound reasonable to implement equal force to defend a network, the Internet is a space of systems designed specifically for the purpose interacting and communicating. Technology and users are increasingly interconnected. As a result, it’s almost impossible to ensure that defensive action targeted at a specific actor or group of actors will only affect the intended targets.

The reality of the argument for hacking back in self-defense is unfortunately more akin to standing by your fence and lobbing grenades into the street, hoping to get lucky and stop an attacker as they flee. With such an approach, even if you do manage to reach your attacker, you’ll almost certainly cause terrible collateral damage. Can your organization afford to clean up such a mess? What would be the repercussions for your reputation and position in the marketplace?

Blame Game

Another significant challenge for private sector organizations looking to hack back is that, unlike governments, they typically do not have the large-scale, sophisticated intelligence gathering programs needed to accurately attribute cyberattacks to the correct actor. Attackers constantly change their techniques to stay one step ahead of defenders and law enforcement, including leveraging deception techniques. This means that even when there are indications that point to a specific attacker, it is difficult to verify that they have not been planted to throw off suspicion, or to incriminate another party.

Similarly, it is difficult to judge motivations accurately and to determine an appropriate response. There is a fear that once people have hack back in their arsenal, it will become the de facto response rather than using the broad range of options that exist otherwise. This is even more problematic when you consider that devices operating unwillingly as part of a botnet may be used to carry out an attack. These infected devices and their owners are as much victims of the attacker as the primary target. Any attempt to hack back could cause them more harm.

The Security Poverty Line

Should hack back be made a lawful response to a cyberattack, effective participation is likely to be costly, as the technique requires specialized skills. Not every organization will be able to afford to participate. If the authorization framework is not stringent, many organizations may try to participate with insufficient expertise, which is likely to be either ineffective or damaging, or potentially both. However, there are other organizations that will not have the maturity or budget to participate even in this way.

These are the same organizations that today cannot afford a great deal of in-house security expertise and technologies to protect themselves, and currently are also the most vulnerable. As organizations that do have sufficient resources begin to hack back, the cost of attacking these organizations will increase. Profit-motivated attackers will eventually shift towards targeting the less-resourced organizations that reside below the security poverty line, increasing their vulnerability.

A Lawless Land

Creating a policy framework that provides sufficient oversight of hack-back efforts would be impractical and costly. Who would run it? How would it be funded? And why would this be significantly more desirable than the status quo? When the U.S. government takes action against attackers, they must meet a stringent burden of proof for attribution, and even when that has been done, there are strict parameters determining the types of targets that can be pursued, and the kind of action that can be taken.

Even if such a framework could be devised and policed, there would still be significant legal risks posed to a variety of stakeholders at a company. While the Internet is a borderless space accessed from every country in the world, each of those countries has their own legal system. Even if an American company was authorized to hack back, how could you ensure your organization would avoid falling afoul of the laws of another country, not to mention international law?

What Directors Can Do

The discussion around hacking back so far has largely been driven by hyperbole, fear, and indignation. Feelings of fear and indignation are certainly easy to relate to, and as corporate directors, powerlessness does not sit well with us. It is our instinct and duty to defend our organizations from avoidable harm.

The potential costs of a misstep or unintended consequences from hack back should deter business leaders from undertaking such an effort. If another company or a group of individuals is affected, the company that hacked back could see themselves incurring expensive legal proceedings, reputational damage, and loss of trust by many of their stakeholders. Attempts to make organizations exempt from this kind of legal action are problematic as it raises the question of how we can spot and stop accidental or intentional abuses of the system.

It’s one thing for students to unintentionally trigger war in the safe confines of a competitive mock scenario, and another thing entirely to be the business leader that does so in the real world. Directors of companies must instead work together to find better solutions to our complex cybersecurity problems. We should not legitimize vigilantism, particularly given the significant potential risks with dubious benefits.

 

Corey Thomas is CEO of Rapid7. All opinions expressed here are his own.

Does Your Enterprise Risk Management Make a Difference?

Published by
Jim DeLoach

Jim DeLoach

Now that the Committee of Sponsoring Organizations of the Treadway Commission (COSO) has released its updated framework on enterprise risk management (ERM), it’s time for companies to take a fresh look at their risk management practices. While the concepts in the update aren’t new, the emphasis is markedly different, with a focus on what’s really important in maximizing the value of ERM.

In recent years, ERM implementations have generally focused on three questions:

  1. Do we know what our key risks are?
  2. Do we know how they’re being managed?
  3. How do we know?

In responding to these three questions, executive management and boards in some companies have made progress in differentiating the truly critical enterprise risks from the risks associated with day-to-day business operations.

While seeking these answers is a useful exercise, is it enough? Directors should also ask:

  • Is our ERM approach helping us identify flaws and weaknesses in our strategy on a timely basis?
  • Is our organization able to recognize the signs of disruptive change, and is it agile and resilient enough to adapt?
  • Do we truly consider risk and return in our decision-making processes or do we blindly follow the herd and remain emotionally invested in the comforts of our business model?
  • Do we seek out what we don’t know? Are we prepared for the unexpected?
  • Is everyone competing for capital and funding with rose-colored glasses, making the resource and budget allocation process a grabfest?

Yes, companies have made progress in various ways with enterprise risk management, but depending on the answers to the above questions, more needs to be done.

Adoption and application of COSO’s Framework could alter the conversation by clarifying the importance of integrating risk, strategy, and enterprise performance. While a stand-alone process may be worthwhile and useful, it is not ERM as defined by COSO. The framework introduces five interrelated components and outlines 20 relevant principles arrayed among those components, offering a benchmarking option for companies seeking to enhance their ERM approach.

Four observations frame what COSO is looking for:

  • Integrate ERM with strategy. There are three dimensions to integrating ERM with strategy-setting and execution:
    • risks to the execution of the strategy;
    • implications from the strategy (meaning each strategic option has its unique risk-reward trade-off and resulting risk profile); and
    • the possibility of the strategy not aligning with the enterprise’s mission, vision and core values.

   All three dimensions need to be considered as part of the strategic management process.

  • Integrate risk with performance. Risk reporting is not an isolated exercise. Operating within the bounds of an acceptable variation in performance provides management with greater confidence that the entity will achieve its business objectives and remain within its risk appetite.

  • Lay the foundation for ERM with strong risk governance and culture. The board and CEO must be vigilant in ensuring that pressures within the organization are neither excessive nor incentivizing unintended consequences. Such pressures may be spawned by unrealistic performance targets, conflicting business objectives of different stakeholders, disruptive change altering the fundamentals underlying the business model, and imbalances between rewards for short-term financial performance and stakeholders focused on the long term.

  • Tie risk considerations into decision-making processes. COSO defines “relevant information” as information that facilitates informed decision-making. The more information contributes to increased agility, greater proactivity, and better anticipation of changes to the enterprise, the more relevant it is and the more likely the organization will execute its strategy successfully and achieve its business objectives.

Boards should urge the executives within their companies to consider the principles embodied by the COSO framework to advance their current ERM approach. In this regard, we suggest organizations focus on three keys:

Position the organization as an early mover. When a market shift creates an opportunity to create enterprise value or invalidates critical assumptions underlying the strategy, it may be in an organization’s best interests to recognize that insight and act on it as quickly as possible. The question is: When the entity’s fundamentals change, which side of the change curve will it be on? Will it be facing a market exploitation opportunity, or will it be looking at the emerging risk of an outdated strategy? The organization attains time advantage when it obtains knowledge of a unique market opportunity or an emerging risk and creates decision-making options for its leaders before that knowledge becomes widely known.

Address the challenges of risk reporting. Consistent with the objective of being an early mover, risk reporting should help organizations become more agile and nimble in responding to a changing business environment. To truly impact decision-making, risk reporting must address three questions:

  1. Are we riskier today than yesterday?
  2. Are we entering a riskier time?
  3. What are the underlying causes?

Risk reporting is often not actionable enough to support decision-making processes. Once risk reporting is designed to answer these three questions, it becomes the key to evolving ERM to a “risk-informed” decision-making discipline.

Preserve reputation by maximizing the lines of defense. How do organizations safeguard themselves against reputation-damaging breakdowns in risk and compliance management? The widely accepted lines-of-defense model consists of three lines of defense. The first line consists of the business unit management and process owners whose activities give rise to risk. The second line consists of the independent risk and compliance functions, and internal audit is the third line. Also important is the tone of the organization—the collective impact of the tone from the top, the tone from the middle, and the tone at the bottom on risk management, compliance, and responsible business behavior. The proper tone lays the cultural foundation for the effective functioning of each of the three lines of defense. Arguably, the final line of defense is senior management and the board. For example, top management acts on risk information on a timely basis when significant issues are escalated and involves the board when necessary.

These three keys offer a focused line of sight for companies and their boards seeking to advance their ERM approach consistent with the principles and guidance in the updated COSO framework. The relationship of ERM to the processes the CEO values most can be compared to the contribution of salt, pepper, and other seasonings to a sumptuous meal. The objective is to enhance the outcomes that the organization is attempting to achieve by enabling it to be more adaptive in a volatile, complex, and uncertain world.

 

Jim DeLoach is managing director at Protiviti. 

Innovation: A Board Imperative

Published by

Lorrie Norrington has over 35 years of operating experience in technology, software, and Internet businesses. Norrington is currently an Operating Partner at Lead Edge Capital, and serves on the boards of Autodesk, Colgate-Palmolive Co., HubSpot, BigCommerce, and Eventbrite. She lives in Silicon Valley. This blog is part of the 2017 NACD Global Board Leaders’ Summit series.

Lorrie Norrington

A company’s board sets the tone from the top and oversees long-term strategy. However, now more than ever, boards also must actively work to understand technology trends and encourage a culture of innovation that drives long-term growth. The development of an innovation mindset has become an imperative for directors.

The pace of technological change is forcing governance needs to evolve faster than anticipated. As a result, the inability to innovate has become one of the biggest business risks in most enterprise risk management assessments. It is useful to understand that both evolutionary innovation (or the combination of small ideas into bigger change) and discontinuous innovation (which is disruptive to companies and industries) can render companies uncompetitive in months and years—not decades.

Below are some of the techniques I’ve used over the past decade as a director to keep current on my knowledge and help boards embrace technology and innovation.

Take It Personally

You don’t have to live in Silicon Valley or be a technologist to possess a solid working knowledge of innovation and technology trends. In our previous roles as executives, we were forced to keep current on business and technology changes. The same holds for board directors. It is up to you. Annual updates through events like the NACD Global Board Leaders’ Summit are essential to learn about key trends and best practices from other boards. However, given the rate of change, you cannot rely solely on annual updates. Every year, at a minimum, I read the top three business technology books on Amazon’s bestseller list, attend one technology conference (Mary Meeker’s annual pitch is a must), and read my favorite tech-focused publications (i.e., Recode and TechCrunch) daily. This routine enables me to engage in the boardroom with an informed perspective.

Go Beyond the CEO

With today’s rate of change, it isn’t realistic to expect the CEO to have all the answers regarding innovation efforts and how teams are applying technology. If your board has a technology and innovation committee, take time to understand executives’ areas of focus and ensure the agenda is balanced to include both the risks and opportunities technology change can create. If your board does not have one, ensure one of your board members is designated to engage regularly with the chief technology officer or chief product officer about their mid-and long-term innovation and technology plans.

Create an “Innovation System” for Your Board

A technology and innovation review should be part of your annual, board-level strategy or product review. Examining current technologies and innovations, as well as early-stage technologies and innovations that management believes to be part of the future, are two key behaviors to build as a part of your board’s robust “innovation system.” Last, by including technology and technical product skills as part of the criteria for new board members, you will ensure the board has the right skills long-term to encourage and challenge management.

In sum, boards set the tone for the entire organization. If you embrace technology and innovation, this empowers everyone throughout the company to do the same. In a world where the rate of technology and innovation will determine long-term success or failure, directors must embrace the changes needed to encourage and challenge management to accelerate their understanding of technology and the pace of innovation.

 

To learn more about technology and innovation, attend the 2017 Global Board Leaders’ Summit, Oct. 1–4, 2017, in National Harbor, MD. For the full Summit agenda, please visit the Summit website.