February 9, 2017
February 9, 2017
While technical defenses might help stave off some attempted hacks, sooner or later a company will become a victim of cybercrime, and a contingency plan for communicating about the aftermath of an attack is critical for any organization. RANE recently reached out to several experts for their advice to companies for managing the flow of information and maintaining control of an organization’s reputation in the event of a breach.
The Initial Response
“There’s a lot to gain or lose when you approach the equity you’ve built in your brand—and trustworthiness is part of the value of your brand,” says Ann Walker Marchant, CEO of The Walker Marchant Group. After a breach, an organization’s leadership must keep in mind all of the people who have placed trust in the brand. The impacted enterprise must convey that it is “willing to do whatever it takes to ensure you minimize risk to them,” she adds.
“You have to understand that it’s most important you’re communicating with your own people internally,” Christopher Winans, executive vice president and general manager at Hill+Knowlton Strategies, argues. Organizations should not allow internal stakeholders to learn about a crisis from external sources. “When your own people are finding out through press reports, it harms confidence within your [entire organization].”
“With a cybersecurity breach, you often don’t know what’s been compromised, at least at the very beginning,” Walker Marchant explains. Often, the best bet is to expect the worst. “You’ve got to assume they’ve got everything and act accordingly without appearing to create fear and panic with your internal and external audiences,” while simultaneously dealing with pressure from various audiences and stakeholders, Walker Marchant said.
Reaching Out to Regulators
A client update published by Debevoise & Plimpton LLP, titled “How to Disclose a Cybersecurity Event: Recent Fortune 100 Experience,” states that Fortune 100 companies disclosed 20 “incidents of major data breaches or cybersecurity events between January 2013 through the third quarter of 2015.” Most of the affected organizations made initial public announcements via news reports instead of a current report on Form 8-K. Debevoise & Plimpton notes that companies that did go the Form 8-K route “most often did so where the breach involved customer financial information.” Organizations, the report’s authors add, “should also be mindful of selective disclosure issues and their obligations under Regulation FD.”
Debevoise & Plimpton also warns against the risk of disclosing incomplete information regarding a breach, noting that “the ‘known’ facts may represent a small piece of the cybersecurity risk mosaic, which can require significant forensic research to assemble.” Potential inaccuracies in any disclosure represent yet another risk for organizations.
Subsequent reporting of updated cyber risk factors were largely contingent upon how breaches were initially disclosed in periodic corporate reports. In annual reports that come after a material breach, the Debevoise & Plimpton report notes, many corporations “view their annual report as an opportunity to update and tailor risk factors more generally, and the occurrence of an intervening cybersecurity event provides fodder for such fine tuning.”
Differing Perspectives Within an Organization
Caution is important, although any delay in responding in a timely manner also presents a risk for targeted enterprises. At the outset of planning the response, Winans adds, “It is better to tell your constituencies what you don’t know than it is not to tell them anything.”
However, there are often conflicting viewpoints of how to act in the immediate aftermath. “The tech guys will weigh in and say the best thing the company can do is get a hold of the FBI and find all the things in the network that are screwed up so they can take action to fix it,” says Steven Bucci, a visiting fellow for special operations and disaster management at The Heritage Foundation. “But you’d be hard pressed to find any lawyers to give their leaders that advice; instead, they’ll say it will hurt the company’s bottom line, it’ll hurt the company’s stock, and it could open up the organization to claims by competitors. While all of that, frankly, is true, that leaves the organization as vulnerable as they were before the breach—and probably also in violation with the Securities and Exchange Commission, as well as open to potential lawsuits from customers or clients.”
Still, it’s understandable that a cautious approach may appeal to many who don’t want to create panic, or those who are simply conflicted over the best course of action, Walker Marchant says. On the other hand, any delay in crafting a measured public response can result in harm to an organization’s brand equity. “Stakeholders will want to know who knew what, when, and why didn’t you tell us?”
Winans says that a clear organizational response plan that involves upper management is crucial before a crisis. “The very first thing you need to do is create a team, a coordinating committee, that is made up of all the functional parts of the company—the C-suite, the CEO or COO. Ideally, it’s got to be the leader of the company that takes charge of the situation, and you have to have people from HR, legal, operations, IT and investor relations.” For a company that answers to a variety of regulators, it’s even more important to get people in different roles together.
“That’s a team that needs to meet every day,” Winans adds. And before an actual breach takes place, that same team should be practicing how they will respond to a worst-case scenario. Winans proposes a “flight school.” “We set up people to actually play out an actual scenario,” he says. “The whole thing is designed to feel like an actual crisis.”
Lessons of a Real World Response
The Sony Pictures hack is an instance where the company was a little more forthcoming, at least with law enforcement, because they had no idea who could be penetrating their systems so extensively. Nevertheless, they suffered serious criticism and ridicule for how poorly they guarded their network.
“Exactly what the breach entailed wasn’t clear at the very beginning,” Walker Marchant says. “It was death by a thousand knife wounds because it was that trickle-down approach, because every day was something different.” Lists of salaries, copies of unreleased films, and sensitive e-mail from senior leadership were also part of the data theft. Still, Bucci argues that “while they did get beat up pretty badly,” in the end “they got through it faster and with far more sympathy from the public by saying, ‘We got hammered.’”
As recent examples of flawed responses by organizations following cyber breaches highlight the risks of incomplete or inaccurate information, boards have one clear warning: Doing nothing is not an option. The age of instant communications and 24/7 media coverage ensures that very little in the cybersecurity universe can reliably remain under wraps for long—lessons that others have already learned the hard way.
“I think the biggest mistake is deluding yourself that you can contain this and no one will find out,” Winans says. “The fact is that very often the worst thing that can happen to a company isn’t a crisis situation. It’s how they respond to it.”
About the Experts
Steven Bucci is a Visiting Fellow for Special Operations and Disaster Management, as well as primary instructor in leadership, at The Heritage Foundation.
Debevoise & Plimpton LLP is a premier law firm with market-leading practices, a global perspective and strong New York roots.
Ann Walker Marchant is recognized as a preeminent strategist and counselor with more than 20 years of experience developing and leading wide-ranging initiatives for the White House and Fortune 100 brands.
Christopher Winans, executive vice president and general manager at Hill+Knowlton Strategies in New York, has 22 years of experience in journalism, 10 of those at The Wall Street Journal.
RANE is an information services and advisory company serving the market for global enterprise risk management. Learn more at www.ranenetwork.com.