NACD held its third annual Cyber Summit in Chicago on June 21, 2017, in partnership with the Internet Security Alliance (ISA). This year’s event followed in the wake of cyber incidents such as WannaCry and the hacking of the Democratic National Committee’s email account, as well as Europe’s adoption of the General Data Protection Regulation (GDPR) and the implementation of China’s Cybersecurity Law.
NACD members left the Cyber Summit with valuable lessons to share with their colleagues.
Speakers acknowledged this context and focused on topics such as building a cyber-risk culture, insider threats, cyber-risk regulation, the threat of state-sponsored attacks, and the economics of cybersecurity. (Click here for a list of event sessions and speakers.)
Five key takeaways emerged for director attendees at the 2017 NACD Cyber Summit:
1. Actively learn from cyber incidents at other companies. A bill that aims to require cyber expertise on public company boards has surfaced twice in Congress since 2015. However, Melissa Hathaway—president at Hathaway Global Strategies and senior advisor at Harvard Kennedy School’s Belfer Center for Science and International Affairs—believes boards do not necessarily need to have a director who is an expert in cybersecurity. Hathaway, who delivered a keynote at the cyber summit, suggests boards regularly hold conversations about current events in cybersecurity, and review a cyber-event case study at each quarterly meeting.
2. Work toward a public-private partnership. Hathaway emphasized the benefit of forming a public-private partnership in the United States to serve as a medium for information sharing about cyberattacks. Canadians have already formed such an organization. The Canadian Cyber Threat Exchange is an independent nonprofit that functions as a middleman between the public and private sectors. According to Hathaway, the U.S. government itself has been a victim of a number of cyberattacks exposing personal data, which has cost it credibility with the private sector. Thus far, U.S. corporations have been largely reluctant to share information about cyberattacks with a government that may not be seen as equipped to adequately respond. At the same time, the government classifies data on cyberattacks that limits information sharing with the private sector.
3. Consider having the CISO report directly to the board. The 2016–2017 NACD Public Company Governance Survey indicates that only 31 percent of boards receive reports directly from the chief information security officer (CISO), despite the increased prevalence and importance of the role. Bret Arsenault, corporate vice president and CISO at Microsoft, indicated that the frequency of meetings between the CISO and the board depends on the board’s existing cyber knowledge. As Microsoft’s CISO, Arsenault conducts a quarterly review with both the full board and the audit committee, in addition to meeting with the CEO and the full leadership team for a half hour once each week. Having all members of senior management involved in the conversation helps set the tone at the top around cyber culture. See the 2017 Cyber-Risk Oversight Handbook for guidance on building a relationship with the CISO (p. 38) and questions for the board to ask management about cybersecurity (p. 21).
4. Strengthen a culture of secure behaviors. In providing oversight of cybersecurity, one aspect of the board’s role is to ensure that the organizational culture reinforces healthy cybersecurity behaviors. For this culture to take hold, it is essential that any cybersecurity-related issues be explained to the board—and employees—in a clear, understandable way. For example, the CISO should speak in business terms to the board and avoid using technical language, according to Arsenault. John Lhota, managing principal for global cybersecurity consulting services at SecureWorks, also suggested using gamification for employee cyber education programs. Directors should evaluate whether a culture of awareness about the importance of cybersecurity truly exists, beginning at the board level. See NACD’s Cyber-Risk Oversight Handbook for tools on assessing the board’s cybersecurity culture (p. 27) and establishing board-level cybersecurity metrics (p. 28).
5. Ensure access rights are limited and continuously monitored. Directors should discuss with management what the company’s most critical data assets—or, “crown jewels”—are, and who could access them. Many high-profile breaches have been carried out by employees or contractors with access to company networks. Robert Clyde, vice chair of ISACA and managing director for Clyde Consulting LLC, indicated the hiring process can aid in selecting trustworthy employees, but employees with administrative privileges (i.e., the ability to install certain software, access certain files, or change configuration settings) can become very destructive if they retaliate against the company after a job loss or make a mistake. The board should check with the CISO to make sure there are a very small number of employees that have administrative privileges on an everyday basis, with slightly more given access in an emergency. Adding secondary approvals—so that two people must be involved in a process—further constrains the possibility of someone accidentally deleting data or removing it on purpose. Access for those with administrative privileges should be amended the second those individuals change jobs, according to Robert Zandoli, director of the ISA and global chief information security officer at BUNGE Ltd.
For more information on providing cybersecurity oversight, please see the following NACD resources:
Robert P. Silvers is a respected expert on Internet of Things security and effective corporate planning and response to cybersecurity incidents. Silvers is a partner at Paul Hastings and previously served as the Obama administration’s assistant secretary for cyber policy at the U.S. Department of Homeland Security. Silvers will speak at NACD’s 2017 Global Board Leaders’ Summit in October and NACD’s Technology Symposium in July.
Robert P. Silvers
Cybersecurity breaches pose a growing threat to any organization. As we’ve seen in recent years, and indeed in recent weeks, the most sophisticated companies and even governments aren’t immune from cyberattack. Ransomware has become a global menace, and payment data and customers’ personal information are routinely swiped and sold on the “dark web” in bulk. Next-generation Internet of Things devices are wowing consumers, but they are also targets, as Internet connectivity becomes standard-issue in more and more product lines.
How do directors prepare for this landscape? Everyone now acknowledges the importance of cybersecurity, but it is daunting to begin to think about implementing a cybersecurity plan because it’s technical, fast-moving, and has no “silver-bullet” solutions. Most boards now consult regularly with the organization’s information security team, but the discussions can be frustrating because it’s hard to gauge readiness and where the organization really stands in comparison to its peers. Sometimes directors confide in me, quietly and on the sidelines, that their real cybersecurity strategy is one of hope and prayer.
There are steps directors can take now to prepare for incidents so that when they occur the company’s response is well oiled. With the right resources and preparation, boards can safely navigate these difficult and unforeseen situations. Three key strategies can assist directors as they provide oversight for cybersecurity risks:
Building relationships with law enforcement officials
Having incident response plans in place (and practicing them)
Staying educated on cybersecurity trends
1. Building Relationships With Law Enforcement Officials
It’s no secret that relationships are central to success. Building the right relationships now, before your worst-case scenario happens, will help manage the situation. The Federal Bureau of Investigation is generally the lead federal investigative agency when it comes to cybercrime, and the United States Secret Service also plays an important role in the financial services and payment systems sectors.
Boards should ensure company management educates law enforcement officials from these agencies about the company’s business and potential risks. In turn, the company should ask law enforcement to keep it apprised of emergent threats in real time. There should also be designated points of contact on each side to allow for ongoing communications and make it clear whom to contact during an incident. This is critical to ensuring that the company has allies already in place in the event that a cyberattack occurs.
2. Having—and Practicing—Incident Response Plans
Directors should ask to see copies of the company’s written cyberbreach response plan. This document is essential. A good incident response plan addresses the many parallel efforts that will need to take place during a cyberattack, including:
a. Technical investigation and remediation;
b. Public relations messaging;
c. Managing customer concern and fallout;
d. Managing human resources issues, particularly if employee data has been stolen or if the perpetrator of the attack is a rogue employee;
e. Coordination with law enforcement; and
f. Coordination with regulators and preparedness for the civil litigation that increasingly follows cyberattacks.
An incident response plan is only valuable if it is updated, if all the relevant divisions within a company are familiar with it, and if these divisions have “buy in” to the process. If the plan is old or a key division doesn’t feel bound by it, the plan isn’t going to work. Directors should insist the plan be updated regularly and that the company’s divisions exercise the plan through simulated cyber incidents, often called “table-top exercises.” Indeed, table-top exercises for the board itself can be an excellent way to familiarize directors with the company’s incident response plan and its cyber posture more generally.
3. Staying educated on cyber security trends
As your board is building relationships with law enforcement officials and preparing an incident response plan, directors should also be educating themselves on cyber risk. Cybersecurity becomes more approachable as you invest the time to learn—and it’s a fascinating subject that directors enjoy thinking about. Do you know what a breach will look like for your company? What protocols do you have in place in case something happens?
According to the 2016–2017 NACD Public Company Governance Survey, 89 percent of public company directors said cybersecurity is discussed regularly during board meetings. Since a majority of directors in the room agree that cybersecurity is worth discussing, directors should collectively and individually prioritize learning the ins and outs of cyber risks.
One easy way to stay up to date on the latest is to ask the company’s information technology security team for periodic reports of the most significant security events that the company has encountered. This will give directors a feel for the rhythm of threats the company faces day in and day out.
Another option is for directors to take a professional course and get certified. The NACD Cyber-Risk Oversight Program is a great example of a course designed to help directors enhance their cybersecurity literacy and strengthen the board’s role in providing oversight for cyber preparedness. Consider these options to keep yourself as educated and informed as possible.
The more you can prepare individually, the better off you will be when you have to provide oversight for a cybersecurity breach at your company.
My introduction to cybercrime came seven years ago as a bolt from the blue. I Googled myself and found that four of the top five search results showed I was on the Federal Bureau of Investigation’s (FBI) Top Ten Most Wanted List.
The attack came as a bolt from the blue.
After checking outside my front door to make sure no FBI agents were lining up to arrest me, I researched what had happened. I was the victim of an Internet stalker—a previous business associate looking to mar reputations of people this person had had no contact with for nearly two decades.
This experience personally taught me the harm that could be done through the Internet and the unique nature of the risks involved, and sparked my commitment to practicing sound cyber-risk oversight.
Cybersecurity as a Risk
Cyber risks have unique characteristics that not many of the more than 60 different risks reported in public companies’ 10-K reporting share. Most other risks and the damage they cause, although highly detrimental to a company, can be assessed and quantified (consider, for example, the cost of rebuilding after a fire). Cyber risk is different because a victim of a cyberattack may never be able to find out who attacked the company or person, where the attack came from, what was taken, or how long the attack had been going on for.
The most striking feature of cyberattacks is their anonymity. It is very difficult to trace an attacker who wants to stay anonymous. An attacker can create dummy corporations, hijack e-mail accounts, and use multiple servers to become virtually untraceable. Another method that hackers use to hide themselves is the virtual private network, which make it very challenging to track where the attack originated. Say the intrusion appears to have come through a server in Singapore. The attacker actually could be in Estonia. Even if you can trace the perpetrator, getting redress would mean international ligation.
What are they taking? Unless the attacker is confronting you with a ransom demand for your data, you may not know what is being taken or corrupted without extensive and time-consuming forensics.
Lastly, how long has this been going on? For the same reasons that it is difficult to identify what is being stolen, the time of the origination of the attack is hard to assess. Often known as “Logic Bombs,” malicious software can lie dormant for long periods, and sometimes years, before it is activated. The classic example is the disgruntled employee who leaves malware that activates itself on the anniversary of his firing.
You Are Not Invulnerable
One of the worse mistakes a board can make is to assume that they are at a lower state of cyber risk, as their corporation is not a bank or does not store credit card information. If the company transfers money and is connected to the Internet, which means just about every company in the United States and many around the world, the company is at high risk for being attacked. Banks and retailers are at extremely high risk. Low risk simply does not exist in the cyber-risk spectrum.
For most companies, the principal vulnerability is economic. Simply put, attackers are trying to make money. Besides stealing information such as employee health care data, or social security numbers that can be sold on the black market, an increasingly popular form of attack is to lock out the company from its data, or encrypt it and charge a ransom to release it or decrypt it.
Brand and reputation attacks are another vulnerability done more to discredit a company’s reputation for either competitive or political motives. To take an obvious example, imagine the damage to a cybersecurity company’s reputation if its own firewalls were breached. Such an attack would deeply harm the core promise that a cybersecurity company makes to its customers to secure its enterprise.
Hacktivism, as the name connotes, is an attack launched based on the attacker’s beliefs and ideologies. For instance, a company that tests its products on animals could find itself as a hacktivism target. Typically, the attacker will post messages about the cause on the company’s website or contact its customers and suppliers.
Lastly, malicious attacks can be launched to inconvenience and disrupt the company such as in the Logic Bomb attack described above. There is usually no economic effect—vengeance is the principal motive.
Since her “arrival” on the FBI’s Top Ten Most Wanted list, Wendy Luscombe has led a real estate investment trust as CEO, served as a director on European and American boards, and studied cybersecurity and cyber-reputation management. All views and opinions expressed here are the author’s own.