Members of corporate boards feel they should be much more actively involved in ensuring the organizations they oversee are adequately addressing cybersecurity. That doesn't mean members of the board of directors want to personally configure firewalls or procure intrusion detection systems -- just that they should make sure someone is doing so. The question is how to do that.
IT security audit organization ISACA and the Institute of Internal Auditors (IIA) are trying to provide answers on the proper role of board members with their report, "Cybersecurity: What the Board of Directors Needs to Ask," available at no charge through the IIA bookstore. The paper was published in conjunction with their jointly sponsored 2014 GRC Conference in West Palm Beach, Fla., a gathering of professionals concerned with governance, risk, controls, and compliance.
While IIA, which has traditionally focused on financial auditing, is the more established organization, the two have teamed up "because cybersecurity and other technology-related risks have taken on such inflated importance that our traditional sweet spot is down to 20% of the total audit plan," IIA president and CEO Richard F. Chambers explained in his opening remarks at the conference.
[It's time to take a more cohesive approach to enterprise security. Read Cybersecurity Demands New Framework.]
The report builds on an IIA survey that found 58% of board members felt they should be actively involved in cybersecurity preparedness. Only 14% said they were actively involved, although 65% said their perception of the risk their organizations faced had increased in the last one to two years. "It is clear from this survey that the board would like to be strategically involved in the cybersecurity initiatives," the report concludes, "but now the question becomes, 'What should the board do?' "
IIA usually talks about three lines of defense for cybersecurity risks, starting with a base level of controls, overseen by a governance structure typically headed by a chief information security officer (CISO), with internal audit as the backstop third line of defense. But cybersecurity and the consequences of failing to adequately secure the organization's systems and data have become so important, the report argues, that the board should act as a fourth line of defense: actively investigating whether those on the lower tiers are doing their jobs.
"If the board is still not convinced, consider this: Proxy adviser Institutional Shareholder Services (ISS) has urged shareholders to overhaul Target's board in the wake of last year's data breach. In a recent report, ISS recommended a vote against seven out of 10 directors 'for failure to provide sufficient risk oversight' as members of the audit and corporate responsibility committees. Cybersecurity is no longer simply another agenda item for IT; it is an agenda item for the board as well," the report says.
In a keynote speech, Robert E. Stroud, VP of strategy and innovation at CA Technologies and ISACA's international president this year, also made the case with a coy reference to last year's breach at the retailer with a big red target in its logo. The credit card and personal data obtained by the attackers, he said, "are a very resalable item on the black market, which is why in cyber you can't take a defensive posture and think of security as just another moat around the castle. You have to take a proactive approach, looking at attackers."
Meanwhile, risk managers need to stay a step ahead of new threats and complications posed by new technologies, from Google Glass and 3D printing to marketing programs that use big data analytics to create new classes of personally identifiable information by correlating web clicks and other consumer actions.
A firm's executive and IT leaders should be addressing those challenges directly, with auditors to check up on them. The board's role is necessarily at a higher level, but members of the board audit committee in particular should be scrutinizing the quality of cybersecurity planning. For example, the board should require that internal auditors perform an annual "health check" of the organization's cybersecurity program. In addition, board members should meet with the CISO at least annually. The board should also be aware of any dependencies on any third-party IT service providers, such as data center operators and cloud services, and the measures taken to ensure they are adequately protecting sensitive data.
IIA and ISACA recommend that boards ask the following six questions:
1. Does the organization use a security framework? Examples include COBIT and regulatory frameworks such as HIPAA in healthcare and PCI-DSS for credit card acceptance.
2. What are the top five cybersecurity risks the organization faces? How is it addressing new challenges like mobile devices, the bring-your-own-device trend, or cloud computing?
3. How are employees made aware of their role related to cybersecurity? Does every employee receive some basic cybersecurity awareness training?
4. Are both external and internal threats considered when planning cybersecurity program activities? Although external incidents tend to receive more media exposure, the report notes, the likelihood of an internal incident causing a major cyber incident is actually greater.
5. How is security governance managed within the organization? The board should understand how the three lines of defense are implemented and make sure there are no gaps between them, such as confusion about the responsibilities of the CISO vs. the auditors.
6. In the event of a serious breach, has management developed a robust response protocol? What incident response and crisis management approaches are in place?
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