managing information risk in financial services

Managing Information RiskPutting the ‘I’ back in IT: Creating Tangible Value from the Intangible Asset

Colin LobleyDirector Information Strategy & Risk

Webinar Aims & Structure Aims:

Provide evidence for taking an information risk approach rather than an IT/cyber security approach

Introduce practical concepts and approach to managing information risk

Why Bother with Information? The Information Opportunity Threats and Risks

Managing Information Risk Current Approaches, Weaknesses and Common Barriers Overcoming the barriers: concepts and approaches to managing information

and information risk management: Processes, Systems, Governance and Culture

Manigent & Me

Director of Information Strategy & Risk.

14 years in strategy, programme and risk management; 6 years focused on the cyber threat environment.

2007 – Business Continuity Journal, Vol. 2, Issue 3: Ascertaining the behaviors and factors driving investment in high impact risks.

2008 – Manigent’s CEO created the Risk-Based Performance Management methodology.

Today – Building business resilience and enhancing performance by managing strategy and risk in today’s continuously turbulent, information-centric operating environment.

WHY BOTHER WITH INFORMATION?

The Value of Exploiting Information: FTSE 350 View A potential gain of £44bn gross operating profit per annum across the FTSE

350 from enhanced information exploitation.

Source: The Information Opportunity Report – Cap Gemini

The Value of Exploiting Information: Sector Comparison


The Value of Exploiting Information: Function Comparison


Other functions with >20% of respondents saying it would be a function of greatest potential: Marketing, HR, Logistics & Supply.

Information Risks: Personal Data Breaches per Sector

Source: Cost of a Data Breach Survey 2013, Ponemon Institute

$215 (£129) per capita in financial services (direct). But the indirect impact on financial services is huge – insurance and compensation

claims.

Personal Information Risk: Evolving Legislative Environment

New legislation and regulatory oversight likely to make this worse

Current: Data Protection Act (UK) Information Commissioners Office enforces

Maximum fine of £0.5m To date largely a public sector focus (& Sony - £350k in a £170m+ incident)

FCA also have the ability to fine Zurich - £2.3m in 2010

New EU Data Protection Regulation in 2015 (est.): Fines of 5% turnover? Criminal Prosecution?

Information Risk: Financial Services Case Studies J.P.Morgan International Bank Limited, 2013, £3.1 million – direct fine by the FCA

for systems and controls failings. Highlighted issues: Client files which were not kept up to date A computer based record system that did not allow sufficient information to be retained,

suitability reports that failed to contain relevant client information. A 2 year persistent failing during which “JPMIB’s senior management did not have

sufficient information and oversight tools to identify and address these deficiencies”.

Sesame Limited, 2013, £6m - fine for failings between 2005-2009 during which the: “vast majority” of sales were flawed because of a “mismatch between customers stated

investment objectives and attitude to risk and the product sold” and “the suitability letters provided to customers stated incorrectly that income or capital

growth was guaranteed”

Many others – TJX, Citigroup, Barclays, De-Vere Group, NASDAQ …… and the list goes on.

Information Risk: Evolving Regulation in FS

Emerging Financial Services Regulative oversight (UK) likely to lead to increased frequency and size of fines and stricter reporting.

FCA Risk Outlook 2013: “Increasing reliance on technology without fully understanding the consequent risks and dependencies”

UK’s Financial Policy Committee stated that: “market participants had increasingly highlighted concerns about operational risk, including threats of cyber-attack”. (June 2013) and “the boards of the relevant supervisory bodies to ensure that there was a concrete plan in place to deliver a higher level of protection against cyber-attacks for each institution at the core of the financial system, including banks and infrastructure providers.” (Sept 2013)

Waking Shark II report: “The PRA and FCA will coordinate to ensure dual-regulated firms are fully aware of the regulators’ incident reporting requirements and update frequencies.”

Information Risk: Linked with Conduct Risk

Customer Management was the #1 area businesses felt could be improved through better information exploitation

Root cause of many FCA fines can be identified as poor management and analysis of customer data

Conduct Risk Agenda: To make relevant markets work well so consumers get a fair deal. Consumers get financial services and products that meet their needs, from firms they

can trust; Markets and financial systems are sound, stable and resilient, with transparent pricing

information; and Firms compete effectively, with the interests of their customers and the integrity of the

market at the heart of how they run their business.

The risk of poor information management will lead to bad conduct.

Conclusion: Information Exploitation and Risk

“Early adopters of effective information exploitation strategies are seeing real and tangible business performance

improvements. Those that chose to do nothing have seen the gap between themselves and the market leaders widen.”

There are significant risks to: The information you have driven by the cyber threats Failing to exploit what you have already Not having the right information to exploit Compliance with changing laws and regulation

MANAGING INFORMATION & INFORMATION RISK

The Traditional Approach …..

HACKERS CHINA LOSS OF REPUTATION

IT (CYBER) SECURITYLED BY CISO / IT DIRECTOR

REACH FOR A STANDARD (ISO 27001)

….. Is immature and clearly not working.

Barriers to Exploiting Information


1. PROCESSES (110) 2. SYSTEMS (66) 3. PEOPLE – governance and culture (121)

Barriers to Managing Information Risk

The Survey says ….. Poor alignment between:

Information security strategy and business strategy Information security strategy and risk appetite or tolerance Security policies and business objectives Security spending and business objectives

Budget constraints / Insufficient capital funding A lack of leadership from the CEO or Board A lack of vision on how future business needs will impact security

I say …. PROCESSES: Complete failure of many businesses to articulate, manage and report the value

of information and information risk linking the benefits and risks to business drivers SYSTEMS: Too much focus on IT systems and not enough on information systems – the asset

of real business value PEOPLE: CIO’s focus on technology not information; lack of Board engagement on an “IT

issue”; no ownership of information assets

Source: EYs Global Information Security Survey; PwC Global State of IT Security Survey 2013 and associated PwC blog

ICT

DECISIONS

DATA

KNOWLEDGE

INFORMATION

Information-centric Business Systems & ProcessesICT & more importantly, information, are the key enablers of any modern business.

ACCESS

STORE

ANALYSE

PROCESS

COLLECT / GENERATE

USE

(ACQUIRE)

STRATEGIC

STRATEGIC OBJECTIVES

OPERATIONAL

OPERATIONS

People: Changing the Information Culture

Think of information as an asset of value:

“The value of the server [...] is probably negligible—it can be replaced quickly or its function can be moved to another server—however, the information asset stored on the container is not as easily replicated if compromised, and the impact to the organization is much more extensive.”

“An information asset is a body of information, defined and managed as a single unit so it can be understood, shared, protected and exploited effectively.”

“60% of the senior executives felt that the information within their organisation was being used for retrospective reporting rather than to point a path to the future – a clear sign of failure to use information for competitive advantage”

Source : Information Asset Profiling; James F. Stevens; June 2005, Carnegie Mellon University; The National Archives – Information Asset Factsheet; Harnessing information to enhance business performance, Cap Gemini

Process: Determine Information Value Drivers “An organisations information assets were felt to be unique and therefore impossible to

compare to the information assets of other organisations.” Valuing information is unique to each business, depending on its business drivers.

Source: Harnessing information to enhance business performance, Cap Gemini; Manigent assignments

Other drivers identified by businesses we have worked with include:

- Brand value- Revenue generation- Contribution to UK

National Security- Supplier expectations

ICT

DECISIONS

DATA

KNOWLEDGE

INFORMATION

People: Governance of Business Systems & Processes

ACCESS

STORE

ANALYSE

PROCESS

COLLECT / GENERATE

USE

(ACQUIRE)

STRATEGIC

STRATEGIC OBJECTIVES

OPERATIONAL

OPERATIONSCIO & KIMs

CTO

COO

Main Board & Operating Board / Exco

Risk Systems & Processes

MULTIPLE THREAT VECTORS

MULTIPLE THREAT ACTORS

INSIDER THREAT / INCIDENT

MALICIOUS NON-MALICIOUS

OPERATIONAL DOWNTIME

REPUTATION

REVENUE

EXTERNAL THREAT / INCIDENT

THEFT OR LOSS OF DEVICE OR SYSTEM COMPROMISED

THEFT OR LOSS OF INFORMATION

LOSS OF INFORMATION INTEGRITY UNAVAILABLE ICT

POOR DECISIONS

INFORMATION UNAVAILABLE

People: Changing the risk culture

“Before the risks to an information asset can be assessed, the tangible and intangible value of the asset must be known.”

“The existence of a significant [IT] vulnerability does not mean that an organization is at a significant risk. A vulnerability is only significant if it places a critical asset at risk. This is an important distinction because assets and their value to the organization determine the context for risk rather than the vulnerability itself.”

Risk Appetite

Identify

Assess

Treatment

Mitigation

Monitor & Report

Process: Risk & Risk Appetite

People: Risk Governance

MULTIPLE THREAT VECTORS

MULTIPLE THREAT ACTORS

INSIDER THREAT / INCIDENT

MALICIOUS NON-MALICIOUS

OPERATIONAL DOWNTIME

REPUTATION

REVENUE

EXTERNAL THREAT / INCIDENT

THEFT OR LOSS OF DEVICE OR SYSTEM COMPROMISED

THEFT OR LOSS OF INFORMATION

LOSS OF INFORMATION INTEGRITY UNAVAILABLE ICT

POOR DECISIONS

INFORMATION UNAVAILABLE

Board

CIO, CTO, CISO, Physical Security, Personnel Security / HR

COO

CRO & Risk Managers

Risk-Based Performance Management (RBPM) puts it all together

Performance Management

Risk Management

Strategy Management

Appetite

What are we trying to achieve?

Are we on track?

What is our Risk Appetite?

Are we operating within appetite?

Governance & Communications

Culture

The Risk-Based Performance Management methodology

1. Set Strategy

2. Manage Performance

3. Manage Risk

5.Governance

6.Communications

7.Culture

Shareholder Value Compliance ProfitSustainability Image

4. Appetite AlignmentAppetite Appetite

Business Drivers Our People Exploitable Reserves

Our Environment Our Operation Our Economic

Profit

The Risk-Based Performance Management change process

Define Strategic

Goals

Define Strengths & Weaknesses

Define Business Drivers

Define the Strategy

Define Assets,

Systems & Processes

Define Initiatives

Define Operational

Risks

Define Operational

Controls

Define Indicators

Assess Risks & Controls

Monitor Appetite

Alignment

Define Strategic

Risks

Define Strategic Controls

Define the Business Model

Define Risk Appetite

Align Risk Appetite &

Strategy

Define Strategic

Objectives

Board Executive

Formulation Execution

Summary & Conclusion Enhanced Information Exploitation offers huge opportunities – +27% operating

profit in Financial Services, £44bn across the FTSE 350

Failure to manage the risks to your information and information processes leads to poor decisions, operational downtime and will ultimately have significant financial and reputational impacts

The regulatory environment is changing – act now to future proof your organisation and move beyond compliance to information performance

Managing information risk can help manage conduct risk

To embrace the opportunity and manage the risks we need to enhance our: Processes, Systems, and People

An integrated strategy and risk approach would be beneficial in develop a robust framework and implementing change.

Thank You for Listening! Future Events

Managing Information Risk in FS Workshop. More detail and practical tools and techniques for managing information and its risks

More detail on the threat and additional case studies Detailed discussion on the Information Lifecycle Methods and approaches to identifying information assets and value The use of value profiles to monitor and report on both value and risks / losses Practical hands-on sessions

Date: 16th April Time: 09:00 – 17:00 Location: London Cost: £500 per delegate

Future webinars and workshops Risk Based Performance Management Driving Value from Conduct Risk Integrating Balanced Scorecard and Risk Management Building better indicators

If you want to talk further please get in touch

Colin Lobley | Tel: +44 (0)77 9519 6283 | E: [email protected]

QUESTIONSColin Lobley | Tel: +44 (0)77 9519 6283 | E: [email protected]

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