Rise in cyber attacks at US companies

“This threat to our country’s economic and national security, and to companies’ bottom line, is real and it is growing.”Jay RockefellerSenator & Commerce Committee Chairman in letter to Chairman of SEC April 9, 2013

Sources: http://thehill.com/blogs/hillicon-valley/technology/292919-rockefeller-asks-sec-to-step-up-cybersecurity-disclosureshttp://www.nytimes.com/2013/05/13/us/cyberattacks-on-rise-against-us-corporations.html?pagewanted=all&_r=0http://www.bloomberg.com/news/2013-05-14/iran-based-hackers-traced-to-cyber-attack-on-u-s-company.htmltechland.time.com/2013/09/26/major-u-s-data-providers-hit-by-cyber-attacks/http://www.npr.org/blogs/alltechconsidered/2013/08/30/217296301/firms-brace-for-possible-retaliatory-cyberattacks-from-syria

Magnitude of the Threat

• Cybercrimes are widespread, systemic and insidious• Annual cost is approximately $100 billion per year • Double-digit year-over-year growth in incidents• 90% of U.S. companies surveyed had detected

computer security breaches* • 74% acknowledged financial losses as a result

*Source: 2011 Computer Security Institute survey

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Verizon 2014 Data Breach Investigations Report (April 23, 2014)• Nearly 200

breaches of payment systems used by retailers, hotels and restaurants

• Cyber education and “hygiene” critical in protecting payment systems

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Business Consequences

• Harm to business, “franchise” risk, company valuation, stock price, etc.

• Long-term financial and business damage • Theft of valuable intellectual property and business

plans• Theft of customer data and funds• Disruption of critical operations and corporate web

sites • Headline and reputational harm

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Potential costs

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Financial losses for company Average cost of $500,000 and 24 days to identify and resolve an attack1

Cyber crime cost companies $300bn - $1trillion total in 20131

Financial losses for shareholders ~5% drop in share price for public companies2

Brand reputation Value of brand can decline 17-31%, depending on nature and industry3

Your reputation

Sources: 1: 2013 Cost of Cyber Crime Study: United States, Ponemon Institute, October 2013, http://www.hpenterprisesecurity.com/ponemon-2013-cost-of-cyber-crime-study-reports2: “Anatomy of data breaches and their impact on market value,” Electronic International Interdisciplinary Conference 2012 http://www.eiic.cz/archive/?vid=1&aid=2&kid=20101-1313: Poneman Institute, Reputation Impact of Data Breach, October 2011 http://www.scmagazine.com/breaches-lead-to-major-reputation-brand-damage/article/215595/

Legal Consequences

• Governmental investigations and sanctions (SEC, DOJ, State Attorneys General, FTC, etc.)

• Consumer litigation• Class action lawsuits• Shareholder derivative demands• Special Board/Litigation Committees and potential

claims against the corporation

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Push for government regulation

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Cyber Intelligence Sharing & Protection Act To provide for the sharing of certain cyber threat intelligence and cyber

threat information between the intelligence community and cybersecurity entities, and for other purposes.

Passed House of Representatives in April; Senate will not vote but is drafting competing legislation

White House Executive Order – Improving Critical Infrastructure Cybersecurity (February 12, 2013) Establish top-to-bottom review of federal government’s efforts to defend

our nation’s information and infrastructure In conjunction, SEC Division of Corporation Finance issued guidance

instructing companies to disclose cyber attacks or risks associated with breaches if such attacks or breaches are likely to be material to investors

Proactive Response Plan

• Detailed, step-by-step Incident Response Plan• Analysis of insurance policies to determine coverage• Legal counsel and key service providers “on speed dial” • Crisis communication strategy and trained spokespeople• Government affairs/communications with regulators• Readiness exercises that simulate an actual attack• Business continuity planning• Security audits of key vendors• Litigation and regulatory preparedness

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Detailed, step-by-step Incident Response PlanAdequate insurance coverage (consider Cyber policy)Legal counsel and other service providers “on speed dial” Crisis communication and Litigation strategiesGovernment affairs/communications with regulatorsReadiness exercises that simulate an actual attackBusiness continuity planningSecurity audits of key vendors

Cybersecurity Strategic Planning Checklist

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Privacy and security guidelines for boards

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Establish ‘tone from the top’ through top-level

policies

Review roles and responsibilities; ensure

risk/accountability shared throughout organization

Ensure regular information flows to executives and board, including cyber incidents and breaches

Review annual IT budgets for privacy and security,

separate from CIO’s budget

Conduct annual reviews of enterprise security

program, review findings, ensure gaps and

deficiencies are addressed

Evaluate adequacy of security around board

materials and communication

Source: Governance of Enterprise Security: How Boards & Senior Executives are Managing Cyber Risks, CyLab 2012 Report – Carnegie Mellon University

Technology in the boardroom

In-person at Time of Meeting

Courier Delivery

Unsecure Email

Mobile App /

PDF Reader

Secure Email

Internal Portal

Secure Board Portal

PDF-BasedPortal

Cloud File

Sharing Service

s

Key concerns Privacy Limited administrator control Hacking and other security

vulnerabilities Purchase of additional secure

container technology

Board portal technology brings a new standard of cyber securityControl access to dataData encrypted in transit and on all devicesDoes not track Director’s electronic footprintRegular, repeated third-party audits and penetration testingLocal redundancy, data back-up and recovery

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Ensure that privacy and security requirements for vendors are based upon key aspects of your organization's security programCarefully review internal and vendor notification procedures in the event of breach or security incident

Important vendor requirements