Rise in cyber attacks at US companies

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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 Rockefeller

Senator & 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-disclosures http://www.nytimes.com/2013/05/13/us/cyberattacks-on-rise-against-us-corporations.html?pagewanted=all&_r=0 http://www.bloomberg.com/news/2013-05-14/iran-based-hackers-traced-to-cyber-attack-on-u-s-company.html

techland.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

Financial losses for company

Average cost of $500,000 and 24 days to identify and resolve an attack

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Cyber crime cost companies $300bn - $1trillion total in 2013

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Financial losses for shareholders

~5% drop in share price for public companies

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Brand reputation

Value of brand can decline 17-31%, depending on nature and industry

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Your reputation

Sources:

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2: “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=20101-131

3: 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

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-tobottom 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

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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 s pokespeople

• 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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Cybersecurity Strategic Planning

Checklist

 Detailed, step-by-step Incident Response Plan

 Adequate insurance coverage (consider Cyber policy)

 Legal counsel and other service providers “on speed dial”

 Crisis communication and Litigation strategies

 Government affairs/communications with regulators

 Readiness exercises that simulate an actual attack

 Business continuity planning

 Security audits of key vendors

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Privacy and security guidelines for boards

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

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Technology in the boardroom

In-person at

Time of

Meeting

Courier

Delivery

Unsecure

Email

Cloud

File

Sharing

Services

Mobile App / Secure

PDF Reader Email

Internal PDF-Based

Portal Portal

Secure

Board Portal

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 security

Control access to data

Data encrypted in transit and on all devices

Does not track Director’s electronic footprint

Regular, repeated third-party audits and penetration testing

 Local redundancy, data back-up and recovery

Important vendor requirements

Ensure that privacy and security requirements for vendors are based upon key aspects of your organization's security program

Carefully review internal and vendor notification procedures in the event of breach or security incident

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