Category Archives: Risk Management

How Active Governance Can Advance Proactive Risk Intelligence

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Boards, regulators and leadership teams are demanding more and more of risk, compliance, audit, IT and security teams. They are asking them to collaboratively focus on identifying, analyzing and managing the portfolio of risks that really matter to the business.

As risk management programs evolve to more formal processes aligned with business objectives, leaders are realizing that by developing a proactive mindset in risk and compliance management, teams can provide added value to help the organization gain agility by identifying new opportunities as well as managing down-side risk. Organizations with this new perspective are more successful in orchestrating change to provide a 360-degree view of both risk and opportunity.

Risk teams that are further along on the journey of leveraging proactive approaches to risk management look not only within the organization but beyond to supplier, third party and customer ecosystems. This means developing a view across the larger enterprise infocosm, to ensure alignment of people, processes and technologies.

An essential prerequisite to proactive risk management is a shift from passive to active governance. To build an active governance competence effectively, governance needs to be “active, engaged and embedded,” rather than “passive, reactive and irrelevant.”

Active governance means being thoughtful about alignment and interlocks policy, risk, compliance, quality and operational programs. Proactive risk intelligence throughout the organization can help it advance by aligning policies, procedures, facilitating an enterprise view of issues and orchestrating change to mitigate risk.

Align Policies, Procedures and Roles

Once proactive risk intelligence is understood and embraced as a concept, the next step is to develop agile and consistent policies that truly reflect and produce desired behavior. This means aligning business strategy and appetites with prescribed behavior, which is typically described not only through policies, but also through procedures, and embedded in role descriptions. It is important to make governance traceable in this way. Likewise, it is critical to make sure roles and responsibilities are aligned with policies and procedures so that employees, partners and third parties are empowered to do the right thing.

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Foundational is consistency between policies and procedures in similar roles across geographies, cultures and business units. Some key things you can do to help your organization include:

  • Align Policies to Business Objectives — Ensure responsible management and oversight of resources by aligning policy to business intent. You can do this by mapping policies to risk tolerances and compliance requirements. Be explicit when defining legal and ethical boundaries.
  • Resolve Global/Local Conflicts in Policies and Procedures — Improve active governance by resolving local/global dissonance—often a policy at one level can contradict a similar overlapping policy at another level—it’s important to iron out discrepancies so that people have confidence in the policy and know it stands for something the organization values.
  • Engage the Right Subject Matter Experts for Policy Creation and Review — Policy life-cycle management can really help. Be sure to include alerts and intelligence to ensure policies reflect compliance to new and changing regulations and business obligations. Establish the right roles and responsibilities for creating, editing, reviewing and publishing polices. Automated workflow can help make this seemingly monumental task achievable. Empower the right decision-making processes for governance of policies and allocation of resources.

Gain an Enterprise View of Issues and Remediation

Now that your organization is looking at risks in the context of appetites, tied to policies that reinforce desired behavior, based on a common language, the next step is rapid, complete issue resolution. Mature organizations can provide a portfolio of issues and incidents, facilitating a 360 view.

By looking at all the incidents and issues tied to a risk, process or asset, your team will begin to develop a preventive capability, and be able to ‘right-size’ remediation investments. Key things you can do to help your organization include:

  • Manage issues as a portfolio — Look at issues across all sources, through a common process, across all aspects of the organization. Not only issues arising from audit, risk management and privacy and compliance teams, IT and security, but also extended to research and development, quality, environmental health and safety and human resource groups.
  • Develop a Proactive, preventive capability  — Think in terms of future changes and what issues may arise in risk and compliance management. For example, getting teams involved early in initiatives such as mergers and acquisitions, new product or service launches or expansion into new markets.
  • ‘Right-Size’ remediation investments — Optimize investments in remediation through end-end root cause analysis—when business units look at an issue in isolation, investments can be made that solve the problem locally, but push symptoms to an upstream or downstream process. Looking at issues across, down and through will help build the 360 views that get at the real root cause and appropriate remediation.

Orchestrate Change across Risk Processes

Creating proactive risk intelligence as a competency is in many ways all about orchestrating change. Continuous value creation is demanded of successful organizations in today’s dynamic world. When collaborative risk teams focus on continuous improvement, they will spot opportunities for operational efficiency and savings that can be used to fund innovations. As organizations mature, collaborative teams can be supported by risk and compliance centers of excellence, shared services and innovation labs.

  • Build a community dedicated to the vision of risk intelligence — Bring people and partners on board with a proactive mindset. Make sure continuous improvement fuels and funds innovation across and within core processes of governance, risk, compliance, privacy and security.
  • Continuously innovate — Manage a portfolio of innovation projects to mature centers of excellence, shared services and distinctive risk and compliance competencies. Leverage technologies to accelerate innovation and gain economies of scale.
  • Continuously improve — A formal investment program identifies synergies and funds strategic initiatives, certification and training programs.

The GRC journey is about orchestrating change to gain a competency of risk intelligence. It requires a proactive mindset and anticipation of future problems needs and changes.

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Active governance is the first step in supporting change and building a competency of proactive risk intelligence by planning and thinking ahead at every stage of the risk management process.

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Active governance goes beyond general oversight to ensure alignment and interlock strategy, through policy, procedures and roles in the operational fabric of the organization and carries through to suppliers, customers and third parties. By starting with these core aspects of active governance, you are in your way to creating a competency of proactive risk intelligence in your organization.

How Retailers Can Better Mitigate Black Friday Risks

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Black Friday Shopping Risks

With the biggest shopping events of the season, retailers face tremendous amounts of both risk and reward as sales and door-busters draw in eager consumers all week. In 2013, Thanksgiving deals brought in 92.1 million shoppers to spend over $50 billion in a single weekend, the National Retail Federation reports.

The National Retail Federation issued crowd management guidelines for retailers and mall management officials to use when planning special events, including Black Friday, product launches, celebrity appearances and promotional sales. General considerations to plan for and curtail any crowd control issues include:

  • Remind and retrain all employees about your store’s emergency protocols to address potential risks facing employees and customers.
  • Dedicate knowledgeable employees to communicate and manage crowds, from arrival to departure, and resolve any potential conflicts that may arise.
  • Strategically place sale items throughout the store to help disperse crowds and manage traffic flow.
  • Request the assistance of local law enforcement if large crowds are expected and arrange for additional security services.
  • Educate employees about relevant policies and procedures and advise them who to contact in the event of a situation.

Last week, the U.S. Department of Labor’s Occupational Safety and Health Administration also issued a public letter to retailers urging companies to plan ahead for better in-store safety for both employees and customers. According to OSHA’s “Crowd Management Safety Guidelines for Retailers,” crowd management plans should, at least, include:

  • On-site trained security personnel or police officers
  • Barricades or rope lines for pedestrians that do not start right in front of the store’s entrance
  • The implementation of crowd control measures well in advance of customers arriving at the store
  • Emergency procedures in place to address potential dangers
  • Methods for explaining approach and entrance procedures to the arriving public
  • Not allowing additional customers to enter the store when it reaches its maximum occupancy level
  • Not blocking or locking exit doors

Brick-and-mortar retailers are not the only ones at greater risk. Companies that operate call centers must also be prepared for a drastic increase in customer inquiries and purchases. According to communications intelligence firm Cognia, 69% of U.S. contact centers carry out credit card payments over the phone and 84% record calls, making their archives particularly vulnerable to potential breaches.

“The first thing to highlight with respect to call center compliance at peak times is that this pressure is unlikely to create new issues, but will amplify existing ones. Attackers / threat actors (the bad guys) will also be aware that this is the time at which procedures are most likely to slip, and social engineering vulnerabilities that have previously been identified can be exploited,” said Tom Evans, Cognia’s chief security officer.

“There are challenges but, from a risk perspective, there is also an opportunity to fine-tune the risk management system under pressure. At these peak times, issues will be visible that would go undetected during business as usual operation,” Evans noted. “There is an opportunity to be proactive and to use the pressure around these peak sales times to identify bad practice that, during less pressured periods, is probably limited to one or two individuals or occasional occurrences, and therefore very hard to spot. Even the most dependable employee under the pressure on big queues may resort to a shortcut to get the job done. Identifying these means that controls can be put in place to prevent them being used again, and therefore the overall risk management position improved.”

To improve security and PCI compliance, Evans recommends that companies focus on areas that have lower security controls overall. For example, seasonal employees, over-spill call centers, and work at home agents may all be components of a contingency plan for peak periods that introduce vulnerability that can be mitigated.

Lessons from MBIA: When Breaches Go Viral

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data breach

We can add another breached company to the ever-growing list: the Municipal Bond Insurance Association (MBIA). While not necessarily unique from other breaches we’ve seen lately, the MBIA incident brought another aspect of breach fallout into the public eye, and that’s the potential for data exposures to go viral. These viral breaches generate tendrils of compromised information that reach far and wide, creating a nightmare for containment—and public relations.

Known as the largest bond insurer in the country, MBIA services accounts for many government investment pools. In late September, the company was alerted by an ethical hacker that hundreds of pages of customer data were showing up online for all to see. We’ve since learned that one of the company’s database servers had been improperly configured, resulting in the exposure of highly sensitive data. Account numbers were compromised along with customers’ names, account balances and other confidential information. But the damage didn’t stop there. Not only was MBIA’s customer data floating around the Internet for all to see, it also had been indexed by several search engines. Information that should have been heavily protected was now on the Web in multiple locations, far outside the control of MBIA.

The release of customer data wasn’t the only problem. High-level security keys were also exposed and indexed, including administrative credentials and instructions for creating new deposit accounts. Not only were cybercriminals given a nearly perfect tutorial to dig into additional data held by MBIA that hadn’t been compromised in the first go-round, the instructions also provided a way for thieves to quietly pull funds out of the compromised accounts. The integrity of MBIA’s systems had been damaged far beyond a simple data breach.

Piling on to the organization’s woes were two failures of their own making. One is that their Oracle server is commonly known to need careful configuration to avoid a potential security gap.

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Oracle has even provided documentation to help administrators configure it correctly and ensure the servers are secure. The other was that MBIA was actually notified of the exposure more than a week before the company finally cut off access to the compromised server.

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Not only was the company behind the curve in configuring its critical infrastructure correctly, it then delayed in fixing a problem that was brought to its attention.

In many respects, MBIA’s breach wasn’t all that different from other breaches. Network vulnerabilities are common avenues for hackers, and security warnings have been known to be overlooked. Target’s massive 2013 breach and similar recent exposures back this up.

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Unfortunately for MBIA, these factors all came together in a perfect storm that resulted in a truly viral breach. Sensitive customer data was compromised and unspeakably valuable credentials and account creation instructions were also exposed. The indexing of that information on more than one major search engine spread the leaked data far and wide. Containment and mitigation became exponentially more difficult.

There is some reasonably good news in all of this. At this time, it doesn’t appear any of MBIA’s clients were defrauded as a result of the breach—yet. There are also important lessons we can learn from MBIA’s mistakes. Network assets must be carefully administered, as their security is one of the first lines of defense against criminals. In addition, security warnings—whether they’re provided by ethical hackers, concerned customers or automated intrusion detection systems—must be immediately checked out.

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DDoS Attacks Cost Businesses $40,000 an Hour

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One of the most common weapons in the cybercriminal’s arsenal is the DDoS attack.

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According to the network security experts at Digital Attack Map, “A Distributed Denial of Service (DDoS) attack is an attempt to make an online service unavailable by overwhelming it with traffic from multiple sources. They target a wide variety of important resources, from banks to news websites, and present a major challenge to making sure people can publish and access important information.

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”

While many have heard of these attacks or suffered from the outages they cause, most people do not understand the true business risks these incidents pose. To get a better picture of the threat, Internet security firm Incapsula surveyed 270 firms across the U.S. and Canada about their experiences with DDoS attacks. On average, they found, 49% of DDoS attacks last between 6 and 24 hours.

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“This means that, with an estimated cost of $40,000 per hour, the average DDoS cost can be assessed at about $500,000—with some running significantly higher,” the company reported. “Costs are not limited to the IT group; they also have a large impact on units such as security and risk management, customer service, and sales.”

Check out the infographic below for more of Incapsula’s findings on the actual costs of DDoS attacks: