Risk Insider: Jack Hampton

Cyber Security: Beware of the Blind Spots

By: | February 21, 2016 • 3 min read
John (Jack) Hampton is a Professor of Business at St. Peter’s University and a former Executive Director of the Risk and Insurance Management Society (RIMS). His recent book deals with risk management in higher education: "Culture, Intricacies, and Obsessions in Higher Education — Why Colleges and Universities are Struggling to Deliver the Goods." His website is www.jackhampton.com.

During my time in the military, I was a company commander in charge of trucks that supplied fresh and frozen food to the troops. I lost one of the trucks on a narrow winding road in the mountains in a foreign country when it encountered an oncoming bus filled with innocent civilians.

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The 19-year old driver swerved to avoid a collision and went over a cliff. In the memorial service, I praised the unselfish act even as I mourned the loss.

The driver encountered a point of limited vision on the road. Maybe driving too fast. Maybe not. He did not have the life experience to be wary of blind spots. He needed to use extra care.

  • Sony had only 11 people assigned to its information security team. Eight were executives or managers. Three were information security analysts.

The telecommunications highway is filled with places where incidents can occur. There are many stretches of straight road where we can drive at full throttle in terms of megabits per second. At times we seem only to be concerned with greater speed and efficiency, but what about the blind spots?

A security check on potential authorized users of a system illustrates the problem. Bradley Manning joined the Army in 2007, passed an FBI security check, and was given a high-level security classification.

Apparently, a shortage of intelligence analysts caused senior officers to ignore signs of psychological instability. The Army gave him access to top secret communications systems and data.

Access to a system should be based on “need to know,” not “need to assist others with clerical tasks.”

Perhaps the most egregious blind spot example involves Sony Corp. The narrative starts in 2011 when George Hotz, nickname Geohot, objected to the fact that Sony did not allow individuals to create their own games on Sony PlayStation.

He cracked the PlayStation codes and shared his findings. Sony sued him and was in turn attacked by the Anonymous hacktivists group. We think that Sony suffered a loss that exceeded $2 billion.

What is the lesson learned? Do not invite angry outsiders to your table.

In 2014, the company announced plans to release a movie depicting the assassination of the North Korean leader, Kim Jong-un. Sony was aware of the anger of a nation with extensive capability to hack sophisticated computer systems.

Three weeks prior to the movie launch, Sony IT personnel met with representatives of a “threat-intelligence” firm to discuss safeguards for its system. Fortune magazine documented Sony’s behavior, which is quite horrible and will not be related here.

A few highlights:

  • In 2007 the top information security officer at Sony Pictures said it was a “valid business decision to accept the risk of a security breach” and Sony would not invest “$10 million to avoid a possible $1 million loss.”
  • Sony had only 11 people assigned to its information security team. Eight were executives or managers. Three were information security analysts.
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For years, senior executives failed to realize the exposure and repeatedly declined to take greater precautions. The company proceeded full speed ahead somewhat oblivious to the blind spots that warn of impending disaster. From all indications, we cannot isolate Sony with this problem.

We need to change our behavior even as we rebuild the information highway.

New Jersey did it in the 1950s with Route 22. This busy stretch of road was the site of numerous head-on collisions. A “Jersey barrier, a low concrete wall dividing two-way traffic, was developed at the Stevens Institute of Technology. The federal government and most states use it today to save lives.

When will we create a successor to the winding and narrow two-lane information thoroughfare that we call the Internet? Until we do, we must pay far more attention to the blind spots.

More from Risk & Insurance

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The Profession

For This Pharmaceutical Risk Director, Managing Risk Means Being Part of the Mission to Save Lives

Meet Eric Dobkin, director, insurance and risk management, for Merck & Co. Inc.
By: | September 28, 2018 • 5 min read

R&I: What was your first job?
My first job out of undergrad was as an actuarial trainee at Chubb.I was a math major in school, and I think the options for a math major coming out are either a teacher or an actuary, right? Anyway, I was really happy when the opportunity at Chubb presented itself. Fantastic company. I learned a lot there.

R&I: How did you come to work in risk management?
After I went back to get my MBA, I decided I wanted to work in corporate finance. When I was interviewing, one of the opportunities was with Merck. I really liked their mission, and things worked out. Given my background, they thought a good starting job would be in Merck’s risk management group. I started there, rotated through other areas within Merck finance but ultimately came back to the Insurance & Risk Management group. I guess I’m just one of those people who enjoy this type of work.

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R&I: What is risk management doing right?
I think the community is doing a good job of promoting education, sharing ideas and advancing knowledge. Opportunities like this help make us all better business partners. We can take these ideas and translate them into actionable solutions to help our companies.

R&I: What could the risk management community be doing a better job of?
I think we have made good advancements in articulating the value proposition of investing in risk management, but much more can be done. Sometimes there is such a focus on delivering immediate value, such as cost savings, that risk management does not get appropriate attention (until something happens). We need to develop better tools that can reinforce that risk management is value-creating and good for operational efficiency, customers and shareholders.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?
I’d actually say there hasn’t been as much change as I would have hoped. I think the industry speaks about innovation more often than it does it. To be fair, at Merck we do have key partners that are innovators, but some in the industry are less enthusiastic to consider new approaches. I think there is a real need to find new and relevant solutions for large, complex risks.

R&I: What emerging commercial risk most concerns you?
Cyber risk. While it’s not emerging anymore, it’s evolving, dynamic and deserves the attention it gets. Merck was an early adopter of risk transfer solutions for cyber risk, and we continue to see insurance as an important component of the overall cyber risk management framework. From my perspective, this risk, more than any other, demands continuous forward-thinking to ensure we evolve solutions.

R&I: What’s the biggest challenge you’ve faced in your career?
Sticking with the cyber theme, I’d say navigating through a cyber incident is right up there. In June 2017, Merck experienced a network cyber attack that led to a disruption of its worldwide operations, including manufacturing, research and sales. It was a very challenging environment. And managing the insurance claim that resulted has been extremely complex. But at the same time, I have learned a tremendous amount in terms of how to think about the risk, enterprise resiliency and how to manage through a cyber incident.

R&I: What advice might you give to students or other aspiring risk managers?
Have strong intellectual curiosity. Always be willing to listen and learn. Ask “why?” We deal with a lot of ambiguity in our business, and the more you seek to understand, the better you will be able to apply those learnings toward developing solutions that meet the evolving risk landscape and needs of the business.

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R&I: What role does technology play in your company’s approach to risk management?
We’re continuing to look for ways to apply technology. For example, being able to extract and leverage data that resides in our systems to evaluate risk, drive efficiencies and make things like property-value reporting easier. We’re also looking to utilize data visualization tools to help gain insights into our risks.

R&I: What are your goals for the next five to 10 years of your career?
I think, at this time, I would like to continue to learn and grow in the type of work I do and broaden my scope of responsibilities. There are many opportunities to deliver value. I want to continue to focus on becoming a stronger business partner and help enable growth.

R&I: What is your favorite book or movie?
I’d say right now Star Wars is top on my list. It has been magical re-watching and re-living the series I watched as a kid through the eyes of my children.

R&I: What is the riskiest activity you ever engaged in? When I was about 15, I went to a New York Rangers versus Philadelphia Flyers game at the Philadelphia Spectrum. I wore my Rangers jersey. I would not do that again.

Eric Dobkin, director, insurance & risk management, Merck & Co. Inc

R&I: What is it about this work you find most fulfilling or rewarding?
I am passionate about Merck’s mission of saving and improving lives. “Inventing for Life” is Merck’s tagline. It’s funny, but most people don’t associate “inventing” with medicine. But Merck has been inventing medicines and vaccines for many of the world’s most challenging diseases for a long time. It’s amazing to think the products we make can help people fight terrible diseases like cancer. Whatever little bit I can do to help advance that mission is very fulfilling and rewarding.

R&I: What do your friends and family think you do?
Ha! My kids think I make medicine. I guess they think that because I work for Merck. I suppose if even in a small way I can contribute to Merck’s mission of saving and improving lives, I am good with that. &




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]