Cyber Risk

Cybersecurity by the Numbers

Some corporate boards innovate in cyber risk while some fall behind, according to some new reports.
By: | May 12, 2017 • 4 min read

New reports show how companies can profit from innovative risk strategies and achieve the cyber risk maturity that still eludes most firms.

PwC released its annual Risk in Review report, “Managing risk from the front line” in April. The report highlights companies that shift risk management strategy into their revenue-generating units — and project higher profits as a result.

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The study’s “Front Liners” — companies most adept at moving risk decision-making into their front line units — comprise only 13 percent of a wide sample (almost 1600 executives across 30 industries), with 63 percent agreeing that they should take similar measures and 46 percent actively intending to within 36 months.

These Front Liners, as PwC calls them, tend to predict increased profit margin growth and increased revenue growth. They also recover more quickly from business disruptions.

Front Liners also manage all measured risks more efficiently, including cybersecurity risks — but many of these top scorers unexpectedly lag in overall “cyber risk maturity.”

Only 3 percent of all respondents showed “very high maturity” at managing cyber risks, with only 6 percent more at “high maturity.”

“Every company is on a journey,” Grant Waterfall, PwC’s global cybersecurity and privacy assurance co-leader pointed out.

Beyond heavily regulated, data-centric industries like banking and finance, he said, traditional or manufacturing firms are increasingly becoming tech companies, as they do business online, through mobile apps, or embed tech in their products.

Grant Waterfall, PwC’s global cybersecurity and privacy assurance co-leader

They accumulate —  and need to protect — consumer data (or consumers themselves, vulnerable from the use of hack-prone driverless cars or medical devices). Their own proprietary information and systems are also high-value hacker targets.

In the new Internet of Things marketplace, companies also need to be known as safe to do business with, said Waterfall.  Cybersecurity budgets may become part of the brand conversation.

Cyber risk is top-of-mind across all industries. A full 62 percent of firms surveyed expect a breach in the next three years. In PwC’s 20th Annual Global CEO survey, 85 percent of U.S. CEOs were “somewhat or extremely concerned” about cyber threats to fiscal growth.

Despite this concern, companies remain slow to upgrade or implement security measures.  Observers blame poor communication between corporate directors and security executives.

Yong-Gon Chon, CEO of Focal Point Data Risk LLC, a data security company, points to a “disparity in alignment” between the perspectives of board members and security leaders. Many studies have highlighted each side’s different priorities, he said. Data (and data security) are intangible and invisible.

Their value can be hard to quantify. Corporate directors may be slow to perceive the security measures (and expenditures) needed.

Waterfall, a co-sponsor of the PwC 2017 report, agreed that this is a problem.

“There’s no lack of awareness at board-level that this is a very, very important risk. But there is a disconnect between the people who really understand the issues and the boards’ understanding of the issues,” he said.

Many boardroom visitors note this troubled dynamic.

Dena Cusick, Technology, Privacy and Network Risk Practice Leader at Wells Fargo Insurance Services, consults with security leaders, directors and their committees on risk transfer options.

Boards — and security leaders — routinely ask her team to fill knowledge gaps or help with readiness evaluations when in-house communication falls short. Cusick has reviewed numerous proprietary risk assessments, and often finds little clarity.

“If I don’t know what this means,” she says, “how is the board going to know what this means?”

Focal Point Data Risk LLC, located in Tampa, Fla., and Virginia-based research services firm Cyentia Institute, jointly issued an in-depth analysis of this tension between CISOs, their CIO/CTOs, and their boards.

“There’s no lack of awareness at board-level that this is a very, very important risk. But there is a disconnect between the people who really understand the issues and the boards’ understanding of the issues,” — Grant Waterfall, global cybersecurity and privacy assurance co-leader, PwC

The “Cyber Balance Sheet” 2017 Report acknowledges that stakeholders’ different priorities (and vocabularies) can preclude meaningful dialogue.

This study identifies and explores six “balance points” where communication stalls or breaks down between the CISO and the directors — and provides tools to ignite collaboration.

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“We as an industry have an opportunity to really change how we measure cyber risk,” said Chon. Common ground, including mutually accepted metrics, must come first.

The report introduces the concept of the cyber balance sheet, which enables security leaders to present data and cyber security concepts as traditional assets and liabilities.

Directors can then view these in the same format used for operational or financial risks. They can accept, mitigate, or transfer risk as needed, directly from the balance sheet. Chon insists true risk management includes all three processes.

When directors are fully educated in their own language, he said, progress begins. Security leaders who can get backing for an organizational “stress test,” such as a breach-readiness assessment, or establish the value of their data (including “crown jewels” vs. other data types), have made important strides.

Board members do lose sleep over possible cyber events, said Cusick. They know the risk is out there, and are not afraid to parse options.

“Someone just needs to distill it for them.”

David Whiteside spent 23 years in the insurance industry, and now works as an insurance and financial journalist. He lives and writes from southwestern Utah. David can be reached at davidw@davidwhitesidecopywriting.com

More from Risk & Insurance

More from Risk & Insurance

In the Fast-Paced World of Retail, This Risk Manager Strives to Mitigate Risks Proactively and Keep Senior Leaders Informed

Janine Kral works to identify and mitigate risks, building strong partnerships with leaders and ensuring they see her as support rather than a blocker. 
By: | October 29, 2018 • 4 min read

R&I: What was your first job?

My very first paid job was working on my uncle’s ranch in British Columbia in the summers. He had cattle, horses and grapes — an unusual combo. But my first real job out of college was as a multi-line claims adjuster at Liberty Mutual.

R&I: How did you come to work in risk management?

Right out of college I applied for a job that turned out to be a claims adjuster at Liberty Mutual. I accepted because they were offering six weeks of training in Southern California, and at the time that sounded really fun. I spent about three years at Liberty Mutual and then I spent a short period of time at a smaller regional insurance company that hired me to start a workers’ compensation claims administration program.

I was hired at Nordstrom as the Washington Region Risk Manager, which was my first job in risk management. When I started at Nordstrom, the risk management department had about five people, and over the years it has grown to about 75. I’ve been vice president for 11 years.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I would say that technology has probably been the biggest change. When I started many years ago, it was all paper and no RMIS.

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R&I: What risks does the retail industry face that are unique?

We deal with a lot of people — employees and customers. With physical brick and mortar settings, there are the unique exposures with people moving in and out in a public environment. And of course, with ecommerce, we have a lot of customer and employee data, which creates cyber risk — which is not necessarily a unique risk in today’s environment.

R&I: Can you describe your approach to working with senior leaders and front-line staff alike to further risk management initiatives?

It starts with keeping the pulse of what’s happening with the business. Retail moves really fast. In order to identify and mitigate risks proactively, we identify top risk areas and topics, and then we ensure that we have strong partnerships with the leaders responsible for those areas. Trust is critical, ensuring that leaders see us as a support rather than a blocker.

R&I: What role does technology play in your company’s approach to risk management?

Janine Kral, claims adjuster, Nordstrom

We have an internal risk management information system that all of our locations report events into — every type of incident is reported, whether insured or uninsured. Most of these events are managed internally by risk management, and our guidelines require that prevention be analyzed on each one. Having all event data in one system allows us to use the data for trending and also helps us better predict what may happen in the future, and who we need to work with to mitigate risks.

R&I: What advice might you give to students or other aspiring risk managers?

My son is a sophomore in college, and I tell him and his friends all the time not to rule out insurance as a career opportunity. My advice is to cast a wide net and do your homework. Research all the different types of opportunities. Read a lot — articles, industry magazines, LinkedIn. Be proactive and reach out to people you find interesting and ask them about their careers. Don’t be shy and wait for people and opportunities to come to you. Ask questions. Build networks. Be curious and keep an open mind.

R&I: What are your goals for the next five to 10 years of your career?

I have always been passionate about continuous improvement. I want to continue to find ways to add value to my company and to this industry.

R&I: What is your favorite book or movie?

My favorite book is Shantaram by Gregory David Roberts. It’s a true story about a man who was in prison in Australia after being convicted of armed robbery, and he escaped to India. While in India, he passed himself off as a doctor in a slum. It’s a really interesting story, because this is a convicted criminal who ends up helping others. I am not always successful in getting others to read the book because it’s 1,000 pages and definitely a commitment.

R&I: What’s the best restaurant you’ve ever eaten at?

Fiorella’s in Newton, Massachusetts. Great Italian food and a great overall experience.

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R&I: What is your favorite drink?

“Sister Carol.” I have no idea what is in it, and I can only get it at a local bar in Seattle. It’s green but it’s delicious.

R&I: What is the riskiest activity you ever engaged in?

Skydiving. Not tandem and without any sort of communication from the ground. Scary standing on a wing of a plane, but very peaceful once the chute opened, slowly floating down by myself.

R&I: If the world has a modern hero, who is it and why?

I can’t think of one individual person. For me, the real heroes are people who have a positive attitude in the face of adversity. People who are resilient no matter what life brings them.

R&I: What about this work do you find the most fulfilling or rewarding?

It’s rewarding to help solve problems and help people. I am proud of the support that my team provides others. &




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at kdwyer@lrp.com.