Cybersecurity by the Numbers
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.
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.
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.
“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.”