Public Sector Risk

Public Sector Upgrading Cyber Security

States have launched initiatives ranging from cyber academies and public-private partnerships to dashboards, and cyber preparedness and response plans.
By: | October 28, 2016 • 5 min read

Public sector risk managers and experts alike say much more needs to be done about cyber security to translate awareness into concrete actions that protect sensitive data.


Only one-third (29 percent) of IT managers in state governments provide their governors with monthly reports on cyber security, compared with only 17 percent in 2014, according to a joint report from Deloitte and the National Association of State Chief Information Officers (NASCIO).

That level of communication has not yet extended to state legislatures, according to the study, “State Governments at Risk: Turning Strategy and Awareness into Progress,” which surveyed 96 state business and elected officials.

Nearly one-third of respondents said they “never communicate” with their legislatures, unchanged from 2014 — which is “an important consideration, given the legislature’s role in appropriating funds,” according to the report.

Still, many states are starting to act and make progress in areas visible to governors.

More than half (54 percent) of respondents said they have implemented at least some of the cyber security recommendations by the National Governors Association, compared with only one-third (33 percent) in 2014.

Mark Raymond, chief information officer, State of Connecticut

Mark Raymond, chief information officer, State of Connecticut

Governors in a number of states have launched initiatives ranging from state cyber academies and public-private partnerships to dashboards, and preparedness and response plans.

The 2016 survey results are the first time there is “some significant traction around the issue,” said Mark Raymond, chief information officer for the State of Connecticut and president of the National Association of State Chief Information Officers based in Lexington, Ken.

“It’s not just about the increased risk and threat, but there are states that are making positive progress in articulating a strategy to increase awareness around what they are doing to reduce the risk,” Raymond said.

Public entities need to take a hard look at all of their computer technology — both hardware and software — and question the totality of access and whether each individual’s access is necessary and appropriate, said Marilyn Rivers, risk manager for the city of Saratoga Springs, N.Y.

“Risk managers need to take a trip to their server rooms and examine the security and access,” Rivers said. “Ask about password control and the regular backup of the information that flows throughout their organizations on an hourly and daily basis.

“Ask how your organization protects itself from all the hand-held mobile devices your employees use or the laptops taken home for work projects,” she said.

She said public sector risk managers should have a plan for what would happen if information stops flowing throughout the organization. Do you have a backup separate from the live system? Can your government recreate itself if held hostage?

Rivers also said public sector risk managers should examine access to websites, including which websites are visited by employees and what tracking cookies are involved.

“Every public entity is facing an urgent cyber crisis that is dynamic and in constant change,” Rivers said. “It is vitally important to all of us as we govern collectively to identify our network access and vulnerabilities and invest in technology and people to assist us in managing this global risk frontier.”

Barry Scott, deputy director of finance and risk manager, City of Philadelphia

Barry Scott, deputy director of finance and risk manager, City of Philadelphia

It is also important for public sector risk managers to invest in a comprehensive insurance program that assists in mitigating and managing the cost of the risks their governmental entity faces, she said.

Barry Scott, deputy director of finance and risk manager for the City of Philadelphia, said that it’s critical that his team strives “to ensure that every city department bears the responsibility for managing information correctly.”

“The first layer is trying to make sure that people are smart in how they manage the information we have about residents and businesses in the city, and storing the information in the proper format,” Scott said. “That helps work with the IT layer, so that appropriate security can be placed to protect that information.”

The public sector also faces a somewhat unique set of challenges — in order to add more resources to the organization’s capabilities, the tax base needs to be engaged, he said.

“Our citizens need to be aware that the services they seek, namely, the ease of access to their information that automated systems bring, have some issues in terms of security and protection — and those services have a cost which we as citizens have to bear,” Scott said.

“One of our biggest challenges as a public entity with finite resources is getting the best value in our resources — and in an increasingly digital world, cyber security is a priority.”


Raymond of NASCIO recommended that IT professionals and risk management departments in the public sector measure where their organizations are on the “cyber risk scale,” what kind of data they have and how they are protecting it.

“You can’t improve the things that are you are not measuring,” Raymond said. “Once you understand the value of that data, you need to determine what controls are needed to be put in place to protect the data.”

Then IT and risk management need to articulate their strategies to the executive management team in a way that enables them to understand both the threat and the efforts around it in a concise manner, he said.

Once executive management clearly understands what can be done about cyber security risks, they can appropriately prioritize resources to reduce exposure.

“States not only have to mitigate for financial risk of data loss or theft from state accounts, but also for the loss of data containing people’s personal information from many sources like birth and death certificates,” Raymond said.

Kristin Judge, director of special projects, National Cyber security Alliance

Kristin Judge, director of special projects, National Cyber security Alliance

“State governments also need to be aware of how cyber attacks can result in lost productivity, lost trust of government, and increased risk of bad decisions — such as a cyber criminals directing the state to let someone out of jail who isn’t supposed to be, or putting someone in jail that’s not supposed to be there.”

Kristin Judge, director of special projects at the National Cyber Security Alliance in Washington, D.C., said her group stresses to public sector risk managers that they must communicate that their entire governmental organization has responsibility for cyber security, and that all workers must be part of the solution.

“We want people to create a culture of cyber security, and just as they have fire drills, they should also have cyber security drills like checking the quality of backups and the process for restoring data, for example,” Judge said.

“It’s also very important to have training, as 90 percent of attacks do not come from sophisticated code meant to break through IT security systems, but rather from employees just clicking on phishing emails — so 90 percent of attacks can be stopped by trained staff.”

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Report: Marine

Crewless Ships Raise Questions

Is a remote operator legally a master? New technology confounds old terms.
By: | March 5, 2018 • 6 min read

For many developers, the accelerating development of remote-controlled and autonomous ships represents what could be the dawn of a new era. For underwriters and brokers, however, such vessels could represent the end of thousands of years of maritime law and risk management.

Rod Johnson, director of marine risk management, RSA Global Risk

While crewless vessels have yet to breach commercial service, there are active testing programs. Most brokers and underwriters expect small-scale commercial operations to be feasible in a few years, but that outlook only considers technical feasibility. How such operations will be insured remains unclear.

“I have been giving this a great deal of thought, this sits on my desk every day,” said Rod Johnson, director of marine risk management, RSA Global Risk, a major UK underwriter. Johnson sits on the loss-prevention committee of the International Union of Maritime Insurers.

“The agreed uncertainty that underpins marine insurance is falling away, but we are pretending that it isn’t. The contractual framework is being made less relevant all the time.”

Defining Autonomous Vessels

Two types of crewless vessels are being contemplated. First up is a drone with no one on board but actively controlled by a human at a remote command post on land or even on another vessel.

While some debate whether the controllers of drone aircrafts are pilots or operators, the very real question yet to be addressed is if a vessel controller is legally a “master” under maritime law.


The other type of crewless vessel would be completely autonomous, with the onboard systems making decisions about navigation, weather and operations.

Advocates tout the benefits of larger cargo capacity without crew spaces, including radically different hull designs without decks people can walk on. Doubters note a crew can fix things at sea while a ship cannot.

Rolls-Royce is one of the major proponents and designers. The company tested a remote-controlled tug in Copenhagen in June 2017.

“We think the initial early adopters will be vessels operating on fixed routes within coastal waters under the jurisdiction of flag states,” the company said.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.”

Once autonomous ships are a reality, “the entire current legal framework for maritime law and insurance is done,” said Johnson. “The master has not been replaced; he is just gone. Commodity ships (bulk carriers) would be most amenable to that technology. I’m not overly bothered by fully automated ships, but I am extremely bothered by heavily automated ones.”

He cited two risks specifically: hacking and fire.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.” — Rolls-Royce Holdings study

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty, asked an even more existential question: “From an insurance standpoint, are we even still talking about a vessel as it is under law? Starting with the legal framework, the duty of a flag state is ‘manning of ships.’ What about the duty to render assistance? There cannot be insurance coverage of an illegal contract.”

Several sources noted that the technological development of crewless ships, while impressive, seems to be a solution in search of a problem. There is no known need in the market; no shippers, operators, owners or mariners advocate that crewless ships will solve their problems.

Kinsey takes umbrage at the suggestion that promotional material on crewless vessels cherry picks his company’s data, which found 75 percent to 90 percent of marine losses are caused by human error.


“Removing the humans from the vessels does not eliminate the human error. It just moves the human error from the helm to the coder. The reports on development by the companies with a vested interest [in crewless vessels] tend to read a lot like advertisements. The pressure for this is not coming from the end users.”

To be sure, Kinsey is a proponent of automation and technology when applied prudently, believing automation can make strides in areas of the supply chains. Much of the talk about automation is trying to bury the serious shortage of qualified crews. It also overshadows the very real potential for blockchain technology to overhaul the backend of marine insurance.

As a marine surveyor, Kinsey said he can go down to the wharf, inspect cranes, vessels and securements, and supervise loading and unloading — but he can’t inspect computer code or cyber security.

New Times, New Risks

In all fairness, insurance language has changed since the 17th century, especially as technology races ahead in the 21st.

“If you read any hull form, it’s practically Shakespearean,” said Stephen J. Harris, senior vice president of marine protection UK, Marsh. “The language is no longer fit for purpose. Our concern specifically to this topic is that the antiquated language talks about crew being on board. If they are not on board, do they still legally count as crew?”

Harris further questioned, “Under hull insurance, and provided that the ship owner has acted diligently, cover is extended to negligence of the master or crew. Does that still apply if the captain is not on board but sitting at a desk in an office?”

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty

Several sources noted that a few international organizations, notably the Comite Maritime International and the International Maritime Organization, “have been very active in asking the legal profession around the world about their thoughts. The interpretations vary greatly. The legal complications of crewless vessels are actually more complicated than the technology.”

For example, if the operational, insurance and regulatory entities in two countries agree on the voyage of a crewless vessel across the ocean, a mishap or storm could drive the vessel into port or on shore of a third country that does not recognize those agreements.

“What worries insurers is legal uncertainty,” said Harris.

“If an operator did everything fine but a system went down, then most likely the designer would be responsible. But even if a designer explicitly accepted responsibility, what matters would be the flag state’s law in international waters and the local state’s law in territorial waters.


“We see the way ahead for this technology as local and short-sea operations. The law has to catch up with the technology, and it is showing no signs of doing so.”

Thomas M. Boudreau, head of specialty insurance, The Hartford, suggested that remote ferry operations could be the most appropriate use: “They travel fixed routes, all within one country’s waters.”

There could also be environmental and operational benefits from using battery power rather than conventional fuels.

“In terms of underwriting, the burden would shift to the manufacturer and designer of the operating systems,” Boudreau added.

It may just be, he suggested, that crewless ships are merely replacing old risks with new ones. Crews can deal with small repairs, fires or leaks at sea, but small conditions such as those can go unchecked and endanger the whole ship and cargo.

“The cyber risk is also concerning. The vessel may be safe from physical piracy, but what about hacking?” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]