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.

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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.”

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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: Entertainment

On With the Show

Entertainment companies are attractive and vulnerable targets for cyber criminals.
By: | December 14, 2017 • 7 min read

Recent hacks on the likes of Sony, HBO and Netflix highlight the vulnerability entertainment companies have to cyber attack. The threat can take many forms, from the destruction or early release of stolen content to the sabotage of broadcast, production or streaming feeds.

Brian Taliaferro, entertainment and hospitality specialist, JLT Specialty USA

“Cyber attacks are becoming the biggest emerging threat for entertainment companies, bringing risk to reputations, bottom lines and the product itself,” said Brian Taliaferro, entertainment and hospitality specialist, JLT Specialty USA.

For most entertainment firms, intellectual property (IP) is the crown jewel that must be protected at all costs, though risk profiles vary by sub-sector. Maintaining an uninterrupted service may be the biggest single concern for live broadcasters and online streaming providers, for example.

In the case of Sony, North Korea was allegedly behind the leak of stolen private information in 2014 in response to a film casting leader Kim Jong Un in what it considered an unfavorable light.

This year, Netflix and HBO both faced pre-broadcast leaks of popular TV series, and Netflix last year also had its systems interrupted by a hack.

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Online video game platforms are also ripe for attack, with Steam admitting that 77,000 of its gamer accounts are hacked every month.

The list goes on and will only get more extensive over time.

Regardless of the platform, any cyber attack that prevents companies from producing or distributing content as planned can have huge financial implications, particularly when it comes to major releases and marquee content, which can make or break a financial year.

“People and culture are the biggest challenges but also the keys to success.” — David Legassick, head of life science, technology and cyber, CNA Hardy

The bottom line, said David Legassick, head of life science, technology and cyber, CNA Hardy, is that these firms have a combination of both assets and business models that are inherently open to attack.

“Vulnerabilities exist at every point in the supply chain because it’s all tech-dependent,” he said, adding that projects often run on public schedules, allowing criminals to time their attacks to maximize impact.

“The combination of IP, revenue and reputation risk make entertainment a hot sector for cyber criminals.”

Touch Point Vulnerabilities

Film, TV, literary and music projects invariably involve numerous collaborators and third-party vendors at every stage, from development to distribution. This creates multiple touchpoints through which hackers could gain access to materials or systems.

According to Kyle Bryant, regional cyber manager, Europe, for Chubb, there is nothing unique about the type of attack media companies suffer — usually non-targeted ransomware attacks with a demand built in.

“However, once inside, the hackers often have a goldmine to exploit,” he said.

He added targeted attacks can be more damaging, however. Some sophisticated types of ransomware attack, for example, are tailored to detect certain file types to extract or destroy.

“NotPetya was designed to be non-recoverable. For a media company, it could be critical if intellectual property is destroyed.”

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As entertainment companies have large consumer bases, they are also attractive targets for ideological attackers wishing to spread messages by hijacking websites and other media, he added.

They also have vast quantities of personal information on cast and crew, including celebrities, which may also have monetary value for hackers.

“It is essential to identify the most critical information assets and then put a value on them. After that, it is all about putting protection in place that matches the level of concern,” Bryant advised.

As with any cyber risk, humans are almost always the biggest point of vulnerability, so training staff to identify risks such as suspicious messages and phishing scams, as well as security and crisis response protocols, is essential. Sources also agree it is vital for entertainment companies to give responsibility for cyber security to a C-suite executive.

“People and culture are the biggest challenges but also the keys to success,” said Legassick.

“Managing the cyber threat is not a job that can just be left to the IT team. It must come from the top and pervade every aspect of how a company works.”

David Legassick, head of life science, technology and cyber, CNA Hardy

Joe DePaul, head of cyber, North America, Willis Towers Watson, suggested entertainment companies adopt a “holistic, integrated approach to cyber risk management,” which includes clearly defining processes and conducting background checks on the cyber security of any third party that touches the IP.

This includes establishing that the third parties understand the importance of the media they are handling and have appropriate physical and non-physical security at least equal to the IP owner in place. These requirements should also be written into contracts with vendors, he added.

“The touchpoints in creating content used to be much more open and collaborative, but following the events of the last few years, entertainment firms have rapidly introduced cyber and physical security to create a more secure environment,” said Ryan Griffin, cyber specialist, JLT Specialty USA.

“These companies are dealing with all the issues large data aggregators have dealt with for years. Some use secure third-party vendors, while others build their own infrastructure. Those who do business securely and avoid leaks can gain an advantage over their competitors.”

Quantification Elusive

If IP is leaked or destroyed, there is little that can be done to reverse the damage. Insurance can cushion the financial blow, though full recovery is very difficult to achieve in the entertainment space, as quantifying the financial impact is so speculative.

As Bill Boeck, insurance and claims counsel, Lockton, pointed out, there are only “a handful of underwriters in the world that would even consider writing this risk,” and sources agreed that even entertainment firms themselves struggle to put a monetary value on this type of exposure.

“The actual value of the IP taken isn’t generally going to be covered unless you have negotiated a bespoke policy,” said Boeck.

“If you’re in season five of a series with a track record and associated income stream, that is much easier, but putting a value on a new script, series or novel is difficult.”

Companies for whom live feeds or streaming are the primary source of revenue may find it easier to recoup losses. Determining the cost of a hack of that sort of service is a more easily quantifiable business interruption loss based on minutes, hours, ad dollars and subscription fees.

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Brokers and insurers agree that while the cyber insurance market has not to date developed specific entertainment products, underwriters are open for negotiation when it comes to covering IP. The ball is therefore in the insured’s court to bring the most accurate projections to the table.

“Clients can get out of the insurance market what they bring to the equation. If you identify your concerns and what you want to get from insurance, the market will respond,” said Bryant.And according to Griffin, entertainment companies are working with their brokers to improve forecasts for the impact of interruptions and IP hacks and to proactively agree to terms with underwriters in advance.

However, Legassick noted that many entertainment firms still add cyber extensions to their standard property policies to cover non-physical damage business interruption, and many may not have the extent of coverage they need.

Crisis Response

Having a well-planned and practiced crisis response plan is critical to minimizing financial and reputational costs. This should involve the input of experienced, specialist third parties, as well as numerous internal departments.

Ryan Griffin, cyber specialist, JLT Specialty USA

“The more business operation leaders can get involved the better,” said Griffin.

Given the entertainment industry’s highly public nature, “it is critically important that the victim of a hack brings in a PR firm to communicate statements both outside and within the organization,” said Boeck, while DePaul added that given that most cyber attacks are not detected for 200-plus days, bringing in a forensic investigator to determine what happened is also essential.

Indeed, said Griffin, knowing who perpetrated the attack could help bring the event to a swifter and cheaper conclusion.

“Is it a nation state upset about the way it’s been portrayed or criminals after a quick buck? Understanding your enemy’s motivation is important in mitigating the damage.”

Some hackers, he noted, have in the past lived up to their word and released encryption keys to unlock stolen data if ransoms are paid. Inevitably, entertainment firms won’t always get so lucky.

Given the potentially catastrophic stakes, it is little surprise these firms are now waking up to the need for robust crisis plans and Fort Knox-level security for valuable projects going forward. &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]