Cyber Risks

Preparing a Data Breach Plan

Putting together -- and practicing -- a data breach preparedness agreement can help save costs and reputation.
By: | August 19, 2014 • 5 min read

With the constant threat of cyber security issues, organizations need to create an effective data breach preparedness agreement that has two overriding strategies.

First, establish a comprehensive, coordinated team approach. Having a breach preparedness team can help an organization act quickly when a data breach occurs.

Michael Bruemmer, vice president, Experian Data Breach Resolution

Michael Bruemmer, vice president, Experian Data Breach Resolution

“Acting quickly can help to prevent further data loss, significant fines and costly customer backlash,” said Michael Bruemmer, Austin, Texas-based vice president of Experian Data Breach Resolution, a data breach resolution firm, which is part of the Experian credit bureau.

Second, select an outside counsel as the team leader, he and others recommended.

“Eighty-five percent of the clients we work with have engaged outside counsel because they have the specific expertise in responding to data breaches,” Bruemmer said. “They understand the federal laws; they understand the 47 state laws for notification.”

Another reason to engage outside counsel is to create confidentiality under an attorney-client privilege for the fact-gathering, documentation and communications that occur after a breach, said Daren Orzechowski, New York-based partner at White & Case LLP international law firm.

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“The reason that is important — particularly in a situation where a class-action may arise in response to an actual breach, or a governmental investigation — is that the conversation between the outside counsel and the rest of the team can be protected by privilege,” Orzechowski said.

The C-suite should be involved in creating and overseeing a company’s pre-breach agreement, said Bo Holland, founder and CEO of AllClear ID, an Austin, Texas-based data breach response organization.

“Given the high stakes and challenging decisions a breach response calls for, it is imperative to have active engagement from the CEO and other C-level executives to drive a comprehensive response plan across business units from the start,” Holland said.

And, said Bruemmer , when you have a CEO or a chairman second-guessing decisions during a live response event, it always creates problems for the team that’s operationalizing the response.

Costly Mistakes

The stakes in creating effective data-breach preparedness plans are growing higher by the year.

Throughout the world, companies are finding that data breaches have become as common as a cold, but far more expensive to treat, according to the Ponemon Institute in its May 2014 “Cost of Data Breach Study: Global Analysis,” sponsored by IBM.

“Mistakes increase direct response costs, lost sales and significantly inflate the legal and regulatory expenses that follow a poorly executed response.” –Bo Holland, founder and CEO of AllClear ID

The study revealed that the average cost to a company per breach was $3.5 million dollars, which was 15 percent more than the previous year.

Bo Holland, founder and CEO, AllClear ID

Bo Holland, founder and CEO, AllClear ID

Unprepared companies make mistakes that increase breach costs by a factor of three to four times, said Holland.

“Mistakes increase direct response costs, lost sales and significantly inflate the legal and regulatory expenses that follow a poorly executed response,” he said.

“We’ve seen companies with the best intentions make costly mistakes in the first 72 hours of a breach response due to lack of planning and not calling the right partners early enough for help, resulting in uncoordinated decision-making, confusion and higher costs,” he said.

A Team Approach

“There are a lot of components in a pre-breach agreement and given the complexity of what a cyber security event could cover, it’s not just one person or one department that should be involved,” said Bruemmer.

“You have to have executive oversight, the C-suite, IT, HR, the chief information officer, PR, legal compliance, just to name a few that need to be involved and have input not only to the agreement itself but also the plan and the execution of the plan because each has an important role,” he said.

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Organizations should also work with data breach partners that have relationships on Capitol Hill to help communicate with and manage regulators, he said.

Orzechowski added: “When you do those projects, and I do a lot of them in my practice, looking proactively, you should get input from the IT professionals, the lawyers, the technologists and the privacy experts,” he said. “And it only makes sense that the same team that builds the plan helps prepare for a problem.”

Another important member of a data breach team is outside public relations counsel, Bruemmer said.

“One of the nice things in working with an outside public relations firm pre-breach is that they’re going to have thought out, ‘What are the eventualities that we need to cover?’ so we’re not reacting to events real time but you have different plans to be able to call on if those circumstances come up,’” he said.

The best thing about these pre-set media plans is that they’ve already been rehearsed, he added. “You find that the good public relations firms not only have good media advice but they have good pre-breach business advice, as well,” he said.

Transferring the Risk

Cyber insurance also plays an important role in pre-breach agreements.

Daren Orzechowski, partner, White & Case

Daren Orzechowski, partner, White & Case

“I think that more organizations have cyber security insurance these days,” said Orzechowski. “So in terms of some of the breach risk that exists, I think the insurance products that are out there are looking to give some kind of control over the liability.”

And, Bruemmer said, most companies (65 percent) that explore cyber insurance are better prepared to create a breach agreement. In addition, companies that have cyber insurance have generally practiced their plan on a quarterly or semi-annual basis, which makes plan execution go more smoothly.

The Ponemon report had a related conclusion: While it has been suggested that having insurance encourages companies to slack off on security, the report noted, “our research suggests the opposite. Those companies with good security practices are more likely to purchase insurance.”

AllClear ID’s Holland noted that while covering the financial risk through cyber policies is important, insurance “does not address the operational risks associated with executing a successful response. Unfortunately, you can’t just buy response competency — you have to prepare your organization.”

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“Customer service is the other critical element,” he said. “Poor customer service compounds the damage, whereas good customer service rebuilds the trust.”

The bottom line, the experts said, is that practice makes perfect.

“It’s not just good enough to have an agreement in place, but you need to have practiced that plan,” said Bruemmer.

Steve Yahn was a freelance writer based in New York. He had more than 40 years of financial reporting and editing experience. Comments can be directed to [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]