Risk Report: Financial Services

Beware the Human Element in Banking Cyber Risk

The financial sector is not alone in seeking to identify how employees fall for cyber phishing scams.
By: | July 30, 2018 • 6 min read

In 2016, all it took was one cleverly worded email for cyber thieves to bilk the Belgian bank Crelan out of more than $75 million.


The phishing scam, in which schemers fabricated a demand-for-funds email that looked like it came from the company’s CEO, was one of thousands of cyber-attacks that buffet banks every day.

Financial institutions can invest millions in cyber defenses, but it’s now known that most cyber losses are the result of human error. In the Crelan case, tens of millions in funds were erroneously transferred in response to a phony demand email, never to be seen again.

The Human Element

Efforts are now underway to address the human element of cyber risk in finance to improve company cultures and reduce the chances an employee will be fooled into transferring money to a fraudulent recipient.

“All organizations face a challenge,” said Josh Ladeau, the global head of technology E&O and cyber, Aspen Insurance.

“For the revenue-producing areas of an organization, there is typically a tug of war between ease of doing business and the thoughtful implementation of security controls; by default these concepts often run counter to each other, not just within financial institutions, and that creates natural friction when trying to culturally integrate security consciousness,” he said.

Adeola Adele, director of integrated cyber solutions and thought leadership, Willis Towers Watson

Addressing the human element of cyber risk, how cultures and individuals can be both a company’s worst cyber security weakness or its most stalwart defender, is an area of concentration for Adeola Adele, director of integrated cyber solutions and thought leadership, Willis Towers Watson (WTW).

Adele and her colleagues are leading client meetings intended to break down the walls between human resources, risk management, compliance and information security staffers, pursuing how traditional human resources strengths like training and testing can be brought into an alliance with risk management.

“I do believe that there is an appetite there for HR to become more involved in this issue,” she said.

When the insurance brokerage Willis merged with the human capital specialist Towers Watson in early 2016, one of the stated goals of company leaders was to put Towers Watson’s human resource experience to work in the field of risk management.

Adele said WTW is now using employee engagement surveys as a tool to measure cyber security weakness.

“We did a human element study a couple of years ago and one of the things that we found was organizations that lack a focus on the customer experience are more likely to suffer a breach,” she said.

Departments Put Stock in Collaborating

The “customer experience,” Adele explained, includes such things as how well companies respond to customer complaints, how they service customers, how their products speak to their customers, how they solicit customer feedback and “in the context of cyber security, that would include the measures they have in place to protect customer data,” she said.


Adele said WTW is also using analytical tools to assess incoming talent on how well it will be able to perform in the area of cyber security, in the context of a severe shortage in the areas of engineering and data science.

“We know that many financial institutions have not done this type of analysis,” she said. “We are helping organizations address this issue, because if they don’t hire someone with the right expertise they are potentially leaving themselves really vulnerable.”

“It is really the combination of upfront training and trying to mitigate the human error component of things, with thoughtful strategies around identification and response, because there has almost become an expectation, from a cyber perspective that things are going to happen.” — Jackie Quintal, financial institutions practice leader, Aon

Jackie Quintal, a financial institutions practice leader at Aon, said she too is seeing a trend toward putting human resources, risk management and other disciplines together to create cultural change around cyber security — not only in financial services but also across industry sectors.

“It is really the combination of upfront training and trying to mitigate the human error component of things, with thoughtful strategies around identification and response, because there has almost become an expectation, from a cyber perspective that things are going to happen,” she said.

James Burns, cyber product leader, CFC Underwriting

James Burns, the cyber product leader for London-based specialty insurer CFC Underwriting, said some of the most frequent losses his team sees are triggered by cyber phishing.

“Companies spend a lot of money on cyber defenses, which is important but might not count for much when an employee sees an email and clicks on it,” Burns said.
He said he does see much more collaboration between HR and risk management these days.

“Again, banks are not alone here,” Burns said. “We frequently see situations where the risk management folks are not talking to the IT department, because for so many years, they didn’t have to,” he said.

“There has been some progress made, but there is much more that needs to be done, certainly in the accounts that we have seen,” Burns said.

The Need for Cultural Shift

Burns’ colleague Neil Beaton, head of a new financial institutions practice at CFC Underwriting, said he believes cultural issues in banking make employees susceptible to phishing.

“One of the things for financial services in particular is that they are hierarchical organizations, and if somebody says to do something, there is a tendency to just follow orders,” he said.

“In those situations, if somebody sees a note from their superior they tend to act on it. What you need is for someone to turn around and say, ‘Am I really supposed to be doing this?’”

“When you start to have those execs in the room, that leads to broader and wider acceptance from the underwriting community to support the risk, whether it be from an underwriting standpoint or a risk mitigation standpoint.” — Michael O’Connell, financial institutions practice leader, Willis Towers Watson

Michael O’Connell, financial institutions practice leader, WTW, and former underwriter with AIG, said in his meetings with underwriters, evidence that internal discussions are underway at some companies to break down silos between HR, information security and risk management is well-received by insurers.

“When you start to have those execs in the room, that leads to broader and wider acceptance from the underwriting community to support the risk, whether it be from an underwriting standpoint or a risk mitigation standpoint,” he said.


Aspen’s Ladeau added some organizations are differentiating themselves from their competitors in the degree to which they are training and collaborating internally to make employees a stronger piece of cyber resiliency and security.

“Cyber security is becoming an area for competitive differentiation,” said Ladeau. “The cyber risk working groups that were traditionally defensive are now bringing in the production folks and driving corporate adherence.”

“I think there are some financial institutions that have embraced that,” he continued. “When you sit in on these underwriting calls there is a marked difference in philosophies, so it’s not a one-size-fits-all answer,” he said.

Ladeau said at least one regional bank as well as a major card brand are now referencing their embrace of cyber security in their marketing, attempting to associate it with their brand.

“Whoever can figure that out first is going to be well-positioned because the issue isn’t going away.” &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.


Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.

R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.


We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?


Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.


Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.


More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]