Director and Officer Insurance for Cyber and Data Privacy Issues

The legal and regulatory worlds surrounding cybersecurity and data privacy have changed a lot in the last two years. When was the last time your organization’s director and officer insurance policy was reviewed? Does your policy provide adequate protection in case of a data breach or cybersecurity issue? Have you stopped to consider not only the domestic (e.g., U.S.) risks, and the potential damages, but also the international risks?

The article below describes the personal liabilities that directors and officers could face when a data breach or cybersecurity incident occurs in India. As the article points out, although the fines may not seem like much (between 100,000 and 500,000 Rupees), they are assessed on the individual officers and directors, and multiple penalties can be assessed depending on the circumstances. This can quickly add up when multiple issues and multiple individuals are involved. It is incumbent upon officers and directors to ensure that their organizations are meeting their cybersecurity and data privacy requirements.

To meet their statutory and ethical obligations, Officers and directors need, at a minimum:

  • actionable information about the organization’s efforts to improve the overall cybersecurity and data privacy posture;
  • independent validation that the day-to-day policies and procedures are being followed; and
  • business-based reporting that demonstrates that the efforts, policies, and procedures are in alignment with the organization’s priorities.

Fathom Cyber helps put this information, and more, at their fingertips. We make cybersecurity and data privacy make sense.

https://www.dandodiary.com/2018/05/articles/international-d-o/guest-post-cybersecurity-liability-emerging-concerns-indian-law/

Cybersecurity and Small Businesses

A day in the life of a cybersecurity professional…

We were a bit surprised recently when someone asked why small businesses need to care about cybersecurity.  Our answer:

Because the cost of a breach will cripple a company  – There was a recent study that showed that 60% of small to mid-size companies are out of business within six months of a cybersecurity incident or data breach.  This is due, in part, to lost revenue, reduced brand value, and the cost of notifications and remediation efforts.  If the companies aren’t paying proper attention to cybersecurity, their insurance coverage won’t help them, either.

Both data privacy and cybersecurity are bet-the-company issues.  If you aren’t familiar with the differences between data privacy and cybersecurity, we previously posted a short discussion of the differences between cybersecurity and data privacy.  Although we think it is important to raise awareness about both topics, this particular post will focus on cybersecurity.

Why should a Small Business Care?

As we are out speaking at different sessions, we often hear companies say “we aren’t a target because…” and the next phrase is almost always either “we have nothing of value”, or “we’re too small”.   But that isn’t true.  Criminal hackers target small businesses for several reasons, including:

  • They are easy targets – Most small businesses simply aren’t devoting appropriate resources to even basic cyber hygiene (e.g., ensuring they are meeting even the first five of the CIS Critical Security Controls).  This means that most small businesses are doing the equivalent of leaving a big pile of freshly-delivered Amazon boxes sitting outside their door on a Friday night with the building’s lights off.  By following a few basic steps (the equivalent of not having packages delivered after hours, leaving lights on, and putting up cameras), companies can significantly cut their risk.  Failure to do so leaves them as easy targets.
  • They aren’t the ultimate prize – Of course, the fact that they are easy targets doesn’t address the “we have nothing of value” issue.  For example, a small business-to-business company probably doesn’t have a lot of credit card, bank account, or personal information about its customers.  So these companies assume they don’t have to worry about cybersecurity as much as the bigger companies.  However, cyber criminals are targeting companies not only for what they can steal from the company, but also because of the relationships that company has with others.  For example, the Target breach from 2014 occurred through an HVAC vendor.  The criminals were able to use information gained from the HVAC vendor’s network to ultimately gain access to the Target network.  Thus, although the small business may not have a lot of inherently “valuable” information on its own, it can lead to much more valuable prizes for the criminals.
  • Their insurance company cares – Insurance companies are becoming more adept at asking cybersecurity-related questions, and finding ways to avoid paying claims.  This means that companies that aren’t paying attention to cybersecurity are less likely to get insurance, that those who get insurance are more likely to pay higher rates and are not likely to have the right coverage when a breach occurs.
  • Their customers care – If the small company is a business-to-business company, its smaller customers may not yet be asking about cybersecurity, but bigger companies are asking increasingly sophisticated cybersecurity questions.  They understand that their vendors are often the weak link in their security, and vendor risk management is a hot-button issue.  If a small company wants to start doing business with big companies, or to continue to do business with big companies, it will need to start paying more attention to cybersecurity.  Its competitors will. And on the business-to-consumer side, consumers quickly abandon smaller companies that have data breaches.
  • Criminals need resources – Although many criminals are searching for valuable data such as credit card information, others are looking for resources.  For example, a growing trend is for crypto mining malware to be installed on hacked computers.  Crypto mining forms a core to blockchain-based tools like Bitcoin and Etherium.  Crypto “miners” perform work for the blockchain tool, and in exchange they are paid a fee when certain conditions are met.  Crypto mining is a big business, generating millions of dollars in revenue each year.  But crypto mining needs computers to work, and running and maintaining those computers can be expensive.  So innovative criminals have taken to hacking into systems and installing mining software without the company’s consent, or even their knowledge.  The company will pay the increased electricity, Internet service, cooling, and other costs, and the criminal keeps all the money.  Krebs on Security has a somewhat older, but still valid, article about other ways criminals use hacked PC’s, including use as a server for command and control of malware and distributing child pornography.  Why would a small business want to make it easy for criminals to set up shop in their company’s office?

As you can see, small businesses must care about cybersecurity if they are to survive.  There is never a better time to start than now.

Selective Cybersecurity Data Filtering

The article below confirms something we at Fathom Cyber see all too often: that executives are given a false sense of security by their IT staff. The data they receive is cherry-picked so only the mitigable threats are shown, and the things the staff isn’t able to handle are swept under the rug. Until a breach occurs.

Executives need better, non biased information coming to them, and in a form that they can understand. Fathom Cyber can help.

https://www.industryweek.com/leadership/middle-market-companies-underestimate-cybersecurity-risks

The State of Connecticut’s Cybersecurity Action Plan

The State of Connecticut recently released a Cybersecurity Action Plan.  This plan makes it clear that if companies don’t start taking cybersecurity and data privacy more seriously, the state, and even the federal government, will be forced to step in and add even more legislation and regulations.  Can your organization quickly identify:

  • the kinds of data it holds, whose data it is, and where it is located;
  • the customers who are supported by a particular computing resource;
  • the internal business processes and functions that are supported by a resource;
  • the controls that are in place to limit access to authorized users; and
  • the dependencies between the different computing systems?

If not, how can your organization expect to show regulators or shareholders that it is taking cybersecurity and data privacy seriously?  The first step in taking cybersecurity seriously is to make cybersecurity make sense.  Fathom Cyber can help.

https://portal.ct.gov/-/media/Office-of-the-Governor/Press-Room/20180503-CT-Cybersecurity-Action-Plan.pdf?la=en

 

“Reasonable” is changing for Boards of Directors

Boards of Directors are increasingly being held accountable for the organization’s cybersecurity shortcomings.  Some Board members have been able to hide behind the “business judgment rule” in the past to avoid having to take ownership of cybersecurity.  But that is changing, and it is no longer reasonable for the board to be hands-off when it comes to cybersecurity.

https://www-forbes-com.cdn.ampproject.org/c/s/www.forbes.com/sites/christopherskroupa/2018/04/19/cybersecurity-and-the-boards-responsibilities-whats-reasonable-has-changed/amp/

 

The Cost of a Data Breach: Everything

A growing trend is for cybersecurity vendors to try to quantify the dollars-and-cents impact of a particular risk.  But these tools often overlook the secondary effects of a breach, including the tarnishing of the organization’s reputation or brand and customer retention issues.  These secondary effects can be especially damaging in services industry, where an individual’s reputation can also be impacted.  The article below discusses what happened to one of the largest law firms in Panama approximately a year after it was hacked and confidential information about many prominent politicians was made public.  Spoiler alert: the once venerable firm has now closed its doors.

https://www.natlawreview.com/article/panama-papers-law-firm-announces-its-closure-due-to-fallout-massive-data-breach

 

Cybersecurity is Everyone’s Responsibility

Cybersecurity is everyone’s responsibility, not just the IT staff’s.  This is true throughout our lives, not just at work.  We need to make sure home computers and network equipment are properly updated with the latest software versions, and to stop using outdated equipment.  “Shadow IT”, or computers or equipment, including resources “in the cloud” that a company’s IT staff doesn’t know about or control, is another major risk area.  As the saying goes, a chain is only as strong as your weakest link.  If people don’t take cybersecurity seriously, they are the weakest link in the chain that protects us all.

 

https://www.technative.io/it-may-be-boring-but-cyber-security-is-everyones-responsibility/

 

Creating a Culture of Enforcement

Without the proper cultural changes, any organization-wide efforts are likely to fail.  This is true whether the efforts involve business issues, like creating the right approach to customer service, or regulatory issues, like compliance with ethics laws, data privacy laws, or cybersecurity regulations.  Although many organizations initially try to change their culture, the effort can be monumental, and the repercussions can be tough.  In some cases, the organization’s top performers and senior leaders are the ones most resistant to change.  Is the organization ready to enforce its policies and procedures, even against these “star players”?  If not, the cultural efforts will fail, and the organization will soon return to its old ways.  The article below provides an approach to creating a culture of compliance.

Creating a Culture of Compliance

Boards Seek More Active Cybersecurity Roles

When we are out talking to those in technology-oriented roles, such as CIO’s, CISO’s, and their staff, there is a perception that their Boards of Directors and executives don’t really care about cybersecurity.  While that may have been true a few years ago, there is a growing recognition by many on the Board and in the C-suite that they need to be more involved in cybersecurity.  They just struggle with how to get involved without having to be a cyber expert.  Fathom Cyber helps organizations bridge the gap between the C-suite’s business expertise and the IT team’s technical abilities.

https://www.wsj.com/articles/boards-seek-bigger-role-in-thwarting-hackers-1515596400?mod=ITP_businessandfinance_0&tesla=y