Category: Regulations

If Data Is Our Most Valuable Asset, Why Aren’t We Treating It That Way?

There have been several high profile data breaches and ransomware attacks in the news lately and the common theme between all of them has been the disclosure (or threat of disclosure) of customer data. The after effects of a data breach or ransomware attack are far reaching and typically include loss of customer trust, refunds or credits to customer accounts, class action lawsuits, increased cyber insurance premiums, loss of cyber insurance coverage, increased regulatory oversight and fines. The total cost of these after effects far outweigh the cost of implementing proactive security controls like proper business continuity planning, disaster recovery (BCP/DR) and data governance, which begs the question – if data is our most valuable asset, why aren’t we treating it that way?

The Landscape Has Shifted

Over two decades ago, the rise of free consumer cloud services, like the ones provided by Google and Microsoft, ushered in the era of mass data collection in exchange for free services. Fast forward to today, the volume of data growth and the value of that data has skyrocketed as companies have shifted to become digital first or mine that data for advertising purposes and other business insights. The proliferation of AI has also ushered in a new data gold rush as companies strive to train their LLMs on bigger and bigger data sets. While the value of data has increased for companies, it has also become a lucrative attack vector for threat actors in the form of data breaches or ransomware attacks.

The biggest problem with business models that monetize data is: security controls and data governance haven’t kept pace with the value of the data. If your company has been around for more than a few years chances are you have a lot of data, but data governance and data security has been an afterthought. The biggest problem with bolting on security controls and data governance after the fact is it is hard to reign in pandoras box. This is also compounded by the fact that it is hard to put a quantitative value on data, and re-architecting data flows is seen as a sunk cost to the business. The rest of the business may find it difficult to understand the need to rearchitect their entire business IT operations since there isn’t an immediate and tangible business benefit.

Finally, increased global regulation is changing how data can be collected and governed. Data collection is shifting from requiring consumers to opt-out to requiring them to explicitly opt-in. This means consumers and users (an their associated data) will no longer be the presumptive product of these free services without their explicit consent. Typically, increased regulation also comes with specific requirements for data security, data governance and even data sovereignty. Companies that don’t have robust data security and data governance are already behind the curve.

False Sense Of Security

In addition to increased regulation and a shifting business landscape, the technology for protecting data really hasn’t changed in the past three decades. However, few companies implement effective security controls on their data (as we continue to see in data breach notifications and ransomware attacks). A common technology used to protect data is encryption at rest and encryption in transit (TLS), but these technologies are insufficient to protect data from anything except physical theft and network snooping (MITM). Both provide a false sense of security related to data protection.

Furthermore, common regulatory compliance audits don’t sufficiently specify protection of data throughout the data lifecycle beyond encryption at rest, encryption in transit and access controls. Passing these compliance audits can give a company a false sense of security that they are sufficiently protecting their data, when the opposite is true.

Just because you passed your compliance audit, doesn’t mean you are good to go from a data security and governance perspective.

Embrace Best Practices

Businesses can get ahead of this problem to make data breaches and ransomware attacks a non-event by implementing effective data security controls and data governance, including BCP/DR. Here are some of my recommendations for protecting your most valuable asset:

Stop Storing and Working On Plain Text Data

Sounds simple, but this will require significant changes to business processes and technology. The premise is the second data hits your control it should be encrypted and never, ever, unencrypted. This means data will be protected even if an attacker accesses the data store, but it also will mean the business will need to figure out how to modify their operations to work on encrypted data. Recent technologies such as homomorphic encryption have been introduced to solve these challenges, but even simpler activities like tokenizing the data can be an effective solution. Businesses can go one step further and create a unique cryptographic key for every “unique” customer. This would allow for simpler data governance, such as deletion of data.

Be Ruthless With Data Governance

Storage is cheap and it is easy to collect data. As a result companies are becoming digital data hoarders. However, to truly protect your business you need to ruthlessly govern your data. Data governance policies need to be established and technically implemented before any production data touches the business. These policies need to be reviewed regularly and data should be purged the second it is no longer needed. A comprehensive data inventory should be a fundamental part of your security and privacy program so you know where the data is, who owns it and where the data is in the data lifecycle.

The biggest problem with business models that monetize data is: security controls and data governance haven’t kept pace with the value of the data.

Ruthlessly governing data can have a number of benefits to the business. First, it will help control data storage costs. Second, it will minimize the impact of a data breach or ransomware attack to the explicit time period you have kept data. Lastly, it can protect the business from liability and lawsuits by demonstrating the data is properly protected, governed and/or deleted. (You can’t disclose what doesn’t exist).

Implement An Effective BCP/DR and BIA Program

Conducting a proper Business Impact Analysis (BIA) of your data should be table stakes for every business. Your BIA should include what data you have, where it is and most importantly, what would happen if this data wasn’t available? Building on top of the BIA should be a comprehensive BCP/DR plan that appropriately tiers and backs up data to support your uptime objectives. However, it seems like companies are still relying on untested BCP/DR plans or worse solely relying on single cloud regions for data availability.

Every BCP/DR plan should include a write once, read many (WORM) backup of critical data that is encrypted at the object or data layer. Create WORM backups to support your RTO and RPO and manage the backups according to your data governance plan. Having a WORM backup will prevent ransomware attacks from being able to encrypt the data and if there is a data breach it will be meaningless because the data is encrypted. BCP / DR plans should be regularly tested (up to full business failover) and security teams need to be involved in the creation of BCP/DR plans to make sure the data will have the confidentiality, integrity and availability when needed.

Don’t Rely On Regulatory Compliance Activities As Your Sole Benchmark

My last recommendation for any business is – just because you passed your compliance audit, doesn’t mean you are good to go from a data security and governance perspective. Compliance audits exist as standards for specific industries to establish a minimum bar for security. Compliance standards can be watered down due to industry feedback, lobbying or legal challenges and a well designed security program should be more comprehensive than any compliance audit. Furthermore, compliance audits are typically tailored to specific products and services, have specific scopes and limited time frames. If you design your security program to properly manage the risks to the business, including data security and data governance, you should have no issues passing a compliance audit that assesses these aspects.

Wrapping Up

Every business needs to have proper data security and data governance as part of a comprehensive security program. Data should never be stored in plain text and it should be ruthlessly governed so it is deleted the second it is no longer needed. BCP/DR plans should be regularly tested to simulate data loss, ransomware attacks or other impacts to data and, while compliance audits are necessary, they should not be the sole benchmark for how you measure the effectiveness of your security program. Proper data protection and governance will make ransomware and data breaches a thing of the past, but this will only happen if businesses stop treating data as a commodity and start treating it as their most valuable asset.

Security Considerations For M&A and Divestitures

I’ve been speaking to security startups over the last few weeks and some of the discussions made me think about the non-technical aspects of security that CISOs need to worry about. Specifically, things like mergers, acquisitions and divestitures and the different risks you will run into when executing these activities. There are a number of security issues that can materialize when combining businesses or separating businesses and in this post I’ll share some of the things you need to think about from a security perspective that may not be obvious at first glance.

What’s Going On Here?

There are a number of reasons for mergers & acquisitions (M&A) or divestitures. For the past two decades, the tech industry has used M&A to acquire smaller startup companies as a way to collect intellectual property, acquire specific talent or gain a competitive advantage. Divestitures may be the result of changing business priorities, separating business functions for regulatory reasons, eliminating redundancies or a way to sell a part of the business to cover costs. Mergers, acquisitions and divestitures are similar because you will want to review the same things from a security perspective, but it is probably easiest to think of divestitures as the reverse of an M&A – you are separating a business instead of combining a business. Divestitures are definitely less common than M&A in the tech space, but they aren’t unheard of. There are also differences in terms of the security risks you need to think about depending on if you are acquiring a business or separating a business. My best advice is to work with the legal and finance teams performing the due diligence and have a set process (that you have contributed to) so you don’t forget anything. With that, let’s dive into a few different areas.

Physical Security

Physical security is something you will need to think about for both M&A and divestitures. For M&A you will want to perform a physical security assessment on the facilities you are acquiring to make sure they meet or exceed your standards. Reviewing physical security controls like badging systems, fencing, bollards, cameras, fire suppression, emergency lighting, tempest controls (if required), safes and door locks will all help make sure your new facilities are up to standard. If you aren’t sure how to perform this, hire a company that specializes in physical security assessments or physical red teaming.

While physical security for M&A may seems straight forward, there are a few gotchas when performing divestitures. The biggest gotcha is understanding and reviewing the existing access of the people that are part of the divestiture because you will now need to consider them outsiders. All of your standard off-boarding processes will apply here such as terminating accesses to make sure someone doesn’t retain access to a system they are no longer authorized to access (like HR, Finance, etc.).

Things can get complicated if parts of the business are divesting, but not fully. Some examples of this are when the business divests a smaller part, but allows the smaller part to co-locate in their existing facilities. This may complicate physical security requirements such as how to schedule or access common areas, how to schedule conference rooms, how to separate wifi and network access, etc. In the above example, the larger company may act like a service provider to the divested part of the business, but there still needs to be effective security controls in place between the two parts.

Personnel Security

I touched on this a bit already, but personnel security is something to consider when performing M&A or divestitures. With M&A the biggest issue will be how to smash the two IAM systems and HR systems together without punching huge holes in your network. Typically what happens is the two parts operate separately for a while and then consolidate to a single system and the employees of the acquired business get new accounts and access.

For divestitures, particularly if they don’t result in a clean split, you will need to focus heavily on access control and insider threats. Think about how you will separate access to things like source code, financial systems, HR systems, etc. If the smaller company has physical access to your space then you need to build in proper physical and logical controls to limit what each business can do, particularly for confidentiality and competitive reasons.

What’s an example of where this can go wrong? Let’s say business A is going to divest a small part of its business (business B). The complete divestiture is going to take a while to finalize so company A agrees to allow company B to continue to access their existing office space, including conference rooms. However, the legal team didn’t realize the conference rooms are tied to company A’s SSO and calendaring system so company B has no way to schedule the conference rooms without retaining access to company A’s IAM system creating a major security risk. Whoops!

The biggest gotcha is understanding and reviewing the existing access of the people that are part of the divestiture because you will now need to consider them outsiders.

Contracts

Contracts may not seem like a typical security issue, but they should be part of your review, particularly when performing M&A. Why? You are acquiring a business that is worth something and that business will have existing contracts with customers. The contractual terms with those customers may not match the contractual terms of the acquiring company, which can cause a risk if there is a significant difference in contract terms. Smaller companies are more agile, but they also usually have less negotiating power compared to large companies and as a result are more likely to agree to non-standard contract terms. What are some terms you need to think about?

  • Vulnerability Remediation Times – How quickly did the new company promise to fix vulnerabilities for their customers?
  • Incident & Breach Disclosure Time Frames – How quickly did the new company promise to notify customers of a breach or incident? I have seen very small time frames suggested in contracts, which are impossible to meet, so I definitely recommend reviewing these.
  • Disclosure of Security Postures – Does the new company have contractual terms promising to provide SBOMs or other security posture assessments to their customers on a regular basis?
  • Compliance Requirements – Has the new company agreed to be contractually obligated to maintain compliance certifications such as PCI-DSS, SOC 2, ISO27001, etc.
  • Penetration Testing & Audits – Has the new company contractually agreed to have their products or services penetration tested or have their security program audited? Have they agreed to provide these reports to their customers on a regular basis?
  • Privacy & Data Governance Terms – Is the new company required to comply with privacy regulations such as allowing customers have their data deleted, or mandating certain data governance requirements like DLP, encryption, data deletion, etc?
  • BCP/DR and SLAs – Are there contractual uptime SLAs or response times and does the existing BCP/DR plan support these SLAs?

My advice is to set a timeline post acquisition to review and standardize all of your contracts to a single set of standard clauses covering the above topics. This is usually part of a security addendum that the legal team can help you create. The biggest challenge with contracts will be to “re-paper” all of your customers to hopefully get them on the same standardized contract terms so your security program doesn’t have a bunch of different requirements they have to try to meet.

Accuracy Of M&A’s

One of the biggest risk of performing M&A’s is trying to get an accurate picture of the existing security posture of the company being acquired. Why is this so difficult? The company being acquired is trying to look as good as possible so they get top dollar. They can’t hide things, but they aren’t going to tell you where all the skeletons are buried either. The acquiring company usually doesn’t get a full picture of the existing security posture until after the deal is done and you start trying to integrate the two parts of the business. If you have a chance to interview the existing security team before the M&A closes definitely ask to see their latest audit reports, compliance certifications, penetration testing reports, etc. Consider working with legal to set conditions for how old these reports can be (e.g. no older than 6 months) to hopefully give you a more accurate picture or require the acquired company to update them before the deal closes. Interview key members of the staff to ask how processes work, what are their biggest pain points, etc. Consider hiring an outside company to perform an assessment, or you can even consider talking to one of their largest customers to get their external view point (if possible).

Wrapping Up

M&A and divestitures can be exiting and stressful at the same time. It is important for the security team to be integrated into both processes and to have documented steps to make sure risks are being assessed and addressed. I’ve listed a few key focus areas above, but most importantly standardizing your M&A security review can help avoid “buyers remorse” or creating unnecessary risk to the acquiring business. Finally, having a documented divestiture process and reviewing the divestiture with legal can help avoid security risks after the fact.

Are We Peak CISO?

Let’s be honest…the CISO role is weird right now. It is going through a transformative phase and the industry is at an inflection point similar to what other C-Level roles (like the CFO) have gone through in the past. What makes the role weird? The CISO community and any company that has a CISO is facing unprecedented regulatory pressure, the economy and interest rates have people on edge, layoffs in the tech sector have shaken employee confidence (to the applause of investors) and technology innovation via AI is causing additional disruption and risk across all sectors.

In additional to these external pressures the past few years have seen the proliferation of CISO title sprawl and confusion from companies about how to best employ and utilize a CISO (hint, we aren’t your scapegoats). Despite all of this turmoil, change is also a time for opportunity and there are a few things I think will help clarify and mature the CISO role.

CISO Title Sprawl

I’ve been tracking job titles and job postings on LinkedIn for the past year or so and I’ve noticed a phenomenon I’ll call title sprawl. A quick search for titles shows there are vCISOs, Advisory CISOs, Fractional CISOs, CISOs In Residence and Field CISOs. On top of this, add in Chief Security Officers, Chief Trust Officers and Heads of Security. Do we need all of these titles? Maybe, but I think this title sprawl is more indicative of three things 1) People with CISO titles are in high demand and people want to retain the title once they get it and 2) Companies are still uncertain about how to title and employ someone to lead their security function. 3) Title sprawl is a result of the political power struggle occurring between the CISO role and other C-Level roles (more on that below).

From the titles above there are really only four functions for a current or former CISO – board member (in some capacity), executive management (officer of the company), consultant and sales. There is similar title sprawl and variance with CTO titles, but not to the extent of the CISO title (yet). Time will tell if other C-Level roles start to follow suit, but for now, let’s break down the functional CISO role buckets.

Board Member – These are current or former CISOs who sit on a board either as a technical advisor, business advisor or some combination thereof.

Executive Management – Individuals employed by a company to lead the information security program. May also manage other parts of IT such as identity, privacy, data, etc. Titles may be CISO, CSO, CISO in Residence (for Venture Capital), Chief Trust Officer and Head of Security.

Consultant – These are individuals who are providing their expertise as a current or former CISO to other companies to help them establish, transition or manage a security program. Often the companies employing these individuals claim they can’t afford a full time CISO, but they seem to be able to afford other full time C-Suite titles (hmm…)? Titles may include Virtual CISO (vCISO), Fractional CISO, CISO in Residence and Consulting CISO. (CISO in Residence again because they can “consult” to their VC holding companies about the state of their security programs).

Sales – These are people who are experts in the field of security, may hold one or more certifications and may be past CISOs. Their job is to help the company they work for drive sales. Typically the title they use is Field CISO or Advisory CISO.

Standardize The Reporting Structure

Moving on from title sprawl, companies are also confused about where the CISO title should sit. Some companies advertise it as a Director level role reporting into the VP of some function. Other’s title it as a VP level role reporting into a Senior VP or some other executive. Still other companies have the CISO reporting to the CEO, CIO, CTO or General Counsel. It is even possible this person is an individual contributor. Companies are clearly confused about whether the CISO is a technologist, regulatory compliance specialist or true C-Suite executive. While reporting structure may be a direct reflection on company culture, it is also a public example of the battle for equivalency that is playing out between the CISO and other C-Level roles. Often, CISOs are hired by other C-Levels (not the CEO) and until it becomes more common for CISOs to report to the CEO as an accepted peer to other C-Levels, this confusion and variance will persist. That being said, if you are considering a CISO title and the company isn’t willing to add you to the D&O liability policy then you may be better off taking a lower level title to eliminate personal risk.

Bolster Security Management Certifications

Security certifications from popular organizations talk a lot about regulations, risk and different security concepts (technical or not), but few, if any, offer a comprehensive certification on what it truly takes to be a CISO. Any CISO level certification should include potential career paths that lead to the CISO role, career paths post CISO role, difference in the CISO role based on company size, exposure to business topics in addition to security topics, SEC reporting, interfacing with law enforcement and lastly discussion of how to maximize success based on where the role sits – e.g. reporting to the CEO, CTO or CIO and how that may change your lens as a CISO. This begs the question if there should be a true professional level CISO certification similar to a professional engineer, accountant or lawyer, but let’s save that discussion for a future blog post.

Embrace Increased Regulation

Given the recent increase in regulation, particularly from the SEC, bolstering CISO certifications to include more business acumen may soon be table stakes instead of a nice to have. Recent regulations forcing companies to disclose material cybersecurity events in their 8k filings are starting to accelerate the maturity of the CISO role at publicly traded companies. Companies can no longer fail to invest in security or report breaches (unless they want steep penalties). In particular, this is forcing the CISO role into the board room or at least on par with other C-Level roles because they have to help these companies navigate the decision to report material events in their filings. Existing and future CISOs can embrace this increase in regulation to backstop their authority at companies who are struggling to fully embrace the CISO role as a C-Level executive. While it may not elevate the current role with a promotion, it should at least open the door to the board room and provide a seat at the table for discussion.

While CISO reporting structure may be a direct reflection on company culture, it is also a public example of the battle for equivalency that is playing out between the CISO and other C-Level roles.

The last point I’ll make about regulation is – while the SEC watered down the requirements for cybersecurity expertise on boards, I predict this expertise will still be required and in demand as companies start to navigate the new SEC reporting requirements. In particular, companies may be penalized and eventually required to demonstrate cybersecurity board expertise (via experience or certifications) if they are found to have a material security breach and can’t demonstrate appropriate security governance at the board level.

What’s The End Result?

It is clear the security industry and the CISO role are in a state of confusion as a result of the tight job market, uncertain economy, increased regulation and pace of technology innovation. The net effect of title sprawl and the struggle for equivalency is – it confuses customers, investors, partners, recruiters and job candidates. Title sprawl artificially increases competition for jobs and causes a wide variance in how the CISO role is employed. However, I think this state of confusion is a good thing because it is forcing conversations and causing people to stop and think. The CISO role is the newest member of the C-Suite and it is growing up and trading in the hoodie for a collared shirt. We are starting to claim our seat at the board level and are able to hold our own or make other C-Level roles redundant. As the CISO role evolves from a “nice to have” to a “must have” in the C-Suite, we will see this confusion fade away and the CISO role will truly reach its peak.

Security Theater Is The Worst

We have all been there…we’ve had moments in our life where we have had to “comply” or “just do it” to meet a security requirement that doesn’t make sense. We see this throughout our lives when we travel, in our communities and in our every day jobs. While some people may think security theater has merit because it “checks a box” or provides a deterrent, in my opinion security theater does more harm than good and should be eradicated from security programs.

What Is Security Theater?

Security theater was first coined by Bruce Schneier and refers to the practice of implementing security measures in the form of people, processes or technologies that give the illusion of improved security. In practical terms, this means there is something happening, but what that something is and how it actually provides any protection is questionable at best.

Examples Of Security Theater

Real life examples of security theater can be seen all over the place, particularly when we travel. The biggest travel security theater is related to liquids. TSA has a requirement that you can’t bring liquids through security unless they are 3 ounces or smaller. However, you can bring a bottle of water through if it is fully frozen…what? Why does being frozen matter? What happens if I bring 100, 3 ounce shampoo bottles through security? I still end up with the same volume of liquid and security has done nothing to prevent me from bringing the liquid through. As for water, the only thing that makes sense for why they haven’t relaxed this requirements is to prop up the businesses in the terminal that want to sell overpriced bottles of water to passengers. Complete theater.

“Security theater is the practice of implementing security measures that give the illusion of improved security.”

Corporate security programs also have examples of security theater. This can come up if you have an auditor that is evaluating your security program against an audit requirement and they don’t understand the purpose of the requirement. For example, and auditor may insist you install antivirus on your systems to prevent viruses and malware, when your business model is to provide Software as a Service (SaaS). With SaaS your users are consuming software in a way that nothing is installed on their end user workstations and so there is little to no risk of malware spreading from your SaaS product to their workstations. Complete theater.

Another example of security theater is asking for attestation a team is meeting a security requirement instead of designing a process or security control that actually achieves the desired outcome. In this example, the attestation is nothing more than a facade designed to pass accountability from the security team, that should be designing and implementing effective controls, to the business team. It is masking ineffective process and technologies. Complete theater.

Lastly, a classic example of security theater is security by obscurity. Otherwise known as hiding in plain sight. If your security program is relying on the hope that attackers won’t find something in your environment then prepare to be disappointed. Reconnaissance tools are highly effective and with enough time threat actors will find anything you are trying to hide. Hope is not a strategy. Complete theater.

What Is The Impact Of Security Theater?

Tangible And Intangible Costs

Everything we do in life has a cost and this is certainly true with security theater. In the examples above there is a real cost in terms of time and money. People who travel are advised to get to the airport at least two hours early. This cost results in lost productivity, lost time with family and decreased self care.

In addition to tangible costs like those above, there are also intangible costs. If people don’t understand the “why” for your security control, they won’t be philosophically aligned to support it. The end result is security theater will erode confidence and trust in your organization, which will undermine your authority. This is never a place you want to be as a CISO.

Some people may argue that security theater is a deterrent because the show of doing “security things” will deter bad people from doing bad things. This sounds more like a hope than reality. People are smart. They understand when things make sense and if you are implementing controls that don’t make sense they will find ways around them or worse, ignore you when something important comes up.

With any effective security program the cost of a security control should never outweigh the cost of the risk, but security theater does exactly that.

Real Risks

The biggest problem with security theater is it can give a false sense of security to the organization that implements it. The mere act of doing “all the things” can make the security team think they are mitigating a risk when in reality they are creating the perfect scenario for a false negative.

How To Avoid Security Theater?

The easiest way to avoid security theater is to have security controls that are grounded in sound requirements and establish metrics to evaluate their effectiveness. Part of your evaluation should evaluate the cost of the control versus the cost of the risk. If your control costs more than the risk then it doesn’t make sense and you shouldn’t do it.

The other way to avoid security theater is to exercise integrity. Don’t just “check the box” and don’t ask the business you support to check the box either. Take the time to understand requirements from laws, regulations and auditors to determine what the real risk is. Figure out what an effective control will be to manage that risk and document your reasoning and decision.

The biggest way to avoid security theater is to explain the “why” behind a particular security control. If you can’t link it back to a risk or business objective and explain it in a way people will understand then it is security theater.

Can we stop with all the theater?

What’s The Relationship Between Security Governance and Organizational Maturity?

Organizational and security governance is touted as a key component of any successful security program. However, I’ve been thinking about governance lately and how it relates to the overall maturity of an organization. This has prompted some questions such as: what happens if you have too much governance? and What’s the relationship between security governance and organizational maturity?

What Is Governance?

First, let’s talk about what governance is.

Governance is the process by which an organization defines, implements and controls the business.

Let’s unpack what this means for a security organization. The process of defining security for the business is done through policies, standards and guidelines. Security policies are requirements the business must meet based on laws, regulations or best practices adopted by the business. These policies align to business objectives. Implementation is done through security controls that are put in place to meet a specific policy or to manage a risk. Lastly, controlling the business is done via audits and compliance checks. The security org follows up on how well the business is following policies, implementing controls and managing risk. Control can also include enforcement, which can involve gating processes, such as requiring approval for business critical and high risk activities, or recommending additional security requirements for the business to manage a risk.

Why Do We Need Governance At All?

In an ideal world we wouldn’t. Imagine a business that is created entirely of clones of yourself. There would be implicit and explicit trust between you and your other selves to do what is best for the business. Communication would be simple and you would already be aligned. In this case you don’t need a lot (or any) governance because you can trust yourself to do the things. However, unless you are Michael Keaton in Multiplicity, this just isn’t a reality.

Governance achieves a few things for a business. First, it communicates what is required of its employees and aligns those employees to common objectives. Second, it helps employees prioritize activities. None of this would be needed if human’s weren’t so complex with diverse backgrounds, experiences, perspectives, education, etc. In an ideal world we wouldn’t need any governance at all. The reality is, we do need governance, but it needs to be balanced so it doesn’t unnecessarily impede the business.

How Does This Relate To Organizational Maturity?

Organizational maturity refers to how your employees are able to execute their tasks to achieve the objectives of the business. This relates to things like the quality of code, how quickly teams resolve operational issues or how efficiently they perform a series of tasks. It can be loosely thought of as efficiency, but I actually think it combines efficiency with professionalism and integrity. Maturity is knowing what good is and being able to execute efficiently to get there. There is a fantastic book about this topic called Accelerate: The Science of Lean Software and DevOps: Building High Performing Technology Organizations by Nicole Forsgren PhD.

Which brings us to the relationship of governance and maturity…

There is an inverse relationship between organizational maturity and organizational governance. In simple terms:

The less mature an organization, the more governance is needed.

For example, if your organization struggles to apply patches in a timely manner, continually introduces new code vulnerabilities into production or repeatedly demonstrates behavior that places the business at risk, then your organizational maturity is low. When organizational maturity is low, the business needs to put processes and controls in place to align employees and direct behavior to achieve the desired outcomes. In the examples above, increased governance is an attempt to manage risk because your employees are behaving in a way that lacks maturity and is placing the business at risk.

What causes low organizational maturity?

Organizational maturity is a reflection of employee behavior, skillset, knowledge, education and alignment. In other words, organizational maturity is a reflection of your organizational culture. In practical terms your employees may simply not know how to do something. They may not have experience with working for your type of business or in the industry you operate in. Perhaps they had a really bad boss at a past job and learned bad behavior. Whatever the reason, low organizational maturity is linked to lots of sub-optimal outcomes in business.

How To Improve Organizational Maturity?

If governance and maturity are inversely linked, the question becomes how can we increase organizational maturity so we need less governance? There are a lot of ways to increase organizational maturity. One that is fairly obvious is to start with a mature organization and maintain it over time. However, this is easier said than done and is why some organizations are fanatical about culture. This relates to everything from hiring to talent management and requires strong leadership at all levels of the company.

“The less mature an organization,
the more governance is needed.”

Other ways to improve organizational maturity are through training and education. This is why security awareness and training programs are so critical to a successful security program. Security awareness and training programs are literally attempting to improve organizational maturity through education.

One last way to improve maturity is via process. The security organization can establish a new process that all teams must follow. As teams go through this process you can educate them and reward teams that exhibit the ideal behavior by relaxing the process for them. You can also help teams educate themselves by publishing the requirements and making the process transparent. The challenge with imposing a new process is having the discipline to modify or remove the process when needed, which comes back to governance.

What’s the right level of governance?

The optimal level of governance is going to be based on your organizational maturity and desired business outcomes. In order to determine if you have too much or too little governance you need to measure organizational maturity and the effectiveness of existing organizational governance. There are industry standard processes for measuring organizational maturity, like the Capability Maturity Model Integration (CMMI) and Six Sigma, or you can create your own metrics. Some ways to measure governance effectiveness are:

  • Ask For Feedback On Security Processes – Are the processes effective? Do teams view them as an impediment or are they viewed favorably? Are the processes easy to navigate and objective or are they opaque and subjective?
  • Measure Effectiveness Of Security Controls – Are your security controls effective? If you ask a team to do work to implement a security control you should have clear metrics that determine if that control is effective. If you implement a control, but that control hasn’t changed the outcome, then the control is ineffective. This can indicate your governance is ineffective or your organizational maturity needs to improve.
  • Assess and Update Policy – Security policies should be living documents. They shouldn’t be set in stone. Security policies need to map back to laws and regulations they support and the business requirements needed to be successful. Laws, regulations and business requirements all change over time and so should your security policies. By having up to date and relevant security policies you can ensure your organizational governance matches the maturity of the business.

What Are Typical Scenarios For Governance And Maturity?

There are four scenarios related to governance and maturity:

A mature organization with too much governance – your organization is mature, but you are overly controlling with process and requirements. The net effect will be to slow down and impede the business unnecessarily. You are effectively lowering the organizational maturity due to too much governance.

An immature organization with too little governance – this is a recipe for disaster. If your organization is immature and you fail to govern the organization you will open the business up to unnecessary risk. You will get out maneuvered by your competitors, you will miss opportunities, you will fail to comply with laws and regulations and generally will have a lot of activity without any result. Your employees will lack coordination and as a result your business will suffer.

A mature organization with too little governance – This isn’t a bad scenario to be in. A mature organization implies they are doing the right things and don’t need a lot of guidance. A laissez faire attitude may be the right thing to allow employees flexibility and freedom, but it does come with inherent risk of not being compliant with laws and regulations. It may also mean there is duplication of effort or multiple ways of doing things, which could be optimized.

Governance and maturity are balanced – obviously this is the ideal scenario where your organizational governance is balanced to the level of maturity of the organization. Easy to think about in practice, difficult to achieve in reality.

Wrapping Up

Organizational governance and maturity are inversely related and need to be balanced in order for the business to operate effectively. There are ways to measure organizational maturity and governance effectiveness and by having a continual feedback loop you can optimally align both for success.

Chief Incident Scapegoat Officer (CISO)?

Last week the SEC filed a complaint in the Southern District of New York charging SolarWinds and specifically its CISO, Timothy Brown, with fraud. According to the compliant, the SEC alleges the company and Brown made false statements about its security posture to investors. Along with the Uber CISO, Joseph Sullivan, this is the second CISO in the past year to be specifically charged for failing to do their job. In my opinion, these court cases are going to negatively impact the CISO role and make security less transparent to investors. Let’s dive in.

What About The Other C-Levels?

Both cases are unique, however the first thing that stands out to me is only the CISOs are being named and charged. I find this odd because in an ideal organization the CISO still has to partner closely with the other C-Level execs to achieve security objectives. Things like external messaging to customers, SEC filings, etc. all require the coordination and knowledge of other C-Level execs like the CFO, Legal, Marketing and even the CEO. Why aren’t these individuals being named and charged for also contributing to the fraud?

In the worst case scenario, a CISO is poorly supported and struggles to get any of their security objectives funded or implemented. Is the CISO to blame in this scenario? What about the CEO and CFO who withheld funding? How about the Engineering leader who failed to prioritize the security recommendations of the CISO? The point is, I have never found a situation where a CISO is able to operate in a vacuum and so the other C-Level execs also have a responsibility to make sure the company is making true statements and not perpetrating fraud. They should all be held equally accountable.

Responsibility Without Authority

The CISO role has had a lot of press and a surge in visibility over the past few years, but the role still has a long way to go to be on par with other C-Level roles. It is common for the CISO role to report to the CTO, CIO or Chief Legal Counsel. It is uncommon for the CISO role to have a direct reporting line to the CEO. We can discuss who the CISO should report to, but in my opinion, the CISO role still needs to mature compared to the other legacy C-Level roles. The position is currently not on the same level as a CTO or CIO role and this impacts the scope and authority of the role.

Additionally, most CISOs don’t actually own the things they are trying to improve the security posture of. There is always a business or engineering owner that is actually responsible for building and operating the systems that make the company money. As a result, the CISO role typically ends of with all of the responsibility for security, but none of the authority. If the CISO makes a recommendation to fix something and the engineering leader rejects it, who is held accountable for that decision?

Chilling Effect On Open Discussion

My biggest concern with the SEC complaint is the reference to emails that are pointing out the known security issues with the Orion system. Matt Levine wrote a great article in Bloomberg questioning the SEC’s logic and I agree with his assessments. I have never read an SEC filing or investment statement expecting the company to highlight their massive security investments. In fact, I would question if a company should disclose that in a filing at all (unless it is material) because you may inadvertently provide information to attackers that could be used to hack the company.

Additionally, most security teams openly discuss security issues via chat or email. I find these discussions are almost always expressing frustration with current situations with the goal of gaining support for investment to remedy the issue. However, discussions via chat and email also happen to be legally discoverable forms of communication. This means every single email about how much your security sucks will be taken out of context by lawyers and used against you. The obvious solution is to never put your current security failings in writing, which means you can never create a presentation to convince the company to invest in improving security. Or alternatively, if you do place things in writing you frame them in a way that they are asking for legal advice so they can be protected by legal privilege.

Predictions For the CISO Role

I wrote a blog post after the Uber verdict, but both the Uber and SolarWinds cases have caused significant anxiety within the CISO community, which I think will impact the CISO in the following ways going forward:

  1. New CISOs hiring into a role will require companies to list them on their Directors and Officers (D&O) Liability Policy. Also, based on this Bloomberg Law Article about FTX, I recommend making sure the D&O policy specifies how much you will get if all the executives are trying to use the policy at the same time for legal fees.
  2. It will become standard for companies to cover the costs for legal counsel specified by the CISO, should they be individually named in a lawsuit.
  3. As these cases become more common, CISOs will demand higher compensation and protect themselves contractually to minimize their personal risk.
  4. Companies will (hopefully) prioritize security investments to minimize the risk of lawsuits, regulatory actions or security incidents.
  5. Costs for companies to employ and retain a CISO will go up over time.
  6. In extreme cases, the CISO role may shift from a salaried employee to a consultant (I-9) to offload the accountability for security to the company and protect themselves.

Final Thoughts

I can’t recall the last time I saw a CTO or CIO charged with investor fraud for making false statements about their products or enterprise environment. Yet, the CISO role has been getting a lot of scrutiny from regulators recently. I’m all for holding people accountable, but the CISO role doesn’t seem to carry the same weight as the CTO or CIO. The role still struggles with gaining support and funding to place security first. If a company culture is weak or the other executives minimize security, then the CISO will fail to make any meaningful progress. In my opinion, if the CISO of the company is named, then all the officers should be named to drive home the message that they are all accountable for the security of the company.

Security Vendor Questionnaires: Too Much or Not Enough?

Over the past few years there has been an increasing trend for customers and partners to request security teams to fill out lengthy security questionnaires seeking specific details about the state of their security program. These requests often come as part of routine audits, regulatory requirements or contract negotiations. As someone who has both sent out questionnaires and been a recipient of questionnaires I’m wondering if the industry has gone too far down this trend or if it hasn’t gone far enough? Let me explain…

As a CSO, I want to discover and manage as much risk as possible. This includes conducting business with partners, customers and other companies. I want to understand my supply chain and limit my exposure to any of their security weaknesses that could be used to attack my company. However, I also want to limit the amount of information I disclose about my security program because once I disclose it, I no longer control that information and it could eventually make its way to an adversary if the company I disclosed it to has a breach.

How do we balance these differing requirements and are security questionnaires really the best mechanism for understanding your supply chain?

How Did We Get Here?

Let’s take a step back and consider how we collectively arrived at the need for security questionnaires. There have been several high profile breaches that have set us down this path. The first was the Target breach in 2013 where Target had their point of sale systems compromised as a result of a third party HVAC vendor. The magnitude of this breach along with the realization that Target was compromised via a third party placed a spotlight on supply chain security for the entire industry.

The second high profile breach was the Solar Winds attack in 2020. This attack infiltrated the software supply chain of Solar Winds and placed a backdoor in the product. Given that Solar Winds was used by a huge number of companies this effectively compromised the software supply chain of those companies as well. This attack increased the scrutiny on the supply chain with additional emphasis on software supply chain and even leading to some sectors (like the government) requiring disclosure of a Software Bill of Materials (SBOM).

Increased Regulatory Pressure

These notable attacks (among others) have lead to an increase in regulations that force companies to disclose details around security breaches, but also to invest appropriately in security programs. Despite these investments and disclosures, companies can still face steep fines and costly lawsuits for security breaches. New regulations such as the SEC Cyber Risk Management rules and recent White House Executive Orders on Improving Cybersecurity and establishing a National Cybersecurity Strategy have elevated awareness and focus on supply chain security to the national stage.

Cyber Insurance Isn’t Helping

As Cybersecurity insurance premiums become more and more expensive, companies will continue to look for ways to decrease the cost, while still maintaining coverage. One of the most effective ways to do this is to establish and document a mature security program that you review in detail with your insurer to explain your risks and how you are mitigating them with appropriate controls. Questionnaires are one part of a security program that can demonstrate how you are evaluating and managing supply chain risk and hopefully drive down your premiums (for now). The problem is this creates an incentive where it is everyone for themselves in an attempt to lower their own premiums.

Transparency Is Lacking

The biggest issue security questionnaires are attempting to address is lack of transparency into the details of the security programs. In general, large publicly traded companies (particular cloud companies) and security product companies tend to be more transparent about security because it is built into their brand as a selling point to attract customers. However, details about technologies, program structure, response times, etc. generally lack specificity (for good reason) and the security questionnaire is an attempt to uncover those details to understand what risks exist when entering into a relationship with another company.

You might argue that companies should simply be more transparent with details about their security program, but this is not the solution. Companies should cover high level details with some specificity to demonstrate they have a security program and how it is structured. However, giving specific details about processes, response times, technologies, etc. will reveal details that can be used by an adversary for an attack. Additionally, do we really know what is happening with all this data from security questionnaires? It may be protected under Non-Disclosure Agreements (NDAs) and confidentiality agreements, but that doesn’t prevent the data from being leaked via an unprotected S3 bucket. It is extremely difficult to change a security program quickly and so it may be in the best interest of the responding company to refuse to answer the questionnaire and instead have an undocumented conversation (depending on your level of paranoia).

Yet More Audit and Regulatory Pressure

On top of all these issues, there are still very real requirements to respond to audits, questions from regulators or to provide these responses to your customers and partners that operate in heavily regulated industries (finance, healthcare, government, etc.). Responding to the questionnaires still takes time and places a burden on your security team and still comes with the risk that the information could be involuntarily disclosed to an adversary.

What’s Really Going On Here?

Responding to regulatory and audit requirements aren’t new requirements for our industry and so answering security questionnaires has been the norm for quite some time. However, I think the use of the security questionnaire has been hijacked by the industry as a catch-all way to accomplish a few things with respect to security:

  1. Assert your security requirements over another company (may work for small companies if they can fund it, but generally doesn’t work for large companies with mature programs).
  2. Minimize risk of doing business with and potentially pass on liability to the recipient company. I.e. “We asked them if they did this thing, but we got breached because of them so they clearly didn’t do that thing so it is their fault.”
  3. Create negotiating points as part of contract negotiations for concessions.

The problem with these is they are attempting to impose a solution or liability on a program they don’t control. As a CSO I can’t agree to these things because being contractually obligated to a specific security solution or SLAs removes my decision making power for how to best manage that risk within my security program. Security programs change and are constantly adapting to stay ahead of threats and risks to the business. Being boxed into a solution contractually can actually create a risk, where there wouldn’t normally be one.

Fatigue Is Real

I genuinely struggle with this problem because security questionnaires have their uses, but are causing real fatigue across the industry. The questions fall into one of two categories: either they are largely the same across customers or they are completely bonkers and don’t justify a response. As both a sender and recipient of questionnaires I can definitely understand both sides of the issue. I want as much information about my supply chain customers, but want to minimize the specifics that I share outside of my control. I want lower cyber insurance premiums and I want to pass all my audits and regulatory inquiries. However, I think the industry has deviated from the original intent of the security questionnaire due to the real fear of being held liable for a failure in their security program, which includes their supply chain.

Chip War Book Afterthoughts

I recently read Chip War by Chris Miller and found it to be a thought provoking exploration of the global supply chain for semi conductors. Most interesting was the historical context and economic analysis of the complexities of the current semi conductor supply chain and how the United States has wielded this technology as an ambassador of democracy across the globe. This book was particularly interesting when considering the recent efforts by the U.S. Administration to revitalize semi conductor manufacturing in the United States via the CHIP Act. Even though the U.S. maintains control over this industry, their control is waning, which is placing the U.S. at risk of losing military and economic superiority.

The US Leads With Cutting Edge Design & Research

One advantage maintained by the U.S. is it leads the way with the latest chip design and research. The latest computer chip architectures increase computing power by shrinking transistors to smaller and smaller sizes, roughly following Moore’s Law to double the number of transistors per chip every two years. In the late 1970’s, the United States was quick to recognize the military and economic advantages provided by semi conductors. Overnight, bombs became more accurate and computing became more powerful allowing decisions to be made quicker and spawning an entirely new industry based on these chips. However, as the U.S. began to rely more and more on semi conductors, the cost needed to come down. This was achieved by outsourcing the labor to cheaper locations (mainly Asia), which subsequently made these countries reliant on the U.S. demand for chips. This allowed the United States to influence these countries to their advantage.

A Technology with Geo-Political Consequences

One side effect of outsourcing the manufacturing of semi conductors is the supply chain quickly became dispersed across the globe. Leading research was conducted in the United States, specialized equipment was manufactured in Europe and cheap labor in Asia completed the package. Until recently, most of this supply chain was driven by the top chip companies such as AMD, Intel and Nvidia. However, other countries, such as China, have recognized the huge economic and military advantages offered by semi conductors and as a result have started chipping away (pun intended) at the United State’s control of the semi conductor supply chain.

The US Can’t Compete On Manufacturing Costs

Despite the passing of the CHIP Act, the United States faces a significant battle to wrest chip manufacturing from the countries in Asia (and mainly Taiwan). The cost of labor in the United States is significantly higher than other countries. Additionally, countries such as Taiwan, South Korea, Japan, Vietnam and China have heavily subsidized computer chip manufacturing in order to maintain a foothold in the global supply chain. In order to compete, the United States will have to make an extreme effort to bring all aspects of manufacturing into the country including heavy tax breaks and subsidies. This will effectively turn into economic warfare on a global scale as the top chip manufacturing countries attempt to drive down costs in order to be the most attractive location for manufacturing.

Supply Chain Choke Points Are Controlled by the US and its Allies (For Now)

However, driving down costs won’t be easy. The highly specialized equipment required to manufacture chips needs to be refreshed every time there is a new breakthrough. The costs are tremendous and make it difficult to break into the industry. Instead, the U.S. has been focusing on maintaining control of particular aspects of the supply chain and even blocking acquisitions of strategic companies by foreign entities. The United States also exerts pressure on the countries within this global supply chain to allow it to maintain an advantage. Yet, as new countries rise to power (China) and seek to control their own supply chains, these choke points will dwindle. Additionally, as non U.S. allies (frenemies?) gain market share in the chip supply chain, the U.S. and its allies need to consider the security of the chips they are receiving from these countries.

Final Thoughts

Chip War by Chris Miller is a fascinating look into the history and global supply chain of semi conductors. For the past 50 years the United States has maintained military and economic advantages over its rival countries as a result of semi conductors. However, this advantage has been waning over the past two decades. The CHIP Act is recognition that the United States must begin to claw back some of the globalization of the supply chain and bring critical parts of the industry back to the U.S in order to maintain economic and military superiority in the future.

Proposed SEC Rule Changes For Cyber

In April of this year the proposed amendments to the cybersecurity disclosure rules are expected to be finalized. These rule changes will have change the way companies report cybersecurity in two main areas. First, it will change when and how companies report security incidents. Second, it will require companies to report how they manage and govern cyber security risk. Let’s dive into how these changes will impact companies, the overall industry and how CSOs can help their businesses navigate the changes.

Changes To Incident Disclosure Requirements

The first major change will standardize how companies disclose cybersecurity incidents. These changes will require companies to report a material incident after four business days and provide updates to past incidents for up to two years after. The effects of these changes are expected to make it easier for consumers and investors to evaluate the impact of a security incident and ultimately how well a company deals with security incidents over time.

The long term results of these incident disclosure requirements may mean publicly traded companies begin to see impact to their stock prices as more material incidents are disclosed. The loss in shareholder value will ultimately result in companies investing more in their cybersecurity programs to better handle incidents or recover more quickly with the goal being to maintain investor or consumer trust. Also, requiring companies to disclose incidents within a specific time period may initially result in more lawsuits, which in the long run may force companies to invest more in security to reduce or manage risk.

For a CSO, I recommend evaluating your existing incident response and disclosure plan. Discuss with your legal and finance team about the criteria for declaring an incident, what constitutes a material incident and how to report this information within the SEC timelines. Four business days is a tight timeline for determining what happened, how it happened, the scope of what happened and accurately reporting this within the standard SEC forms. It will also be challenging to comply with the new SEC rules, while at the same time notifying the appropriate partners, customers or consumers so they aren’t learning about it first from the SEC disclosure. This may result in businesses rushing out the disclosure without all of the details, which could erode investor and customer confidence. Or, it could result in the company changing their rules for determining a “material” incident, which might buy them some time to delay the disclosure for more accurate reporting. This will be a fine line to walk and I highly recommend the CSO partner with the Chief Legal Counsel and Chief Financial Officer so they don’t run afoul of the new rules.

Lastly, a CSO will also want to help their organization navigate the risks of these disclosures. It is possible that a company will still be remediating or recovering from an incident when they are required to disclose the incident in their SEC forms. This could disclose details about the incident, the attack and vulnerabilities in a public forum, which could invite follow on or copy cat attacks. A CSO will need to guide their organization how to manage these disclosure risks, while dealing with the ongoing incident. I strongly recommend you run your executive staff through one or more tabletop exercises that runs through various scenarios you may encounter.

Disclosure Of Cyber Security Risk Management & Governance

The second major change will require companies to disclose how they are managing and governing security risk. This will require companies to provide details into their security strategy, security policies and criteria for selecting third party service providers. It will also require disclosure of management’s role and qualifications for assessing and managing security risk.

Overall, I think these changes will have a positive effect on the CSO role. Organizations that previously gave lip service to establishing, funding and governing a comprehensive security program will now be evaluated by investors and consumers in a standardized public forum. Stiff penalties will follow in terms of loss of market value, loss of consumers or even fines from regulatory agencies if organizations fail to adequately meet “industry standard” or investor expectations for security programs.

Additionally, CSOs can now “strut their stuff” by continuing to build, document and lead comprehensive security programs that measure and manage risk. These programs will stand as evidence to the investment and preparedness of the organization to deal with security incidents and manage risk. The new SEC disclosure requirements will allow investors to evaluate and ultimately reward organizations that are meeting expectations for security maturity and resiliency.

Requiring boards and executive management (named officers) to disclose their role and qualifications for assessing and managing security risk will also have a positive impact in how CSOs and security organizations are treated throughout the company. First, it will become common place for organizations to seek seasoned security veterans for a position on their boards. There will be an initial rush to find appropriate talent and in the long term these board positions will become a new career path for former CSOs and security executives.

Second, the addition of security experience to boards will mean CSOs have an ally at the senior levels of the company who understands risk and can help drive conversations around security that would otherwise be glossed over or dismissed. For boards that don’t hear directly from the CSO, security minded board members can explore security topics with their representatives (like the CTO, CIO or Chief Legal Counsel). The end result will elevate security and risk as a topic of importance within board rooms, beyond the current discussions.

Third, supply chain security will continue to receive focus now that organizations will be required to disclose their selection and evaluation criteria for third party suppliers. Publicly traded companies will seek to identify and manage this risk through comprehensive security evaluations of third parties or even developing comparable capabilities in house. Publicly traded companies will also look to limit their liability from third party suppliers and so I expect increased contract language to meet specific security requirements and penalties passed on to the third parties as a result of security incidents caused by them.

Possible Ripple Effects

Overall, I consider these new rules to be a good thing. They will elevate the conversation of cybersecurity risk to the board level and require companies to prove their maturity through standardized disclosures that investors can evaluate. However, there will be some interesting ripple effects as a result of these rule changes.

First, as organizations begin to comply with these rules and disclose aspects of how they govern cybersecurity there will be a chaotic period where publicly traded companies seek to find the line between disclosing too much information and not enough. The industry as a whole will begin to evaluate these disclosures for what is considered acceptable or “good” and this will eventually drive the industry to a steady state where the disclosures become normal or standard.

Second, the third party evaluation and disclosure requirements will have a trickle down effect to the third party vendors (both publicly traded and private companies) because they will be forced to meet the elevated security standards of the companies they provide products or services to. Third party vendors will also need to worry about any new legislation coming out that will hold them liable for security issues in their products and services as specified in the new National Cybersecurity Strategy. This will ultimately raise the bar or maturity for the entire industry, which is a good thing.

Lastly, I expect a niche industry of board level security certifications to pop up that certify executives for board level service. Service on a board as a certified security representative will also be the new resume builder or LinkedIn credential that senior security executives aspire to in the later stages of their career. This may also become an area the SEC chooses to define in the future, such as number of years of experience required to serve on a board, credentials required, certifications, etc.

Wrapping Up

Overall, the new SEC Cybersecurity rules look to strengthen investor and shareholder confidence in the way a company is handling cyber risk or increase transparency around how the company is handling events over the past 2 years, which could become material in how investors view the health of the company. In short, cyber maturity will become another criteria for how to evaluate the performance of a company. Ultimately, these rule changes will elevate the maturity of security across the industry and enhance investor and consumer trust in a company’s ability to manage cyber security risk.

Link to Proposed Rule Changes

Five Take Aways From The New 2023 National Cybersecurity Strategy

In the first week of March, the Whitehouse released the new National Cybersecurity Strategy that outlines areas of focus and investment to “secure the digital ecosystem for all Americans.” Like most strategies, it is high level, broad in scope and forward thinking. Most of the strategy covers expected topics, with objectives like: protecting critical infrastructure, investing in research and development, expanding the qualified cyber workforce and increasing public-private collaboration. However, I found a few of the objectives thought provoking and ambitious because they have the potential to mature or disrupt the industry if enacted into standards or legislation.

Ransomware

The United States has labeled ransomware as a strategic objective that needs attention to prevent disruption of critical infrastructure and other “essential services,” like hospitals. Payments from ransomware support the activities of criminal groups and ransomeware attacks result in not only financial loss, but can result in loss of life through the inability to provide accurate or timely care. Dish Networks is the latest victim of ransomware, resulting in a 20% decrease in stock price, not to mention the amount it costs Dish to recover from the attack, including the loss of revenue from inability to process payments or provide adequate support.

Ransomware is a difficult problem to solve because the government can’t magically secure all of the vulnerable networks and systems in the US. Instead, the US Government plans to target the financial networks that process ransomware payments, disrupt infrastructure that supports ransomware and place diplomatic pressure on countries that continue to provide safe haven to ransomware operations. It will be interesting to see what effect this will have on ransomware attacks, but optimistically, I hope this will have the same result as recent high profile botnet disruptions.

As of yesterday, the administration can claim its first success in taking down part of a ransomware gang in Germany and Ukraine responsible DoppelPaymer and tied to EvilCorp.

Privacy

The Whitehouse considers privacy a strategic objective for the United States. The European Union set the global standard for privacy with GDPR and since then the United States has lagged behind other countries for national privacy regulations. This is evident because several states like California and Colorado have already passed privacy laws that establish fundamental rights to privacy for their residents and there are another three dozen bills in progress across several states in the US. A patchwork of state privacy laws will make it difficult for companies to navigate and satisfy each individual privacy law. Citizens in the United States suffer from poor privacy practices from companies that seek to monetize or use the data for strategic purposes.

There are dozens of privacy bills floating around Congress to address individual privacy, financial privacy, health privacy, and education privacy. These laws would give US Citizens fundamental rights to their privacy, the ability to control how their data is used and shift the collection of data from opting out to requiring consumers opt in to collection. A national privacy law would help consolidate the patchwork of state legislation and make it easier for businesses to navigate the new requirements. It would also place the United States on equal footing with other international standards like GDPR, which has had a significant impact on advertising and marketing business in the EU.

Liability for Third Party Software Security

One of the most interesting strategic objectives in the National Cybersecurity Strategy is the intent to “shift liability for insecure software products and services” to the companies that produce them. This has the potential to mature the technology sector by establishing a standard of security quality through legislation or penalties. The administration intends to do this by establishing a framework that will shield companies from liability if they follow the secure development practices in the framework.

In reality, software development is not that simple. Following a secure software development framework will not address the complex software security supply chain issues facing the technology sector. Use of open source software libraries is a common development practice that accelerates the development of software so companies don’t have to re-develop functions for themselves. This accelerates the software development life cycle and also self regulates by allowing the industry to settle on and standardize certain functions or technologies. While I applaud the sentiment to hold companies liable, it is unclear where the liability stops and this may actually hinder innovation in the technology sector. If a business includes an open source software package in their software are they now liable for the security of a software package they don’t control? Or, does the liability pass on to the random person who built the software package from their basement? Will companies now shift to stop using software they don’t control and develop these capabilities in house, which can waste development resources from producing products and services that generate revenue? What about embedded systems that have limited network connectivity or limited storage space to support continuous updates?

When looking at the history of massive security breaches like Target, SolarWinds, Sony or Equifax, there is certainly a need to hold someone accountable, particularly when the incident impacts consumers, shareholders or critical infrastructure. However, there are too many questions and complexities within existing software supply chains to simply regulate this problem away. I cautiously look forward to seeing how the administration navigates these issues without impeding innovation or levying burdensome penalties.

Federal Cybersecurity Insurance

One of the more interesting strategic objectives is to explore the creation of a Federal Cyber Insurance backstop. The concept is similar to FDIC for banks or disaster relief funds for natural disasters. A government cybersecurity insurance fund could be used to support areas of economic strategic investment that are not mature enough for full blown commercial cyber insurance, but need some sort of financial safeguard. The backstop can also be used for national level services that would have a catastrophic impact to the country if they were impacted due to a cyber event. A federal cyber insurance fund could be meted out like a disaster relief fund to help these critical services restore functionality or shore up finances in a time of crisis. Overall, I think this is a good thing and could provide some stability to the technology sector that is at times beholden to a cybersecurity insurance industry that has high rates and uncertain payouts.

Global Supply Chain

The COVID pandemic broke the equilibrium of a fragile global supply chain. Small disruptions in factory output or the availability of supplies brought several previously stable industries to a halt. As a result, the United States is rightfully considering the security of this global supply chain and what components are critical to maintaining military and economic superiority.

Computer chips are at the forefront of maintaining this military and economic superiority. In 2022 the Whitehouse signed an executive order, called the CHIPS and Science Act, to fund initiatives to make critical supply chain components, like semi-conductors, in the United States. Shifting or changing the global supply chain will take time, particularly with semi-conductors and so it makes sense to start immediately. Almost all of the manufacturing for semi-conductors occurs in Asia (South Korea, Taiwan and China) and it makes sense for the United States to begin to diversify this critical resource from a geographic region that is seeing increasing geopolitical instability. For example, if China invaded Taiwan it would massively disrupt the global supply chain for the rest of the world (including the United States). However, most semi-conductor industries have been built with, or heavily subsidized by, local governments and so the United States will have to match or exceed these subsidies if they truly want to be competitive in the global market, while securing a critical component of the supply chain.

Wrapping Up

Overall, the National Cybersecurity Strategy is a comprehensive and forward thinking strategy that has identified areas of national strategic cybersecurity importance in need of investment. Not all of the strategic objectives are clear on how they will achieve the goal without causing unintended negative consequences, but the intent to improve the resilience and preparedness of the United States is evident.