Why Cyber-Risk Is a C-Suite Issue

Organizations realize the scale of cyber-risk but lack counter-actions to build resilience.

In a global study of more than 2,200 organizations across 22 different countries, NTT Security’s 2019 Risk:Value research found that cyberattacks (43%), data loss or theft (37%), and attacks on critical infrastructure (35%) — aimed particularly at telecoms and energy networks — concern respondents the most. The survey respondents figured these threats would present a greater risk to their organization over the next 12 months than trade barriers and other critical global issues such as the environment, terrorism, and government failures.

Fortunately, corporate awareness of the need for beefed-up cybersecurity is growing. Eighty-four percent and 85% of businesses, respectively, said that strong information security and protecting data integrity were just as important as business continuity, and even more important than revenue growth. Nine in 10 respondents said strong cybersecurity would be a boon for their organization.

Cybersecurity Policies and Incident Response Plans Missing

However, many organizations are having a hard time maintaining even basic levels of security. Only 58% have a formal security policy, but only 48% of those say their employees know what’s in it, meaning that just 28% of companies have security policies that are broadly understood by their employees. They also fall short in incident response planning, which maps out what stakeholders must do in the event of a security incident. Just 52% of the respondents have such a plan. While this is 3% higher than in 2018, only 57% of the respondents from companies with a policy actually know what’s in it. The potential ramifications are clear: If they were hit by a successful cyberattack, the organizations unfamiliar with their own plans would struggle to handle the incident, and, if they managed to muddle through it, would take longer to recover.

Despite Increasing Risks, Security Budgets Remain Flat

In addition to their planning shortfalls, companies are not keeping up with increasing IT dependency and risks. On average, 15% of IT budgets are directed to security, but the share of operations budgets attributed to security has fallen since last year, to 16%. This is troubling, especially since the attack surface has grown exponentially due to the burgeoning Internet of Things (IoT) and connected operational technology (think industry 4.0).

Companies in Germany (14%) and Switzerland (12%) are spending the lowest percentage of their IT budget on security. Spending on security is the lowest in the construction and manufacturing sectors, which allocate 13% of their IT budgets to it. The introduction of potentially devastating threats to the operational infrastructure widely used in the manufacturing sector is deeply troubling in light of the paltry resources being devoted to countering these risks.

One-Third of Companies Would Rather Pay Ransom

One noteworthy finding of the NTT research is the amazing number of companies that are willing to pay ransom. One-third said they’d prefer to hand over ransom to a criminal than invest in cybersecurity. It’s “cheaper,” they said. Such reasoning is both dangerous and naive, since it encourages the bad guys to come back — perhaps with even greater demands than in the first instance.

A similar percentage of respondents said they’d rather pay ransom than be fined for noncompliance, which suggests a fear about the consequences of noncompliance and a lack of confidence in some organizations in their ability to deal with important regulatory issues and to implement a robust incident response plan. This situation is cause for concern because cybercriminals are getting more sophisticated by the day. In fact, cybercrime is undergoing an industrialization wave with large-scale syndicates forming a flourishing underground economy, estimated to produce annual revenues in excess of a staggering $1.5 trillion. Moreover, some nation-states are expanding their cyber warfare capabilities — be it to gather intelligence, sabotage critical infrastructure, or aid their local economy.

The costs of attacks and customer record exposures is hitting the hundreds of millions. Recent examples of such attacks include, among many others, Marriott Hotels’ loss of up 383 million customer records and over 5 million passport numbers, and the exposure of 540 million Facebook customers.

Leaders Think Cybersecurity Is an IT Task

The poor coordination of security measures may be due to subpar or ill-informed senior leadership. The NTT survey revealed that 84% of the respondents said they believe cybersecurity should be a boardroom issue, but only 72% said it actually is a boardroom issue. One in four (23%) said that someone in their organization (such as a CISO) managed day-to-day security in their organization, but only 13% said this person had ultimate responsibility for cybersecurity.

Nearly half (45%) of all respondents — and 57% of C-level respondents — said that cybersecurity is the IT department’s problem. This highlights the alarming gap that often exists between cybersecurity and the C-suite. Apparently, little has changed over the past two years, even though a single successful attack can have significant financial and legal consequences. Smart business leaders need to cultivate a different corporate mindset to winnow out the risks in their organization’s digital strategy.

Conclusion

Cybersecurity is a prime concern for business leaders. Rightly so, as the dependence on IT uptime and resilience has never been greater. However, corporate boards need to move beyond awareness and rhetoric into action in order to reduce the risk exposure of their organization and ensure long-term success.

More rigorous regulatory frameworks and larger fees for violations are boosting awareness of cyber-risk and the need for compliance throughout the organization. But they need to spur an evolution in corporate governance, too. Solutions that might have worked in the analog days (for example, simply putting security under IT) are no longer adequate, particularly when revenues and profits from digital operations and brand reputation are at stake. In the digital era, virtually every board decision will affect the organization’s cyber-risk posture. That’s why cybersecurity should be a recurring item on board agendas and continually reassessed in terms of the broader risk framework. On top of those measures, an incident response and communication plan and regular fire drills are critical. They’re the only way to give the organization a chance to recover quickly after a successful cyberattack.