Monthly Archives: June 2016

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June 27, 2016 by: James Bone Categories: Risk Management Cognitive Risk Framework for Cybersecurity

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Redesigning Risk Management and Internal Controls for Cyberrisks

Cybersecurity has gotten a great deal of attention these days for two reasons – billions of dollars are being spent in response to a growing threat in cybersecurity and, secondly, the lack of meaningful and sustainable success in preventing hackers from stealing data. Every organization is vulnerable to attack and no matter the amount of money spent hardening the enterprise threats continue to escalate. This phenomenon is called the Cyber Paradox. The definition of a paradox: “something (such as a situation) that is made up of two opposite things and that seem impossible but is actually true or possible.” How is it that incremental investments in security have not impacted the marginal cost of cyberrisk?

“The answer may surprise you… security investments have been focused on the wrong vulnerability.”

Researchers who have studied the cyber black market have made an obvious but overlooked finding in trends associated with participants in the cyber black markets. There is a smaller percentage of hackers with the technical capability to successfully penetrate most of the hardened security defenses in corporations…called “hard targets” prompting hackers to target the softest targets to hack…the human mind.

Cognitive hacks, phishing attacks, botnet delivered malware and other cognitive directed attacks have found a great deal of success executing its exploits and conversely corporate and government security professionals have spent the least amount of time, money, resources and mental energy developing security strategies to defend the weakest link in their organization. This is obvious to most security professionals but to date very few organizations have created a thoughtful approach to secure the organization to its biggest vulnerability ….. the people who work in the organization. This is not the Insider Threat that most researcher and security professionals believe is the biggest threat. Edward Snowden’s breach has created an illusion of vulnerability that appears larger than it really is. Like shark attacks….we are afraid of the oceans because a small fraction of people are attacked creating a media frenzy that is greater than the actual threat.

The biggest vulnerability is much more simple. It is the access organizations give through mobile devices, social media and Internet surfing.   Cognitive hacks now exceed all other hacks in success rate because it is the softest target to attack and the least defended in most organizations. Cost of cyber attacks is a poor metric for determining security defense success. Success rate at defending against a breach is the only metric that really matters. So how does an organization improve its success rate of defending against an attack? Cognitive hacks require a cognitive security response.

“Cognitive security uses data mining, machine learning, natural language processing and human-computer interaction to mimic the way the human brain functions and learns. It gets stronger over time, learning with each interaction and getting better at proactively stopping threats. Cognitive systems bring the ability to spot anomalies and flawed logic, and provide evidence-based reasoning — enabling analysts to weigh alternative outcomes and improve decision-making”, according to IBM’s Watson division.   However, cognitive security, or CogSec, is a much more diverse set of solutions than IBM’s Watson. CogSec is a multidisciplinary approach that is in the early stage of development that will use a variety of security informatics in defensive and offensive strategy in response to cyberrisks. “One-off” solutions are insufficient to deal with an adversary that is expert in asymmetric risk management. That is why a Cognitive Risk Framework for Cybersecurity is needed to operate in this new domain of cyberrisk.

The concepts referenced in the Cognitive Risk Framework for Cybersecurity (CRFC) is drawn from a large body of research in decision science, psychology, philosophy, cognitive computing, systems engineering and other cross disciplinary topics. A cognitive risk framework is fundamental to the integration of existing internal controls, risk management practice, cognitive security technology and the people who are responsible for executing on the program components that make up enterprise risk management. Cognitive risk fills the missing gap in today’s cybersecurity program that fails to fully incorporate the “softest target”, the human mind.

A functioning cognitive risk framework for cybersecurity provides guidance for the development of a CogSec response that is three-dimensional instead of a one-dimensional defensive posture. Further, cognitive risk requires an expanded taxonomy to level set expectations about risk management through scientific methods and improve communications about risks. A CRFC is an evolutionary step from intuition and hunches to quantitative analysis and measurement of risks.

The CRFC five pillars expand the language of risk with concepts from behavioral science to build a bridge connecting decision science, technology and risk management. The CRFC five pillars establish a link and recognize the important work undertaken by the COSO Enterprise Risk Framework for Internal Controls, ISO 31000 Risk Management Framework, NIST and ISO/IEC 27001 Information Security standards; which make reference to the need for processes to deal with the human element. The opportunity to extend the cognitive risk framework to other risk programs exists however the focus of this topic is directed on cybersecurity and the program components needed to operationalize its execution.

The CRFC program components include five pillars: 1) Intentional Controls Design; 2) Cognitive Informatics Security (Security Informatics); 3) Cognitive Risk Governance; 4) Cybersecurity Intelligence & Active Defense Strategies; and, 5) Legal “Best Efforts” Considerations in Cyberspace.

The Five Pillars of the Cognitive Risk Framework will be discussed in detail in the next posting but for now consider these the foundational building blocks for an enhanced cybersecurity program now and in the future that is sustainable and responsive to asymmetric cyber attack.

June 21, 2016 by: James Bone Categories: Risk Management Contract Risk Playbook: Risks Hiding in Plain View

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When Lehman Bros. declared bankruptcy in 2008, the
firm held more than 1 million outstanding contracts
in a vast multiplex web of global interactions. It had
become so diverse and sprawling that the board and
senior executives were unable to quickly produce reliable
information about its exposures.
“The challenge is that risk is a real time problem. Yet
many companies don’t have real time access to relevant
contracts — and it’s a matter of how fast they
can move to deal with these issues as they come up,”
says Bill Hewitt, CEO of Exari.
“If you look at the financial crisis, Lehman Bros.
was eventually proven to be solvent. It just took six
months to find out and by then it was too late.”
Boards and senior executives need the necessary
information to connect the dots before a major event.

The purpose of this playbook is to examine how contractual
agreements, a vital and often overlooked
corner of operations, can provide management with
the business intelligence to help reduce risks, uncover
waste, and improve performance.