Is IT equipped to deal with clear and present danger?

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Are the security lights on, but no  one is home at your company?

An April 2010 survey of 80 chief security officers and over 200 members of ASIS International (a trade association for corporate security professionals) basically says that while most large organizations have risk analysis processes – there is no one in charge of risk management.
Question No. 1 – Does your organization have a formalized risk analysis process? … 90 percent of the respondents, said that their organizations have such a formalized risk analysis process.
Question No 2 – Does your organization have an executive with a mandate to manage enterprise risk ? … only about 40 percent of the respondents had an executive with such a mandate.
Erwann Michel-Kerjan, managing director of the Risk Management and Decision Processes Center at Wharton School of Business says:
“That’s hard to believe, given that extreme events and risk management are making headlines almost every other day.”

In order  to understand why large enterprises invest in risk analysis process but not in risk management we need to take a closer look at Western (US and EU for the sake of argument) corporate value systems.

For a manager of a company on the verge of bankruptcy, equity compensation is a one-sided bet with upside only. For example, say the CEO  bets on a bridge loan at usurious terms in order to buy time to close an acquisition deal. If the bet pays off, his equity compensation pays off, but if he loses the bet (and the company goes bankrupt or is sold for a pittance), his personal compensation exposure is zero, but the stockholders, bond holders, customers and business partners will be left holding the bag.  Since it’s a one-sided bet with no downside, executives may also be tempted to adopt borderline business practice in order to proactively optimize their compensation.

Risk analysis provides invaluable input to improve business practice and reduce security breach exposure but you have to execute on the implementation of the security countermeasures and be prepared to hold them up to scrutiny of your peers on a regular basis.  That requires a strong work ethic, transparency and accountability.

Since executives are generally not held personally accountable for security breaches  – it is not surprising at all that most enterprises have  formal risk analysis processes but few firms have managers with  the personal responsibility to execute on security risk management.

Let’s return to our original question – ‘Is IT equipped to deal with clear and present danger?’

We now see that IT and their information security colleagues may indeed have the formal risk analysis processes and even the latest in data security technology countermeasures to reduce the impact of security breaches but they don’t function inside a corporate value system that rewards them for cost-effective security.

And that my friends – is already an ethical question, not a process management nor a compensation question.

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