Tag Archives: GRC

The Tao of GRC

I have heard of military operations that were clumsy but swift, but I have never seen one that was skillful and lasted a long time. Master Sun (Chapter 2 – Doing Battle, the Art of War).

The GRC (governance, risk and compliance) market is driven by three factors: government regulation such as Sarbanes-Oxley, industry compliance such as PCI DSS 1.2 and growing numbers of data security breaches and Internet acceptable usage violations in the workplace. $14BN a year is spent in the US alone on corporate-governance-related IT spending .

It’s a space that’s hard to ignore.

Are large internally-focused GRC systems the solution for improving risk and compliance? Or should we go outside the organization to look for risks we’ve never thought about and discover new links and interdependencies .

This article introduces a practical approach that will help the CISOs/CSOs in any sized business unit successfully improve compliance and reduce information value at risk. We call this approach “GRC 2.0” and base it on 3 principles.

1.    Adopt a standard language of GRC
2.    Learn to speak the language fluently
3.    Go green – recycle your risk and compliance

GRC 1.0

GRC (Governance, Risk and Compliance) was first coined by Michael Rasmussen.  GRC products like Oracle GRC Suite and Sword Achiever, cost in the high six figures and enable large enterprises to automate the workflow and documentation management associated with costly and complex GRC activities.

GRC – an opportunity to improve business process

GRC regulation comes in 3 flavors: government legislation, industry regulation and vendor-neutral security standards.  Government legislation such as SOX, GLBA, HIPAA and EU Privacy laws were enacted to protect the consumer by requiring better governance and a top-down risk analysis process. PCI DSS 2.0; a prominent example of Industry regulation, was written to protect the card associations by requiring merchants and processors to use a set of security controls for the credit card number with no risk analysis.  The vendor-neutral standard, ISO27001 helps protect information assets using a comprehensive set of people, process and technical controls with an audit focus.

The COSO view is that GRC is an opportunity to improve the operation:

“If the internal control system is implemented only to prevent fraud and comply with laws and regulations, then an important opportunity is missed…the same internal controls can also be used to systematically improve businesses, particularly in regard to effectiveness and efficiency.”

GRC 2.0

The COSO position makes sense, but in practice it’s difficult to attain process improvement through enterprise GRC management.

Unlike ERP, GRC lacks generally accepted principles and metrics. Where finance managers routinely use VaR (value at risk) calculations, information security managers are uncomfortable with assessing risk in financial measures. The finance department has quarterly close but information security staffers fight a battle that ebbs and flows and never ends. This creates silos – IT governance for the IT staff and consultants and a fraud committee for the finance staff and auditors.

GRC 1.0 assumes a fixed structure of systems and controls.  The problem is that, in reducing the organization to passive executives of defense rules in their procedures and firewalls, we ignore the extreme ways in which attack patterns change over time. Any control policy that is presumed optimal today is likely to be obsolete tomorrow. Learning about changes must be at the heart of day-to-day GRC management.

A fixed control model of GRC is flawed because it disregards a key feature of security and fraud attacks – namely that both attackers and defenders have imperfect knowledge in making their decisions. Recognizing that our knowledge is imperfect is the key to solving this problem. The goal of the CSO/CISO should be to develop a more insightful approach to GRC management.

The first step is to get everyone speaking the same language.

Adopt a standard language of GRC – the threat analysis base class

We formalize this language using a threat analysis base class which (like any other class), has attributes and methods. Attributes have two sub-types – threat entities and people entities.

Threat entities

Assets have value, fixed or variable in Dollar, Euro, and Rupee etc.  Examples of assets are employees and intellectual property contained in an office.

Vulnerabilities are weaknesses or a lacking in the business. For example – a wood office building with a weak foundation built in an earthquake zone.

Threats exploit vulnerabilities to cause damage to assets. For example – an earthquake is a threat to the employees and intellectual property stored on servers in the building.

Countermeasures have a cost, fixed are variable and mitigate the vulnerability. For example – relocating the building and using a private cloud service to store the IP.

People entities

Business decision makers encounter vulnerabilities and threats that damage company assets in their business unit. In a process of continuous interaction and discovery, risk is part of the cost of doing business.

Attackers create threats and exploit vulnerabilities to damage the business unit. Some do it for the notoriety, some for the money and some do it for the sales channel.

Consultants assess risk and recommend countermeasures. It’s all about the billable hours.

Vendors provide security countermeasures. The effectiveness of vendor technologies is poorly understood and often masked with marketing rhetoric and pseudo-science.

Methods

The threat analysis base class prescribes 4 methods:

  • SetThreatProbability -estimated annual rate of occurrence of the threat
  • SetThreatDamageToAsset – estimated damage to asset value in a percentage
  • SetCountermeasureEffectiveness – estimated effectiveness of the countermeasure in a percentage.
  • GetValueAtRisk

Speak the language fluently

A language with 8 words is not hard to learn, it’s easily accepted by CFO, CIO and CISO since these are familiar business terms.

The application of our 8 word language is also straightforward.

Instances of the threat analysis base class are “threat models” – and can be used in the entire gamut of GRC activities:  Sarbanes-Oxley, which requires a top down risk analysis of controls, ISO27001 – controls are countermeasures that map nicely to vulnerabilities and threats (you bring the assets) and PCI DSS 1.2 – the PAN is an asset, the threats are criminals who collude with employees to steal cards and the countermeasures are specified by the standard.

You can document the threat models in your GRC system (if you have one and it supports the 8 attributes). If you don’t have a GRC system, there is an excellent free piece of software to do threat modeling – available at http://www.ptatechnologies.com

Go green – recycle your threat models

Leading up to the Al Qaida attack on the US in 9/11, the FBI investigated, the CIA analyzed but no one bothered to discuss the impact of Saudis learning to fly but not land airplanes.

This sort of GRC disconnect in organizations is easily resolved between silos, by the common, politically neutral language of the threat analysis base class.

Summary

Effective GRC management requires neither better mathematical models nor complex enterprise software.  It does require us to explore new threat models and go outside the organization to look for risks we’ve never thought about and discover new links and interdependencies that may threaten our business.  If you follow the Tao of GRC 2.0 – it will be more than a fulfillment exercise.

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What is security?

So what is security anyhow?

Security is not about awareness.

A lot of folks talk about the people factor and how investing in security awareness training is key for data protection.

I think that investing in formal security awareness training, internal advertising campaigns and all kinds of fancy booklets and cards for employees is a waste of time and money.  I prefer a  CEO that says “here are my 4 rules” and tells his staff to abide by them, who tell their direct reports to abide by them until it trickles down to the people at the front desk.  Making common sense security part of the performance review is more effective than posters and HR training.

Security from this perspective, is indeed an exercise in leadership. Unfortunately, in  many organizations, the management board sees themselves as exempt from the information security rules that they demand from their middle managers and employees. It might be a general manager bringing his new  notebook into the office, jacking into the corporate LAN and then attaching a wireless USB dongle effectively bridging the corporate network to the Internet with a capital I, not understanding and not really caring about the vulnerability he just created.

Security is not an enterprise GRC system

If you take a look at the big enterprise GRC systems from companies like Oracle – you see an emphasis placed on MANAGING THE GRC PROCESSES – document management and signature loops for ISO certification, SOX audits etc. I suppose this makes the auditors and CRO and Oracle salesperson happy but it has nothing to do with making secure software. In my world – most hackers attack  software, not audit compliance processes and GRC documentation. In other words – managing  GRC processes is a non-value add for security.

Security doesn’t improves your bottom line
Have you ever asked yourself why security is so hard to sell?

There are two reasons.

1) Security is  complex stuff and it’s hard to sell stuff people dont understand.

2). Security is about mitigating the impact of an event that might not happen, not about making the business operation more effective.

Note a curious trait of human behavior  (formalized in prospect theory – developed by Daniel Kahneman and Amos Tversky in 1979), that people (including managers who buy security) are risk-averse over prospects involving gains, but risk-loving over prospects involving losses.

In other words – a CEO would rather take the risk of a data breach (which might be high impact, but low probability) than invest in DLP technology that he does not understand. Managers are not stupid – they know what needs to be done to make more money or survive in a downturn. If it’s making payroll or getting a machine that makes widgets faster for less money – you can be sure the CEO will sign off on making payroll and buying the machine before she invests in that important DLP system.

Since almost no companies actually maintain security metrics and cost of their assets and security portfolio in order to track Value at Risk versus security portfolio over time – a  hypothesis of return on security investment cannot be proven. Indeed – the converse is true – judging by the behavior of most companies – they do not believe that security saves them money

So what is security?

It’s like brakes on your car. You would not get into a car without brakes or with faulty brakes. But brakes are a safety feature,  not a vehicle function that improves miles per gallon. It’s clear that a driver who has a lighter foot on the brakes will get better mileage, and continuing the analogy, perhaps spending less money on security technology and more on security professionals will get you better return on security investment.

Challenge your assumptions about what makes for effective security in your organization.  Is enterprise security really about multiple networks and multiple firewalls with thousands of rules? Perhaps a simpler firewall configuration in a consolidated enterprise network is more secure and cheaper to operate?

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The financial impact of cyber threats

Kudos to ANSI for publishing a free guide to calculating cyber risk.

Better late than never – thousands of security professionals in the world use the Microsoft Threat Modeling Tool and the popular free threat modeling software PTA, to calculate risk in financial terms – not to mention the thousands of other users of risk calculative methods from dozens of software companies like  Palisade and Countermeasures.

The good news

It’s important that a standards body like ANSI  endorse calculating cyber risk in dollar terms, directing their message to executives.  Any CFO will want to see a brick and mortar calculation for justifying security investment – especially in today’s market where money is scarce and cyber-threats are abundant. I can appreciate the effort that must have been involved in getting Homeland Security Standards Panel (HSSP),  the Internet Security Alliance (ISA) and dozens of industry professionals involved.

The bad news

The ANSI document has a number of fundamental flaws:

a. It doesn’t offer practical ways of building a cost-effective, prioritized program of security countermeasures, although it talks about the multi-dimensional nature of the threats and vulnerabilities in high-level terms:

The key to understanding the financial risks of cyber security is to fully embrace its multi-disciplinary nature. Cyber risk is not just a “technical problem” to be solved by the company’s Chief Technology Officer. Nor is it just a “legal problem” to be handed over to the company’s Chief Legal Counsel; a “customer relationship problem” to be solved by the company’s communications director; a “compliance issue” for the regulatory guru; or a “crisis management” problem. Rather, it is all of these and more.

b, An additional problem with the ANSI document is that it doesn’t a practical risk-calculative method for real life. In a real business the risk calculation is a complex multi-dimensional interplay between threats, vulnerabilities and security countermeasures that simply cannot be performed in a 2 dimensional Microsoft Excel.

c. The real failing of the ANSI method is totally ignoring that risk is caused by damage to assets. Although the document mentions  assets: physical assets, digital assets (that if stolen are really copied…) and intangible assets (such as company reputation)  – it does not acknowledge that  assets have financial value.  Any CFO worth her salt, will be able to make a reasonable judgment of corporate cyber asset asset: for example, availability of the Oracle Applications Financial reporting system at quarter-end  or intellectual property such as mechanical design files of products that the company manufactures.

It’s a step in the right direction, but late in coming and lacking in scope. I hope that the document will receive wide distribution – it’s well written and easy to understand –  most executives should have no problem relating to the material and adopting and adapting it to their business situation.

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