Security Liability in an 'Assume Breach' World

Sara Boddy contributed to this article.

Anything we put online must swim in a sea of enemies. The F5 Labs report, Lessons Learned from a Decade of Data Breaches reveals that the average breach leaked 35 million records.  Nearly 90% of the US population’s social security numbers have been breached to cybercriminals. When confronted by staggering statistics like these, it is prudent to assume it’s a matter of "if, not when" your systems will be hacked. The safest stance is to operate in an "assume breach" mode. This means anticipating that most of the systems and devices you use on a day-to-day basis, from IoT devices in homes to web servers supporting applications, are susceptible to attack.

At the heart of this, CISOs are so worried about the impacts of a breach that 81% of them either won’t report a breach, or would only report a material breach which, depending on the size of the company and its materiality threshold, could mean that very significant breaches go unreported. The recent F5 and Ponemon report "The Evolving Role of CISOs and their Importance to the Business," found that:

So why are CISOs reluctant to report a breach? It seems that every high-profile breach is followed by the cleaning out of the C-suite. From Equifax to Uber, a breach means those in charge of cybersecurity are sent off in search of new employment.

This should raise serious questions regarding liability for corporate leadership. But according to Harvard Business Review: "Just 38% of directors reported having a high level of concern about cybersecurity risks, and an even smaller proportion said they were prepared for these risks." That’s no surprise. Organizations run on IT, and most of our IT systems are being engineered beyond our ability to operate or monitor them.

Complex and Multifaceted
Compounding this problem is the fact that cybersecurity is a complicated field with many facets and sub-disciplines. Consider these eight areas identified by the International Information System Security Certification Consortium as essential knowledge for cybersecurity:

Most executives have a working knowledge of sales, contract law, and accounting, but once you dive into the deep water of IT security, comprehension gets far more difficult. It doesn’t help that many IT processionals speak in terms of technology, not business. From this, we can conclude:

This lack of awareness raises serious questions about liability for the organization, the CISO, and the leadership itself. While businesses generally work to limit their liability whenever and wherever they can, when it comes to cyber-risk executive teams seem to be exposing themselves unnecessarily. The exposure stems from regulations that make protecting other people's information a business duty and obligation.

'Commercially Reasonable' Data Protection
In general, the law states that organizations must use “commercially reasonable” methods to secure access to the data they collect and process about their employees, customers and, in the case of hosting/outsourcing organizations, their customer’s customers. There are plenty of standards to measure what is commercially reasonable, such as those published by the National Institute of Standards as well as commercial standards, such as the Payment Card Data Security Standard (PCI-DSS), which also introduces contractual liability if standards are not met.

When it comes to contractual liability there are many things could go badly for an organization and ways in which they can be penalized: breach of contract (if contract requires cybersecurity), general negligence (especially if internal processes are not being followed), or breach of warranty (if contract guarantees a certain level of security quality). On top of that, there is the potential for class-action customer and shareholder lawsuits for negligence. This is not counting all the regulatory liability that stem from FTC lawsuits for false advertising regarding security, state attorneys general suing for improper notification, and the forthcoming GDPR regulatory requirements.

With such painful liability threats looming, organizations need to look at their information security plan as a liability defense plan. Cybersecurity is part of the business, which means that it’s not just an IT issue, but also a quality issue (liability regarding product quality), a customer service issue (liability regarding customer data), and an operational issue (liability regarding service delivery). Security leaders should be aware of the potential liability and make use of trusted advisors, both within and outside the organization, to help manage this risk. Lastly, executives, once aware of their risks and liabilities, need to follow up and monitor operations in order to ensure that the business liability is kept to a minimum.

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