Cyber Security is Driving Board Engagement with Internal Audit

by David Ritzert 10. March 2016 12:14
Almost three out of four companies are now including cyber security risks in their internal audit plans, according to a survey of more than 1,300 IA professionals just released by Protiviti. This is an increase of 20% year over year, and stands in contrast to the findings reported in the Institute of Internal Auditors 2016 North American Pulse of Internal Audit, which concluded that internal audit leaders lack confidence in their staff’s cyber security capabilities (see our related blog). Suppliers and business partners are increasingly engaged with the issue as well. More than half of the survey respondents reported receiving inquiries from clients, insurance vendors, and customers about their cyber security posture. An important byproduct of cyber security risk becoming a fixture in the annual audit plan is that it is driving more Board engagement with the process. The Protiviti survey provided these important takeaways: in order to implement and maintain an effective cyber security plan, an organization must have a high level of engagement by its board of directors regarding information security risks, and it should also include an evaluation of cyber security risk in its current audit plan. Having directors more engaged with the internal audit process will provide further support for IA professionals as they seek to integrate increased cyber security measures into the overall enterprise risk management plan. This is a very positive trend.
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Preparedness is Key in Managing Crises

by Ken Urish 14. January 2016 12:35
Not if, but when. That is the approach companies should take toward breach response planning in our current cyber security environment. Risk managers must prepare as though a breach or data security crisis will occur in their company. Looking at past breaches of companies big and small provides perspective on the actions that have worked best for such organizations. There are steps that can be taken that will mitigate damage and manage reputational issues. Before delving into what companies should be doing, it’s important to stress what doesn’t work, and what companies should not be doing. Making the wrong moves, even early, can diminish trust from stakeholders and customers and set in motion further, possibly irreparable mistakes. One of the worst consequences of being unprepared is a lack of certainty about how to handle situations, and firms that aren’t prepared often shoot themselves in the foot through inaction. Part of that inaction is a hesitancy or delay in declaring the issue to stakeholders, clients, customers, etc. But a delay can cause distrust in those people that weren’t informed in a timely manner. Further inaction can cause issues to compound, which makes the situation even more difficult to deal with and to recover from. When any declaration or announcement is made regarding the situation, it should come from an informed place. Misrepresenting the facts or providing false information will only complicate issues further. Additionally, don’t make assumptions about what 3rd parties are or aren’t doing to ameliorate the issue. Take the information you have and do the right things. A well prepared company will be focused on business continuity, key stakeholders, and data management. In order to keep things moving in the midst of crisis, it’s important that you maintain stakeholders' trust during this time. That is why preparedness is such an issue. You should be fostering and developing relationships with your stakeholders, so that trust is already present. Even if the trust is there, don’t lose sight of the human element. The stakeholders are people, and their feelings are important to listen to and to consider. Making fast, critical decisions will also instill trust in your abilities and keep things moving. Very importantly, a lot of data related to your business and any that was directly involved in whatever caused the incident will need to be collected and reviewed by legislators, regulators, lawyers. Having the necessary data in place keeps the process moving and maintains a level of transparency for everyone involved. It also avoids negative legal and regulatory consequences. Obviously, to have the data readily available, means having a plan in place to track and monitor important data. As you can see, preparation is the biggest part of what to do versus what not to do. A company that is prepared to deal with a crisis is already ahead of the game and many missteps that would normally occur are naturally eliminated during a thorough planning process.

Seeking Cyber Resiliency in 2016

by Ken Urish 8. December 2015 11:40
In the evolving cyber risk management environment, cyber security is becoming an increasing priority for CFO’s, risk managers and financial executives. This is evidenced by the projected increased emphasis on cyber security for 2016 disclosed by two recent surveys. Consulting firm Protiviti surveyed 650 CFOs and found that, while margins and earnings performance top the list of priorities for 2016, cyber security risks are the next highest priority. TD Ameritrade surveyed 300 senior finance executives and found that 41% of respondents identified data security as an area for increased capital expenditures for 2016. With this increased emphasis, CFO’s are reacting to increased sophistication and frequency of cyber attacks, and a better understanding of the inherent financial risks. The true cost of a cyber breach is complex. A breach of intellectual property affects not just competitiveness, it also hurts market share due to reputational damage and loss of confidence by customers. Productivity suffers during the remediation process and the throughout the internal changes – system upgrades, procedural changes, etc. - that tend to be implemented following a breach. Then there is litigation expense, and in many industries, fines and fees from regulatory non-compliance. Along with growing awareness of the true cost of a breach is the acknowledgement by many risk managers that it is "not if, but when" a breach will occur. Therefore, the focus of the increased expenditures is not just for defense, but rather on preparing for efficient breach response and containment. Investments are increasing in cyber insurance, forensic tools, and for training staff in both protection and response techniques. In short, we are seeing a shift by CFOs and risk managers to a more proactive approach to cyber risk management. The goal - a cyber resilient organization.
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The Rising Tide in Risk Management

by Mark Gibbons 30. October 2015 15:59
Based on the results of a survey conducted in September 2015[1] with 150 directors of public company boards, it seems that directors are finally starting to understand their critical role in addressing cyber security. Indeed, cyber attacks are becoming more and more frequent, often targeting high-profile companies and their sensitive data and information. As the attacks become more widespread and damaging, the involvement of the corporate board in mitigating cyber risk has become an imperative. Of the 150 corporate board directors surveyed, 22% reported having experienced a cyber breach within the past two years, which has doubled since 2013 (11%). While those numbers are alarming, the good news is that 69% of corporate directors reported their board being more involved with cyber security than it was in the previous 12 months. Additionally, more than 70% of board members report having increased their company’s investments in cyber security within the last 12 months. 28% have purchased cyber insurance. Though the tide seems to be turning, the survey results indicate that there are many corporate boards and directors that haven’t yet taken key steps to mitigate cyber risk and protect their digital assets. Only 34% of directors reported having conducted a formal assessment of their critical digital assets, while 32% have had an assessment, but have no final strategy in place based on those assessments. Furthermore, although third-party vendors are a critical source of cyber attacks, only 35% of directors have developed cyber risk requirements for their third-party vendors. Has your board performed a risk assessment of its critical assets? Do you have a plan in place to mitigate cyber attacks? Don’t be the 21% without a plan in place.   To view the results of the survey, conducted by our Alliance partner BDO, click here. [1] Survey conducted by Market Measurement on behalf of Urish Popeck’s alliance partner BDO.
Categories: Risk Management

30% of CFOs See Transfer Pricing as the Greatest Risk

by Dennis Stuchell 26. July 2012 15:40
Among 60 chief financial officers of companies with more than $1 billion in annual revenues, nearly one-third (30%) said that transfer pricing was their biggest tax-related challenge and risk, according to a new survey by Alvarez & Marsal reported by WSJ.com). Only four CFOs reported spending most of their time—and money—on transfer pricing issues, but the prevalent concern among respondents helped push transfer pricing to Number 2 on the survey of risk, just behind global compliance.   The higher risk profile for transfer pricing has resulted from increased attention by the IRS.  Intellectual property, including trademarks, trade names, patents, copyrights, and internally developed software, is increasingly being shared among multinationals. The IRS, under Sec 482, requires related parties to report transfer pricing at arm’s length. In this environment, a well structured corporate transfer pricing plan is essential to withstand IRS audit scrutiny. 
Categories: Advisory

Governance Update: Liability Risk for Boards Increasing

by Ken Urish 14. September 2011 13:20
In a plus for corporate governance advocates and a rare positive emerging from the current economic climate, the financial crisis appears to have driven home the need for boards to manage risk more effectively. This conclusion is based on the findings of a survey of board members of public companies with revenues ranging to $750M that was released this month by our alliance partner BDO. As the responsibility of boards has grown in recent years due to regulatory requirements, board risk management activities have been focused heavily on compliance. Now, facing increased risks as a result of the financial crisis, it appears that boards are more willing to take a proactive role in risk management. In the survey, when asked what topics they would like to spend more time on, a majority (55%) of board members at public companies cite risk management, more than any other area. Moreover, an even greater percentage (61%) believe their liability risk as a director has increased during the past few years. Interestingly, the study shows that the CEO position is considered by board members to be the most helpful position for assessing and managing risk (44%), with the CFO following at 33%. 
Categories: Assurance