In a panel called "What Every CFO Must Know About Cyber Threats and Security" held here last week, some well-known security executives spoke to chief financial officers (CFOs) about the costs of data breaches -- and the benefits of proper preparation.
The panel, sponsored by the Northern Virginia Technology Council, offered CFOs some tips on what they should pay attention to when the security discussion comes up.
"The Ponemon Institute estimates that the cost of the average data breach -- the average, mind you -- is over $5 million," said Len Moodispaw, CEO of KEYW, a consulting firm that focuses on cybersecurity and counter-terrorism defense. "What that says is that it pays to make the right [security] decisions from a financial perspective."
Nick Savage, a special agent for the FBI's cybercrime branch, agreed. "Five million dollars may be simply the cost of doing business if you're a large organization, or if you are very small, it could put you out of business," he said. "The threat actors we see are very persistent and very patient, so the [financial] decisions you make need to take that into account."
The panelists encouraged CFOs to be willing to spend money on security -- but to be educated about what they are spending it on.
"In some ways, security is IT's revenge on the finance department -- they say, 'You don't understand what we do, so we'll spend your money however we like," joked Kevin Mandia, CEO of security forensics firm Mandiant. "As a CFO, you need to understand something about the security issue. For example, you can invest in a compliance program, or you can invest in an actual security program. A full security program will cost you more, but in the end, it may save you more."
Other panelists also told the CFOs that spending a small amount up front may save the company a great deal in a breach situation. Michelle Schafer, vice president of the security practice at public relations firm Merritt Group, said companies should take the time to develop a breach response program -- and rehearse various scenarios -- before a compromise occurs.
"It's about your brand and the potential loss of trust if a breach happens," Schafer said. "You need to have a breach response plan in place that involves all the players who might play a role, including legal and PR. And you need to practice it ahead of time, with tabletop exercises or simulations."
Companies should also consider the benefits provided by breach insurance policies, said Rachel Lavender, senior vice president of the FINPRO practice at Marsh USA, which provides security and privacy coverage that may not be provided in standard business insurance policies.
"There are gaps in typical business policies that you might not be aware of, and that can create problems for you if a breach occurs," Lavender said. "Before something happens, you should take a look at each policy closely to see what it will cover and what it won't."
While the panelists pointed out the benefits of up-front spending on security, they also encouraged CFOs to be firm in resisting capricious technology spending.
"It's so easy to go off spending money on security without knowing what you're doing," Moodispaw said. "We've seen companies look at firewalls and say, 'Hey, if one is good, then we should buy five or six.' You need to counsel your organizations to think twice about buying the latest, hottest things and focus on what works."
Lavender agreed. "The biggest advice is to know your data," she said. "What format is it in? Where is it? In the network? In the cloud? And if you go through a merger or acquisition, you need to know their data and where it resides as well."
If a breach does occur, then it's important to limit its impact and the potential impact on the organization's reputation, panelists said. "It's a punitive world -- you can be a victim and still have to absorb the blame," Mandia observed.
But some organizations, such as Heartland Payment Systems, have taken the damage done by a breach and turned it into a positive for their images, Schafer noted.
"Heartland took what happened to them and embraced it and counseled other companies to help them avoid making the same mistakes," Schafer said. "They turned the breach around and made it something that helped their reputation and their brand."