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10:30 AM
Stephen Boyer
Stephen Boyer

From Securities To Security: Why The SEC Is Bringing Cyber To The Boardroom

The SEC is emerging as a key proponent of corporate cyber security responsibility and diligence. What does that mean for the CISO?

From major retail data breaches to the Heartbleed bug, 2014 is shaping up to be the year where cyber security becomes a high-level priority among businesses. The major events of the past months have also prompted increased attention from Washington, including both houses of Congress. Yet as cyber security bills languish in the halls of the Capitol, one government body is quickly positioning itself as a regulator of corporate cyber security: The Securities and Exchange Commission.

The SEC has been emerging as a key proponent of corporate cyber security responsibility and diligence. Last year, the regulatory body released an alert, calling on companies to shore up their networks and allocate resources to effectively confront cyberthreats. In March, SEC Commissioner Luis Aguilar echoed this sentiment by publicly stating that board members are responsible for the cyber security posture of their organizations.

Board-level oversight of cyber security issues is not a novel idea. Security professionals and commentators have been calling for cyber security to move out of IT departments and into the purview of top-level executive and board members for some time. Yet, the recent moves by the SEC show some preliminary movement toward future regulation that could hold companies (and their boards) accountable for the cyber security performance of their organizations. While specific regulations from the SEC around cyber issues don’t currently exist, the organization is pushing the issue. The Office of Compliance Inspections and Examinations will begin incorporating cyber security preparedness into mandatory examinations taken by entities that deal with securities, such as hedge funds.

Beyond compliance examinations, how will the SEC change security for an organization? It is impossible to say for sure, but it should be a wakeup call to board members who have not previously monitored the security of their companies. As Commissioner Aguilar aptly noted in a recent address at the New York Stock Exchange, “Boards are responsible for overseeing that the corporation has established appropriate risk management programs and for overseeing how management implements those programs.” While boards that implement these programs should be lauded, there is significant follow-through that comes with oversight of security.

For the practice of board oversight to become a reality, members need consistent metrics and benchmarks to provide a better view of security performance over time. While checkbox items such as adequate personnel, budget, and technology resources are highly important, board members need points of comparison and metrics that can be revisited time and time again. By defining a set of key performance indicators, boards can empower CISOs and security executives to better manage and mitigate cyber risks, which will change the perception of cyber security preparedness from being a black hole for budgets to that of a competitive differentiator.

The SEC is likely to continue to weigh in on the issue of cyber security, as failed network security can disrupt the functioning of capital markets. While concrete regulations may not be imminent, the questions raised by this governmental body bring up an important point: The cyber security performance of an organization is directly related to corporate governance. These issues can be viewed, no longer as “cyber” issues, but rather as business issues.

Stephen co-founded BitSight in 2011 and serves as Chief Technology Officer. Prior to founding BitSight, he was President and co-founder of Saperix, a company spun out of the MIT Lincoln Laboratory focused on vulnerability and network topology risk analysis. Saperix was ... View Full Bio

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Marilyn Cohodas
Marilyn Cohodas,
User Rank: Strategist
9/26/2014 | 11:09:25 AM
Re: Security oversight

I can see that reporting structure for large financial services companies,  retail and healthcare. In other segments, where regulation and compliance aren't so prescribed, i suspect the trend might have the CISO report elsewhere, maybe to the CEO. In any case, the trend towards taking raising infosec into it's own domain, apart from IT is a good thing and an important trend..
User Rank: Apprentice
9/25/2014 | 10:37:06 AM
Re: Security oversight
We are seeing the evolution of the Chief Risk Officer (CRO) where the cyber security function (ex. the CISO) reports up to the CRO. This structure principally exists in large financial services companies; however, other industries will likely follow suite. In many ways corporate culture and execution follows corporate structure and having the cyber security function as part of enterprise risk management reporting chain will likely change the internal attitudes and priorities. 
Marilyn Cohodas
Marilyn Cohodas,
User Rank: Strategist
9/24/2014 | 2:14:12 PM
Re: Security oversight
The devil is in the details and with no specific prescriptive requirements yet in place (if ever) it's hard to know what (if any) the SEC sentiment will have on board-level security awareness and practices. I'm not holding my breathe, though. 
User Rank: Author
9/24/2014 | 12:54:22 PM
Just the start of a boardroom sea change
Great piece. We'll look back a year or two from now and wonder why this was so recent a trend.
User Rank: Ninja
9/24/2014 | 12:05:16 PM
Security oversight
While I am not a big proponent of government oversight into the internal workings of organizations, perhaps this push by the SEC will serve as a wakeup call to move IT security out from under IT oversight. I completely agree that IT security is not a "cyber" issue, but is in actuality a business issue, and must be treated as such. Risk based IT security approaches are no different than other business decisions where risks are weighed and acted upon accordingly. When IT and security fall under the same oversight, and risk mitigation solutions infringe upon the IT agenda, decisions may be heavily influenced by the IT group in their favor especially when the tie breaker is the IT executive. That contaminates the decision, and directs a course not necessarily good for the organization itself. These are decisions that must be made by individuals who have organizational goals as their primary concern, and not the goals specific to a unit within the organization. I understand that this notion of separation goes against old and prevalent practices, and is difficult to overcome, especially if IT is heavily entrenched in the boardroom. However, modern, forward thinking security practices see the situation as it really is - a potential for a conflict of interest that must be resolved by parties external to both IT and security groups. It is my opinion that IT security has evolved to the point where it is a discipline in itself, and although rooted in the same foundations of IT, security must have its own voice in the organization.
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