Are Directors Tone Deaf on Cybersecurity?

March 27th, 2017

cybersecurity-3-27-17.pngAre the boards of directors at U.S. banks taking the cybersecurity threat seriously enough?

In Bank Director’s 2017 Risk Practices Survey, 85 percent of the 167 respondents—a group that includes bank directors, CEOs, chief risk officers, and chief information and chief technology officers—identify cybersecurity as the risk category they are the most concerned about. And that heightened level of concern is evident across all sizes of institutions in the survey, from banks under $1 billion in assets to those greater than $10 billion.

After all of the high profile, highly successful and highly publicized cyberattacks that have occurred over the last several years, surely every bank director understands the serious nature of cyber risk today. Hackers are incredibly creative and persistent in their efforts to penetrate bank security systems and steal sensitive customer data, money—or both. A successful intrusion can be costly to the bank, damage its reputation with customers, and become an issue with regulators if they believe the bank has a weak cybersecurity program.

Twenty-six percent of the respondents say their bank has experienced a data breach or some other type of cyberattack since 2015, and another 4 percent were the victims of a breach prior to 2015. In other words, nearly one-third of the respondents have already experienced a breach—an incident rate that should get all directors’ attention regardless of whether their banks have been victmized or not.

So, what is being done about this? Over the past two years, the survey participants’ banks have made a number of improvements to their cybersecurity programs, including:

  • Eighty-two percent have invested in technology to better detect and deter cyber threats and intrusions.
  • Eighty-one percent have improved training for staff.
  • Eighty percent have increased their focus on cybersecurity at the board level.
  • Seventy-five percent have improved their internal controls related to cybersecurity.
  • Seventy-five percent have improved and tested their bank’s cyber-incident management and response plan.

But there is still more that can be done to protect against hackers. According to the survey, 38 percent of the respondents still don’t employ a full-time chief information security officer (CISO). As one might expect, this deficiency is most evident at banks under $1 billion is assets, even though they are still likely targets for a cyberattack. The benefit of having a CISO, rather than giving this responsibility to the chief risk officer or chief information officer, is that cybersecurity has become so specialized that it should be handled full-time by one individual with experience in the field. Fifty-one percent of the survey participants say their bank won’t be hiring a CISO in 2017, and 43 percent say they are unsure. Banks under $1 billion are already less likely to employ a CISO, and the survey data suggests that they’re unlikely to hire one this year.

Most surprising of all is that only 17 percent of the respondents say cybersecurity is discussed at every board meeting. Thirty-six percent say the board reviews the issue quarterly, 19 percent say they discuss it semi-annually and 10 percent talk about cybersecurity just once a year. If cybersecurity is truly the most pressing risk management issue facing bank boards today, then why isn’t it being discussed at every board meeting, at every bank?

If it’s the board’s responsibility to set the tone at the top when it comes to risk governance throughout the bank, then it would seem that a lot of boards are tone-deaf when it comes to cybersecurity.

jmilligan

Jack Milligan is editor in chief of Bank Director, an information resource for directors and officers of financial companies. You can connect with Jack on LinkedIn or follow @BankDirectorEd on Twitter.