What CEOs and Directors Need to Know About Their Bank’s Cyber Risks

August 21st, 2017

cybersecurity-8-21-17.pngCybersecurity is quickly moving to the forefront of pressing concerns for financial institutions and their leaders. Regulators and examiners increasingly are expecting the board of directors and C-suite executives to obtain a greater familiarity with cyber threats and mitigation measures.

In May 2017, for example, the Federal Financial Institutions Examination Council (FFIEC) updated its Cybersecurity Assessment Tool (CAT), which was developed to help identify an institution’s risks and determine its preparedness. The FFIEC’s instructions for using the assessment explicitly contemplate the involvement of the chief executive officer and the board. Banks aren’t yet required to use CAT, but it’s expected to become mandatory eventually.

The message is clear—executives no longer can afford to take a hands-off approach to cybersecurity. They need to stay informed on critical security issues, and their chief information security officers (CISOs) should play a key role in keeping them up-to-date.

Role of the CISO
The CISO plays an advisory role, helping other C-suite executives make better, risk-informed decisions in the day-to-day execution of the bank’s operations. A CISO also can help design and implement the security strategy a bank deploys to effectively protect itself and its customers from known threats.

To provide the expected advisory services, the CISO must be aware of the current threats (including general threats, industry-specific threats and even institution-specific threats) confronting the bank. In addition to understanding this threat landscape, the CISO needs intimate knowledge of the bank’s ability to mitigate these threats, which includes evaluating the existence and effectiveness of the security program and its controls, and communicating the results to the C-suite.

Armed with measurements of the existence and effectiveness of the security program’s controls, the CISO can provide specific advice to the CEO and other C-suite members about the risks facing the bank and the additional steps that might be necessary.

The CISO regularly should brief executives on the following:

Status of Security Controls
Security controls—composed of people, processes and technology working together to mitigate specific threats—are the bedrock of any cybersecurity program. Executives must understand the status of such controls to know how well the bank is equipped to defend against threats.

Evaluating the status of such controls can be accomplished with dashboards that provide executives with a visual representation of all required security controls and the effectiveness of each. It is important for executives to understand how the effectiveness is measured. Is it a system that just measures the existence of the control, or is some form of measurement or testing done on the control? Historical metrics related to control implementation and effectiveness also are essential to provide perspective and illustrate progress (or lack thereof).

Status of Regulatory Compliance
Banks are subject to a broad and complex web of compliance obligations. Depending on the services they offer, applicable state and local regulations, and the types of information they process, the regulatory burden can differ dramatically among banks. For every financial institution, though, failure to comply can lead to fines, lawsuits and customer loss. The CISO should brief fellow C-suite executives on the bank’s current compliance status with all applicable laws and regulations. He or she also should update executives on how the bank is tracking and proactively preparing for potential regulatory changes.

Upcoming Security Initiatives
The CISO should explain current threats and the areas of risk that need to be addressed through various security initiatives, a measure which might require capital expenditures and approval from executive management. The explanation should cover not only where the security program stands today but also the overall direction going forward. Because this information can affect business initiatives that are not directly related to security, it facilitates risk-informed decision making.

Risk Management
Risk management is an ongoing process conducted by the security team to identify the areas with the highest level of risk based on known threats, weaknesses, controls and assets. In the end, the security team might determine that some identified risks are not sufficiently mitigated or that the residual risks remaining after the controls have been implemented are so considerable that they require new security initiatives. This information is vital for executives, as risks that aren’t adequately addressed must be considered when conducting business operations.

Know What You Know—And What You Don’t
No one, not even regulators and examiners, expect C-suite executives to be experts on cybersecurity issues. These executives should, however, understand their banks’ security posture so they can satisfy regulatory expectations and make better, risk-informed decisions for the overall business.

gcombs

C. Glen Combs is a partner at Crowe Horwath LLP. He has a broad array of business experience derived from eight years in public accounting and 25 years as an entrepreneur.

mgilliam

Michael R. Gilliam, CISSP, is a senior manager at Crowe Horwath LLP. He leads teams responsible for delivering enterprise cybersecurity services and personally specializes in cybersecurity assessments and penetration testing.