United States: Cybersecurity, Corporate Governance, And Risk Management: Best Practices

Last Updated: May 5 2016
Article by Peter A. Sullivan and Christopher Escobedo Hart

As litigators, we help clients resolve conflicts that have matured into disputes.  In the realm of cybersecurity, we defend claims brought by private parties or governmental entities against companies facing the fallout from a data breach.

In advising clients in the context of litigation, we have identified tools that are available to mitigate or prevent the types of breaches that we see in litigation.  In the area of cybersecurity, companies have begun to consider the issue holistically and as part of a larger compliance and integrity program, rather than shunting cybersecurity issues to the IT department today and litigation counsel tomorrow.  In the face of significant, public data breaches and the losses suffered by the companies that are exposed, executives and corporate boards are now treating cybersecurity as a governance and risk management issue.

What does it mean to say that cybersecurity is now a corporate governance and risk management issue?  In general, it means that companies should look at issues concerning cybersecurity the way they look at other risks they face, examine those risks carefully, and respond appropriately.  To get a handle on the scope and significance of those risks, the nature of the data at risk must first be understood: how does the company use data, what data does it uses, who in the company uses that data, who in the company manages and sees that data, how is that data is stored, and so on.  Analyzing this risk is heavily dependent on the company's business.  The scope of the risk for a large national retailer, which processes point-of-sale personal credit card information from customers in hundreds of stores across the country, will be different from that of a start-up IT services company operating in a single state with local corporate customers.

Nevertheless, there are general practices that would serve all types of companies well.  With this context in mind, we offer the following six "best practices" in managing issues of cybersecurity in the workplace.

Know your data.

What data does your company collect, use, manage, and discard?  How is that data collected, stored, and maintained?  Who has access to it?  If you have given any thought to these questions, you will recognize that the questions are much easier to ask than to answer.  Understanding the answers to these questions requires a patient and thorough assessment of your company's data landscape.  The kind of data your company collects, how that data is used and maintained, and who in the company views it or uses it are all highly relevant considerations in assessing liability in the event the data is compromised.  For example, if your company provides lines of credit to customers nationwide, you might be subject to both state data privacy laws  and federal laws governing companies that provide financing to consumers.  Public companies must also be concerned with federal SEC regulations and enforcement.  Companies dealing with health care or patient information are subject to the federal HIPAA law and state laws governing such information.

Even small private companies that do not collect, maintain, or use personal data from customers must concern themselves with the consequences of a data breach.  Trade secrets might be at stake, for example.  A smart and thorough data mapping will identify where trade secret information and proprietary customer data resides.  But remember that company data invariably includes employee data.  Employee information is as sensitive as customer data; and how that data is collected, stored and maintained must be understood.

Finally "knowing your data" does not simply mean assigning someone in HR or IT the task of creating a data map and filing it away.  It means regularly auditing the type of data that is collected and maintained.  It also means knowing where, physically, such data is kept and who has access to it.  And it means knowing when it can be discarded, and how.  Knowing your data is the first step in managing the risks associated with that data.

Create lines of oversight and accountability.

Now that we know our data, who is going to be charged with protecting it?  Up until recently, one common way to handle the data protection question was to give those responsibilities to the Chief Technology Officer, who managed the company's technology infrastructure and IT staffing.  The virtue of allocating responsibility to the CTO is that he or she will understand well the nature of the data processed and stored within the company.  In practice, however, this is usually not an effective allocation of responsibility.  The responsibilities of a CTO are typically so broad and diffuse that cybersecurity might not get the full attention that it deserves.  For that reason, some companies have taken to the idea of having a specific "cybersecurity officer" as an executive position whose responsibilities are separate and apart from the maintenance of IT infrastructure and staffing.  Even with a separate cybersecurity officer position, there must be close coordination with the CTO.  Finding the right balance has a great deal to do with the specific needs of your company.

Cybersecurity also needs to be a recurring item on the agenda of boards for public companies the same way that safety is often a recurring item of discussion.  Having a knowledgeable board on cybersecurity issues will help set the tone at the top and instill a culture of accountability in cybersecurity.

Create good policies (and stick to them).

It is not enough to know your data and have lines of oversight.  Companies must also create cybersecurity policies that employees can understand and follow.  Policies are necessary for three reasons.  First, they force the company itself to fully understand its risks and how those risks are going to be handled.  You need to know the problem to solve the problem.

Second, if a company has a good policy and actually sticks to it when a crisis occurs, that company is in a far better position to avoid liability.  Often, federal and state laws allow companies to avoid liability if a company can show that it had a reasonable and comprehensive policy in place and followed that policy before, during, and after a breach.  Good policies demonstrate diligence and good faith when the time comes to defend against a claim or charge.

Third, policies help establish a culture of compliance.  They help establish tone at the top.  Policies, whether they be statements of principles or rules to follow, give structure and importance to cybersecurity for the employees who need to carry out those policies.

Train your people.

Your company's employees are the ones who use your company's data.  They need to know what data they are using (and have access to) and what the parameters and limitations are from proper use and maintenance of that data.  As important as creating a cybersecurity policy is, even the best policy will be meaningless if it is simply posted in the dark recesses of your company's intranet, never to be heard from except when it's occasionally dusted off and updated.  A company's policies are only as good as a company's ability to adequately educate employees as to those policies, and train them on how to implement and execute those policies.

Education is the company's opportunity to not just talk the talk, but to walk the talk, too.  Employees need to believe that there is buy-in at the top, and that everyone takes compliance seriously.  Education and training should be an integral part of your company's data security plan.

Create good contracts.

Vigilance in cybersecurity does not end at your company's boundary.  If third parties use data that you collect, you must carefully create and vet contracts with those third parties to confirm that they have acceptable protections in place.  Doing so can mean all the difference in avoiding liability.  Engage knowledgeable counsel in drafting contracts.

Prepare for the worst.

The most common question we get is, "How can I avoid a data breach?"  The answer:  You can't.  Data breaches are the inevitable and foreseeable cost of data ubiquity.  While some breaches are of the front-page news story variety — a hack happening from abroad, stealing trade secrets and compromising financial data — more often breaches happen because of simple human error, like a lost, unencrypted laptop left on a subway.  Or they happen because a company's IT department was so concerned about protecting the "perimeter" — the external threats — that it forgot about the homeland — the internal threats that come from careless or disgruntled employees who have access to more data than they need to perform their job.

That being said, companies that plan for the worst will be best positioned to survive the worst.  Have a business continuity plan.  Have a forensic plan in place to resolve and root out the breach.  Determine which authorities you will need to contact in the event of a particular breach.  Have a crisis management professional lined up to handle the fallout with your customers.  These plans can be collected and kept in a cybersecurity playbook.  Make the playbook ahead of time, and keep it up to date.  If so, you'll be ahead of the game.

Cyberinsurance policies can also play a role.  Cyberinsurance is still something of the "wild west" in insurance products, but the right one can be useful in helping to minimize the exposure and costs that come from a large data breach.  Premiums and terms vary, but insurance can help your company cover many of the costs associated with cleaning up a breach.  Again, having knowledgeable counsel to vet policies is key.

***********

We used to think of cybersecurity as an IT issue,  but gone are the days when all you needed to do to satisfy security concerns was to maintain and update the malware security software.  Cybersecurity is no longer simply a virus-update issue.  The bigness of the data that we collect has utterly transformed the way companies think about security.  In the end, there is no magic bullet that will prevent data breaches.  The pirates and the hackers are too smart and too motivated to get to your information.  But good governance and risk management practices will help your company limit data breaches, and where a breach occurs, following these practices will help the company survive a data breach and the fallout that results.

To view Foley Hoag's Security, Privacy and The Law Blog please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
12 Oct 2018, Other, Boston, United States

The New England Electricity Restructuring Roundtable has been meeting bimonthly since 1995 to discuss current topics related to important changes in the electric power industry in Massachusetts and throughout New England.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions