United States: DoD's Efforts To Secure Information On Contractor Systems Continues, But All Companies Are At Risk And Should Take Steps Now To Protect Themselves

Last Updated: December 18 2017
Article by Richard W. Arnholt and Anthony McFarland

As recent malware, ransomware and distributed denial of service attacks have made clear, the cyber threats posed to governments and commercial entities are real and growing. Critical infrastructure such as power plants, airports and communication systems are vulnerable to attacks on the cyber battlefield, as are banks, manufacturers, and law firms, among other commercial entities. In an attempt to address these risks, the U.S. government is imposing heightened cyber-security requirements on contractors, some of which are summarized below. But, in light of the growing cyber threats posed by nation states, subnational groups and bored teenagers, even companies that are not subject to these new requirements should evaluate the sufficiency of their current cyber security protocols and consider taking steps such as the simplified four-step "starter plan" – train, maintain, test and repeat – laid out below to address vulnerabilities.

Commercial organizations and governments, including the U.S. government, have begun to respond to these threats by standing to cyber commands and belatedly starting to harden the IT systems on which sensitive information is stored. Because of its reliance on contractors, a high volume of sensitive U.S. government data, both classified and unclassified, is stored on systems that are not owned or operated by the government. To address the risk of this information being compromised, as it has been repeatedly in the past, the U.S. Department of Defense (DoD) has been pushing out heightened security protocols for systems owned or operated by or for government contractors if those systems process, store or transmit certain types of unclassified but controlled technical information or other information that the government deems to require safeguarding (classified information stored on contractor systems is subject to stricter protections). Without these protections, the U.S. government would be forced to maintain such information, defined by the applicable regulations as "covered defense information," solely on U.S. government systems, an impossibility given the government's dependence on contractors.

As a result of these measures, DoD contractors that handle covered defense information will soon be required to comply with heighted cyber-security requirements. While the applicable regulations require compliance by the end of 2017, in June 2017 DoD clarified that the looming end-of-year deadline for implementation of the rigorous cyber security requirements set forth at National Institute of Standard and Technology (NIST) SP 800-171 could be satisfied by implementation plans that laid out the path for achieving those standards, even if they are not met by the end of the year. This was welcome relief to defense contractors, as DoD's interpretation is not clear related to the applicable regulations requiring contractors to represent that they will implement the security requirements in NIST SP 800-171 as soon as practical, but no later than December 31, 2017. One of the key provisions – DFARS 252.204-7012, Safeguarding Covered Defense Information and Cyber Incident Reporting – which must be flowed down to subcontractors also includes cyber incident reporting regulations and media preservation obligations, among other requirements, that does not apply to commercial-off-the-shelf items, but is applicable to commercial item contracts awarded pursuant to FAR Part 12.

DoD issued some helpful responses to frequently asked questions about the these requirements in January 2017, available here, and is expected to issue additional FAQs after its clarification last month that a contractor need not be fully compliant with NIST SP 800-171 by the end of this year. While DoD's interpretation is a welcome relief, contractors should determine now whether they are subject to these heighted security requirements and, if they are, move post haste to implement them.

Even for contractors that are not at immediate risk of being subject to these heightened DoD requirements, the increasing frequency and impact of cyber-attacks highlights that need for every company to ensure its IT systems are protected. If your company relies on computer systems to conduct its business, you should immediately begin implementing cybersecurity best practices, including:

  • Adoption of security policies and procedures;
  • Preparation of an incident response plan;
  • Enforcing complex, revolving passwords;
  • Mandating multi-factor authentication;
  • Implementing mobile device management; and
  • Obtaining cyberliability insurance.

Whether your company is in the beginning stages of cybersecurity planning, or deep into updating an existing plan, it is easy to become overwhelmed researching and reviewing cybersecurity guidelines and recommendations, and then digesting and prioritizing the suggested practices. This is particularly true for businesses without dedicated IT departments. But doing nothing is neither a practical, nor regulatory, option.

Thankfully there is a simplified four-step starter plan that can be put into place quickly, at relatively low cost, by any company: Train. Maintain. Test. Repeat.

Train. The overwhelming majority of cyber incidents stem from social engineering attacks that infiltrate the system because of user error. The most prominent threats to companies continue to be phishing, and especially spear phishing, scams. There is no substitute for ongoing cybersecurity training, which should extend from the top of the organization – including general counsel, C-suite officers and senior leadership – to the newest hiree. Training should be continuous, beginning with the onboarding process. Dedicate an individual or group to be responsible for conducting due diligence on the various training sources and methods available, and making recommendations on which procedures to put in place.

Maintain. The recent WannaCry ransomware attack emphasized that cybersecurity training alone is not enough. Computer data was encrypted by WannaCry as a result of a Windows operating system security weakness – not a typical phishing attack. Organizations could have avoided, or at least minimized, the ransomware raid through a regular, diligent program of applying updates and patches as soon as they are made available.

Test. There are a number of valuable methods to test an organization's cybersecurity program. The most common is penetration testing (pen testing), where a third party is hired to try to gain unauthorized computer network access from outside the organization. Businesses should seriously consider undergoing a pen test on a regular, perhaps annual, basis. Testing should also extend to an institution's public-facing applications, which often are over-looked as an avenue for intrusion or infection.

Beyond vendor testing, businesses should implement their own internal pen testing on a periodic, more frequent interval. Because the organization's systems analysts and network administrators are the most familiar with the organization's own systems and network, they are uniquely situated to detect security issues. In addition, ongoing "table top" exercises can help pinpoint potential security weaknesses and educate technology associates on cybersecurity risks. Vacations occur, illnesses happen, and cell phone batteries die. To ensure internal tests simulate real world conditions, include scenarios where certain personnel are unavailable.

An additional testing method, which is a form of cybersecurity training, is to periodically cast phishing email lures to the business's own personnel, interns and CEO alike. This type of intentional phishing expedition will help raise cybersecurity awareness throughout the organization.

Repeat. Training, maintaining and testing are not boxes to be checked off or one-time activities. Regulations and guidances change, the workforce turns over, new testing methods develop, and most importantly, cyber threats evolve. Organizations must train, maintain and test on an ongoing basis as a part of a continuous and enhanced cybersecurity program.

Cybersecurity is a culture, not a cost center; a mindset, not a mine field. Fostering this cybersecurity culture is the single most effective defense against a cyber event, and therefore safeguard of the assets of an organization, its customers, employees, and shareholders.

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.

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