United States: Top 10 Topics For Directors In 2018: Cybersecurity Threats

Cybersecurity threats

The stakes will continue to rise for boards in connection with cybersecurity in 2018. The past year has redefined the upward bounds of the megabreach. The Yahoo! hack (three billion accounts) forced Yahoo! to accept a $350 million decrease in purchase price from Verizon. The Equifax hack, affecting 143+ million individuals, and exposing the social security numbers of nearly half of the adult U.S. population, resulted in the ouster of the CEO and a shakeup of the board. Additionally, the fallout from the Uber breach, affecting 57 million riders and drivers, is ongoing.

Ransomware threats shut down major multinational companies for days and have increased fourfold in the past year. SEC itself fell prey to a cyberattack, with the breach undisclosed for nearly a year. As a result, the next year will likely bring increased state and federal regulation of cybersecurity. As SEC Co-Directors of Enforcement Stephanie Avakian and Steven Peikin warned, "The greatest threat to our markets right now is the cyber threat." Boards should continue to focus on governance, crisis management and recommended best practices going forward.

Governance. Strength of governance in the risk area of cybersecurity will be a key focus in 2018. The SEC has recommended that companies designate a committee responsible for overseeing cybersecurity risk, and it has further advised that boards should have at least one cybersecurity expert or consultant. The Equifax data breach serves as a post breach governance case study. The fallout from one of the largest data breaches continues, but, so far, it has resulted in the ouster of the CEO, CIO and CISO; establishment of a special litigation committee; initiation of countless regulatory investigations, including 30+ state enforcement inquiries; investigations by the DOJ, SEC, FTC, UK Financial Conduct Authority and others; and 70+ lawsuits, including consumer class actions and securities class actions. The Equifax board has since appointed a cybersecurity expert to its board and technology committee. Ensuring that directors have properly established governance surrounding cybersecurity will be critical going forward in what is fast becoming a "bet-your-job" and "bet-the-company" risk.

Crisis management. A well-coordinated response to a cybersecurity crisis can mean the difference between being perceived as the victim of hackers or the negligent corporate wrongdoer. Although most breach notification deadlines were, at the earliest, 45 days from discovery of the breach, companies must move much more quickly in notifying consumers and government agencies to maintain credibility. The New York Department of Financial Services (NYDFS) Cybersecurity Regulation requires notification within 72 hours for covered entities, and the National Association of Insurance Commissioners (NAIC) just passed a model law that follows suit. The NYDFS, NAIC and countless other regulations require companies to have firmly established and tailored incident response plans and to conduct tabletop scenarios to test them.

Cybersecurity and data protection abroad. The European Union's General Data Protection Regulation (GDPR) goes into force on May 25, 2018, and has significant implications for companies both in the U.S. and abroad. GDPR expands its territorial reach by applying to any company that offers goods or services or monitors the behavior of EU data subjects. It implements requirements such as requiring Data Protection Officers for certain companies; requiring Privacy by Design; imposing documentation and data minimization requirements; requiring improved consent procedures; requiring quick data breach notification; and imposing obligations on data processors, not just data controllers. Penalties for noncompliance are steep—with fines of the greater of 4% of worldwide annual revenue or EUR$20 million. The United Kingdom intends to implement a similar regulation to GDPR following its exit from the EU.

Best practices going forward. Announcing the results of the OCIE's recent exams of registered investment advisors and funds, the SEC identified consistent deficiencies by various regulated entities:

  • failure to reasonably tailor policies and procedure
  • failure to adhere to or enforce policies and procedures
  • failure to adequately conduct system maintenance, resulting in Regulation S-P issues
  • failure to remediate high-risk observations discovered through penetration tests and vulnerability scans.

The SEC recommended the following best practices, which also serve as best practices for any public company:

  • maintenance of an inventory of data, information and vendors; and classification of risks, vulnerabilities, data, business consequences, and information regarding each service provider and vendor
  • detailed cybersecurity-related instructions for issues such as penetration tests, security monitoring/auditing, access rights and reporting guidelines for lost, stolen or unintentionally disclosed sensitive information
  • maintenance of prescriptive schedules and processes for testing data integrity and vulnerabilities, including patch management policies
  • established and enforced controls for access to data and systems
  • mandatory employee training at onboarding and periodically thereafter
  • engaged senior management.

Calls for cybersecurity regulation following the Equifax breach have increased substantially. As the scale and scope of breaches continue to broaden, regulations will likely follow. At least 42 states have introduced more than 240 bills or resolutions related to cybersecurity in 2017, and some state regulations, such as the Illinois Biometric Information Privacy Act (which has resulted in 35 class action lawsuits in the past year alone), promise to bring increased enforcement. Improved governance and crisis management planning will make directors best prepared to respond to cybersecurity threats.

View the full report 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
 
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