Rise in cyber attacks at US companies “This threat to our country’s economic and national security, and to companies’ bottom line, is real and it is growing.” Jay Rockefeller Senator & Commerce Committee Chairman in letter to Chairman of SEC April 9, 2013 Sources: http://thehill.com/blogs/hillicon-valley/technology/292919-rockefeller-asks-sec-to-step-up- cybersecurity-disclosures http://www.nytimes.com/2013/05/13/us/cyberattacks-on-rise-against-us-corporations.html? pagewanted=all&_r=0 http://www.bloomberg.com/news/2013-05-14/iran-based-hackers-traced-to-cyber-attack-on-u-s- company.html techland.time.com/2013/09/26/major-u-s-data-providers-hit-by-cyber-attacks/ http://www.npr.org/blogs/alltechconsidered/2013/08/30/217296301/firms-brace-for-possible- retaliatory-cyberattacks-from-syria
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Rise in cyber attacks at US companies “This threat to our country’s economic and national security, and to companies’ bottom line, is real and it is growing.”
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Rise in cyber attacks at US companies
“This threat to our country’s economic and national security, and to companies’ bottom line, is real and it is growing.”Jay RockefellerSenator & Commerce
• Cybercrimes are widespread, systemic and insidious• Annual cost is approximately $100 billion per year • Double-digit year-over-year growth in incidents• 90% of U.S. companies surveyed had detected
computer security breaches* • 74% acknowledged financial losses as a result
*Source: 2011 Computer Security Institute survey
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Verizon 2014 Data Breach Investigations Report (April 23, 2014)
• Nearly 200 breaches of payment systems used by retailers, hotels and restaurants
• Cyber education and “hygiene” critical in protecting payment systems
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Business Consequences
• Harm to business, “franchise” risk, company valuation, stock price, etc.
• Long-term financial and business damage • Theft of valuable intellectual property and business
plans• Theft of customer data and funds• Disruption of critical operations and corporate web
sites • Headline and reputational harm
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Potential costs
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Financial losses for company Average cost of $500,000 and 24 days to identify and resolve an attack
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Cyber crime cost companies $300bn - $1trillion total in 20131
Financial losses for shareholders ~5% drop in share price for public companies
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Brand reputation Value of brand can decline 17-31%, depending on nature and industry
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Your reputation
Sources: 1: 2013 Cost of Cyber Crime Study: United States, Ponemon Institute, October 2013, http://www.hpenterprisesecurity.com/ponemon-2013-cost-of-cyber-crime-study-reports2: “Anatomy of data breaches and their impact on market value,” Electronic International Interdisciplinary Conference 2012 http://www.eiic.cz/archive/?vid=1&aid=2&kid=20101-1313: Poneman Institute, Reputation Impact of Data Breach, October 2011 http://www.scmagazine.com/breaches-lead-to-major-reputation-brand-damage/article/215595/
Legal Consequences
• Governmental investigations and sanctions (SEC, DOJ, State Attorneys General, FTC, etc.)
• Consumer litigation• Class action lawsuits• Shareholder derivative demands• Special Board/Litigation Committees and potential
claims against the corporation
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Push for government regulation
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Cyber Intelligence Sharing & Protection Act To provide for the sharing of certain cyber threat intelligence and cyber
threat information between the intelligence community and cybersecurity entities, and for other purposes.
Passed House of Representatives in April; Senate will not vote but is drafting competing legislation
White House Executive Order – Improving Critical Infrastructure Cybersecurity (February 12, 2013) Establish top-to-bottom review of federal government’s efforts to defend
our nation’s information and infrastructure In conjunction, SEC Division of Corporation Finance issued guidance
instructing companies to disclose cyber attacks or risks associated with breaches if such attacks or breaches are likely to be material to investors
Proactive Response Plan
• Detailed, step-by-step Incident Response Plan• Analysis of insurance policies to determine coverage• Legal counsel and key service providers “on speed dial” • Crisis communication strategy and trained spokespeople• Government affairs/communications with regulators• Readiness exercises that simulate an actual attack• Business continuity planning• Security audits of key vendors• Litigation and regulatory preparedness