Identifying and Dealing with Cyber Risks

Security breaches to computer systems have consistently been a major drain on organizations, both private and public.

With technology constantly evolving and posing more threats, both internal and external, to the existence and functioning of the business, management need to be always on the guard of these computer threats or cyber attacks.

Failure to properly identify, evaluate, monitor and manage these ever-increasing cyber threats will result in the organization incurring huge costs.

As a starting point, organizations need to understand the source and nature of the threat. Is it an external of internal attack?

Examples of external threats include attacks by organized criminals and threats from terrorists. Examples of internal threats include turbulence in personnel through new hires, transfers and terminations.

Cyber risk management has now become one of the top concerns for organizations. Not only are organizations realizing the wide array of opportunities presented by recent developments in information technology.

They have also become aware of the huge threats posed by such developments.

The type of cyber attacks has also evolved over the years. For example, in the 1980s, email viruses were the most common form of attack, in the 1990s denial of service attacks took over, for example worms and trojans.

From the early 2000s network and infrastructure attacks such as bandwidth consumption and resource starvation or exploitation became common.

This development of new forms of attacks does not mean that the organization should turn a blind eye on early forms of attacks.

These still need to be managed and at the same time organizations need to be one step closer or ahead of the attackers.

In dealing with cyber risks, management should know the different categories of information technology risk. Having detailed knowledge of these risks will help devise appropriate tools and means of managing them.

The different categories include:

1. Malicious Codes and Programs: These pose a threat to everyone who uses the internet. Examples include Viruses, Worms, Trojan Horses and Logic/Time Bombs. Today, new viruses are targeting instant messaging, voice mail, mobile phones and other personal devices.

If these attacks are not properly managed, the impact on the organization can be destructive. For example, in October 2012, The “Shamoon” virus dubbed the most sophisticated of its kind attacked Saudi Arabia’s state oil company ARAMCO and Qatar’s natural gas firm, Rasgas.

Shamoon included a routine called a “wiper,” coded to self-execute, which replaced crucial system files with an image of a burning U.S. flag. It also overwrote all the real data on the machine with garbage.

More than 30,000 computers that it infected at ARAMCO were rendered useless, and had to be replaced. The scope and speed with which this happened was unprecedented.

What this means is that organizations must bolster their cyber defenses. Protection is available at the individual and system level, for example, use of anti-virus programs.

2. Malicious Hacking and Intrusion: This involves unauthorized penetration of the computer system for the legal purpose of obtaining illegal access to key information such as customer information, financial records, R&D information, employee records etc.

Can also involve denial of service attacks, for example, password sniffing to obtain access to bank or credit resources. Organizations should effectively monitor such activities and ensure proper controls are in place to reduce the extent of damage caused by such threats.

Failure to do so might result in corporate, industrial or government espionage or a business competitor defacing your website.

For example, an organization called the Syrian Electronic Army (SEA) has recently been targeting a number of western media organizations, including the Guardian, the BBC and al-Jazera.

The SEA recently attacked The Associated Press and breached its Twitter accounts. They sent bogus messages which wrecked havoc on stock exchanges worldwide.

The hackers tweeted that President Obama had been injured in a bomb attack at the White House, causing a temporary 143-point drop on the Dow Jones industrial average.

The same hackers have also lodged an attack on the Guardian by sending spoof emails to staff encouraging them to click on links that could compromise some of the company’s emails and social media accounts. The same could happen to your organization.

With a lot of information circulating on social media sites and the web, management need to know what exactly is being said out there with regards to the company’s products, services, channels, customers, management, or operations so that they can make sound decisions.

Research has shown that India is one of the top spammers. The country relays 9.3% of all spam.

Other notable spammers include USA 8.3%, South Korea 5.7%, Russia and Indonesia 5%, Italy 4.9%, Brazil 4.3%, Poland 3.9% and Pakistan 3.3%.

3. Fraud and Deception: This includes various forms of attacks in the form of spoofing, masquerading or salami attacks resulting in damage to privacy. There are also electronic forms of fraud such as phishing and credit card theft.

In order to combat fraud, organizations must initiate training programs that raise the awareness level of employees and users of computer systems and instill an understanding of the need for sound password practices and other protection policies.

4. Misuse and Sabotage: Involves misuse or vandalization of resources through unauthorized access, for example unauthorized software changes or downloads.

5. Errors and Omission: Software programmers are capable of making human errors when designing and developing software systems. Also involved in this category of risk is accidental or unintended destruction of files or data and routing or transmission errors.

6. Physical and Environmental Hazards: These can either be intentional or accidental threats. Fires, floods, earthquakes, or tsunamis can cause destruction to computer systems with sensitive information.

Theft by current and former employees of computers or storage facilities with sensitive information also poses high risk to the organization.

To avoid losing such important information, there must be proper and efficient back-up facilities to ensure business continuity.

Key sensitive information must be stored and locked in designated areas and only individuals with permission to such information should be allowed access at all times.

Their activities on the systems should also be regularly checked and monitored.

Since cyber risk management is about information security, preserving the organization’s information confidentiality, integrity and availability to ensure business continuity is therefore critical.

Organizations can adopt some or all of the following best practices for information security.

  • Use of firewalls, anti-virus, worm and trojan software to reduce virus vulnerability.
  • Make use of software updates by adopting patches issued by the software source. Software updates correct application vulnerabilities when they are detected.
  • Implement a password policy with a sound password structure and workability (the ability to remember).
  • Physical security including disaster recovery planning and physical protection in the form of locks to control access to critical system equipment.
  • Policy and training to create awareness of information systems security risks.
  • Secure remote connections and server lock down.
  • Make use of intrusion detection systems to monitor network traffic to seek matching bit patterns.
  • Conduct continuous security audits using testable metrics. Audits should identify lost productivity due to security failures and should include subsequent user awareness training.
  • Include security in business decision-making processes. For example, when pricing products or services, required funding for security measures need to be included in business cases.

As cyber activities continue to increase and more information gets splashed across the worldwide web, organizations must increase focus and enhance their cyber risk mitigation strategies.

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Leading in Uncertain Times

One of the biggest challenges facing business leaders today is making the right decisions that will ensure their organizations succeed, survive, and remain competitive in an increasingly uncertain and complex environment.

A recent post, The best way to lead in uncertain times may be to throw out the playbook, by Strategy+Business has several good points.

The article is about the COVID-19 pandemic, how global companies navigated through the crisis, and how best to prepare for future disruptions. Here are some key points and my comments.

  • Rather than follow a rigid blueprint, executives must help organizations focus on sensing and responding to unpredictable market conditions.
    • Comment: Senior leaders play a vital role in providing clarity about the organization’s strategic direction, creating alignment on key priorities to ensure the achievement of enterprise objectives, and ensuring the business model is continuously evolving to create and capture value in the face of uncertainty. They must not rest on their laurels and stick to the beliefs and paradigms that got them to where they are today and hope they will carry them through tomorrow. Regulatory changes, new products, competition, markets, technologies, and shifts in customer behavior are upending many outdated assumptions about business success. Thus, the businesses you have today are different from the ones you will need in the future hence the importance of continuously sensing changes in the global economy. Employees and teams often feed off the energy of their leaders and tend to focus their attention where the leader focuses attention. If the leader is comfortable with current business practices and rarely embraces the future or challenges the status quo, then the team is highly likely to follow suit.
  • When it became clear that supply chains and other operations would fracture, organizations began scenario planning to shift production sources, relocate employees, and secure key supplies.
    • Comment: Instead of using scenario planning to anticipate the future and prepare for different outcomes, it seems most of the surveyed organizations used scenario planning as a reactionary tool. Don’t wait for a crisis or a shift in the market to start thinking about the future. The world is always changing. As I wrote in The Resilient Organization, acknowledge that the future is a range of possible outcomes, learn and develop capabilities to map out multiple future scenarios, develop an optimal strategy for each of those scenarios, then continually test the effectiveness of these strategies. This does not necessarily mean that every change in the market will impact your business. Identify early warnings of what might be important and pay closer attention to those signals. In other words, learn to separate the signals from the noise.
  • The pandemic forced the organization’s senior management team to re-examine how all decisions were made.
    • Comment: Bureaucracy has for a very long time stood in the way of innovation and agility. To remain innovative and adapt quickly in a fast-changing world, the organization must have nimble leadership and an empowered workforce where employees at all levels can dream up new ideas and bring them to life. Identifying and acting on emerging threats and potential opportunities is not the job of the leader alone but every team member. To quote Rita McGrath, in her book Seeing Around Corners, she writes, “Being able to detect weak signals that things are changing requires more eyes and ears throughout the organization. The critical information that informs decision-making is often locked in individual brains.” In addition to the internal environment, the leader must also connect with the external environment (customers, competitors, regulators, and other stakeholders), looking for what is changing and how.
  • It’s worthwhile for leaders of any team to absorb the lessons of sense-respond-adapt, even if there is no emergency at hand.
  • Sensing: Treat the far-flung parts of your enterprise as listening stations. The question leaders must ask is, “What are we learning from our interactions beyond the usual information about costs and sales?” Train your people to listen for potentially significant anomalies and ensure that important information is not trapped in organizational silos.
    • Comment: Cost and sales data are lagging indicators that reveal the consequences or outcomes of past activities and decisions. Although this information can help leaders spot trends by looking at patterns over time, it doesn’t help understand the future and inform what needs to be done for the numbers to tell a different story. In addition to lagging indicators, pay attention to current and leading indicators and understand the relationship between these indicators and outcomes.
  • Responding: Improve communication across intra- and inter-organizational boundaries. Leaders should view business continuity as an essential function that acts as connective tissue for the enterprise.
    • Comment: In addition to creating mechanisms that allow the free flow of information both inside and outside the organization, decision-makers should also be comfortable receiving information that challenges their personal view of the world, even if it’s not what they want to hear. Create a culture of psychological safety where people are not afraid to share bad news for fear of getting punished, but rather are acknowledged and rewarded for speaking up. Leveraging the diversity of thought enables leaders to anticipate the future as an organization, decide what to do about it collectively, and then mobilize the organization to do what’s necessary.
  • Adapting: Challenge assumptions, and question orthodoxies. There’s always the temptation to mitigate threats simply by applying existing practices harder and faster. One way to get at those deeper issues and encourage double-loop learning is to ask, “What needs to be true for this to be the right approach?”
    • Comment: In an increasingly uncertain environment, it’s difficult to survive and thrive with an old business model or outdated technologies. Many businesses fail because they continue doing the same thing for too long, and they don’t respond quickly enough and effectively when conditions change. As a leader, stay curious and connected to the external environment, look for market shifts, understand what needs to be regularly refreshed and reimagined, adopt new technologies and capabilities, and adapt in ordinary times but also during times of transition. Unfortunately for many leaders, it’s just more convenient for them to continually downplay the fact that conditions are changing than take the appropriate course of action that drives business success.

How are you preparing your organization for potential future disruptions?

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The Collaborative Organization

These days the term collaboration has become synonymous with organizational culture, creativity, innovation, increased productivity, and success.

Let’s look at the COVID-19 pandemic as an example. At the peak of the crisis, several companies instructed their workers to adopt remote working as a health and safety precautionary measure.

Two years into the pandemic, they are now asking their employees back to the office full time or are planning to adopt a hybrid model.

The need to preserve our collaborative culture and accelerate innovation are two of the top benefits being cited by organizational and team leaders for bringing workers back.

Collaboration is indeed essential for the achievement of team goals, functional objectives, and the overall success of the organization.

Today’s breakthrough innovations are emerging from many interacting teams and collaborative relationships.

When teams, functions, and organizations collaborate, the whole is greater than the sum of its parts; group genius emerges, and creativity unfolds.

But, what makes a successful collaboration? What are the key enabling conditions?

  • It extends beyond the boundaries of the organization. Business success is a function of internal and external relationships. Instead of viewing your business in vacuo, understand that you are part of an ecosystem. External to your organization, who do you need to partner with to enhance your value creation processes, achieve/exceed your objectives, or successfully execute your strategy?
  • Ensure the objectives are clear and there is shared understanding by everyone. Unclear objectives are one of the topmost barriers to team and organizational performance.
  • Foster a culture that encourages opinions and ideas that challenge the consensus. People should feel free to share their ideas and not hold back for fear of others penalizing them or thinking less of them. Collaboration is hindered when one or two people dominate the discussion, are arrogant, or don’t think they can learn anything from others.
  • Groups perform more effective under certain circumstances, and less effective under others. There is a tendency to fixate on certain topics of discussion amongst groups which often leaves members distracted from their ideas. To reduce the negative effects of topic fixation, members of the group should be given periods to work alone and switch constantly between individual activity and group interaction.
  • Effective collaboration can happen if the people involved come from diverse backgrounds and possess complementary skills to prevent conformity. The best collective decisions or creative ideas are often a product of different bodies of knowledge, multiple opinions, disagreement, and divergent thought processes, not consensus or compromise.
  • New technologies are making collaboration easier than ever, enabling us to increase our reach and broaden our network. Although new technology helps, it will not make your organization collaborative without the right culture and values in place. First, define what you want to achieve through collaboration then use these tools to promote creative collaboration.

How else are you championing collaboration within your organization to create value and succeed?

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Preparing for Geopolitical Shocks

Geopolitical instability has steadily increased over the past years, and uncertainty in the global economy is at an all-time high. Thanks to globalization and advances in technologies, we now live and work in a tightly interconnected world, one in which the boundaries that previously separated domestic from global issues have disappeared.

Threats are no longer confined to traditional political borders, social structures, and geographic boundaries. Geopolitical shifts have dramatically altered the global economic landscape and brought politics and business together.

The rise of China as an economic and politically influential power has threatened the dominance of the United States as the world’s largest economy. Although the opening of China and a market of 1.4 billion people have benefited both countries, it has also intensified competition and sparked U.S. economic and technological espionage accusations against China, leading to strained relations between the two giants.

U.S. companies operating from China have felt the impact of this tense relationship. The opposite is true for Chinese companies in the U.S.

Across Europe, national populism is on the rise and now a serious force. In 2016, the United Kingdom shocked the world when it voted to leave the European Union, generating reverberating effects across markets.

Banks and financial services companies that once benefited from the EU passporting system have had their cross-border banking and investment services to customers and counterparties in the many EU Member States impacted, causing them to reimagine their value proposition models.

The recent invasion of Ukraine by Russia is another example of a geopolitical event that has had devastating effects on human livelihood and businesses. Although the conflict between the two countries has risen over the years, I think it’s fair to say that few political analysts, governments, and businesses predicted a war to happen.

The war has created a humanitarian crisis, rattled global commodity and energy markets, caused prices to soar, and forced many international companies to temporarily suspend their Russian activities or completely cut ties with the country.

Global supply chains which are already fragile and sensitive due to the COVID-19 pandemic are now facing new challenges in the aftermath of the Russia-Ukraine crisis. Multilateral economic sanctions have been imposed on Russia. A state of affairs that was unthinkable months ago and is now threatening to derail the nascent global economic recovery from the COVID-19 pandemic.

Given the global domino effect of geopolitical events and the shrinking of the distance between markets and politics, the need to better understand and more effectively mitigate geopolitical risk has become more urgent. The business impacts, whether direct or indirect, vary by company type and industry sector.

Your company may not be able to prevent wars between nations, but you can anticipate and better prepare for geopolitical shocks:

  • Integrate strategy, risk, and performance decision-making. Consideration of risks to business success is an important part of the strategy selection and execution process, not an afterthought.
  • Develop a better understanding of geopolitical trends and how they are changing. For example, what are the megatrends in business, politics, and technology that are making geopolitical risks more diverse, prevalent, and consequential?
  • Assess the links between these geopolitical events and business performance. What are the events that matter most to your business? For example, how might current global political trends pose physical, business, and reputational risks to your parent organization?
  • Anticipate how these trends are likely to play out in the short, medium, and long terms, and develop mitigation strategies for each geopolitical scenario. Proactively anticipate and plan for radically different worlds, instead of reacting to problems as they arise
  • Review your mitigation strategies as the world changes. Are they effective enough in case of a major shock?
  • Develop capabilities for continuous learning to anticipate, address, and recover from geopolitical crises.

What do you think?

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