During the last 12 to 18 months, there have been a number of notable natural catastrophes and weather related events. Devastating earthquakes hit Haiti, Chile, China, New Zealand, and Japan. Monsoon floods killed thousands in Pakistan, and a series of floods forced the evacuation of thousands from Queensland. And of course, there was the completely unusual, when for example, ash from the erupting Eyjafjallajökull volcano in Iceland forced the shutdown of much of Western Europe’s airspace. These high profile events, together with greater awareness and increased regulation, have renewed interest in improving business continuity and disaster recovery preparedness. Last quarter, I published a report on this trend: Business Continuity And Disaster Recovery Are Top IT Priorities For 2010 And 2011.
A few weeks ago, Stephanie Balaouras and I posted a podcast on a topic that has been a high priority for many of our customers — how to apply risk management techniques to IT security. We know that many of you are feeling the pressure to take the lead in IT risk management and in some cases even play a role in initiating risk management at the corporate level.
The key to success is understanding the core elements of risk management and how to plug them into existing processes without creating simply another layer of overhead. A major theme of my recent research has been on existing risk management standards and how they are being applied to IT Security and Risk functions. For example, the ISO 31000 risk management standard outlines a five-step process for formalized risk management. My January report, Introducing ERM To IT Security And Risk , provides a summary of the standard, and I will be expanding upon the next steps in my upcoming research documents. In addition, look out for my next doc on Regulatory Intelligence, to be published in the next few months.
In the meantime, I encourage you to listen to this podcast to hear about best practices and lessons learned from clients who have gone through these steps. And as always, I welcome any questions or feedback.
Even in the toughest times, winners will invariably emerge. With the way expectations are changing regarding corporate controls and disclosure, risk management professionals (whose lack of influence was seen as a substantial cause of our current state of affairs to begin with) will likely be among the first beneficiaries of our new outlook on business.
Forrester customer inquiries seem to have taken a step back when it comes to risk management. While there are still plenty of incoming technology and vendor selection questions, there has been a noticeable spike in calls about fundamental issues, such as how to build and organize risk management programs. Knowledge and experience in risk management basics is in high demand.
Every month or so, news events (attacks on government sites, massive privacy breaches, etc.) provide a ‘wake-up call’... a proof point used by vendors and practitioners alike that protecting our national and corporate information assets has never been more critical. On occasion we even see these incidents yield promises of action, for example the anticipated appointment of a US Cybersecurity Czar, which my colleague Khalid Kark discusses here.
But in spite of these warnings, my conversations with enterprise risk and IT risk professionals still reveal many disconnects, including that IT risks are not measured consistently with other enterprise risks. In addition, many IT risk professionals do not see their biggest risks showing up on the corporate risk register.
Pouring over endless details of risks, regulations, taxonomies, and technologies can sometimes give us a narrow view of the world, so it seems worthwhile to take a minute to mark the 125th anniversary of the cataclysmic eruption of Krakatoa this week. For those of us that want to think big but can’t remember that far back, this week is also the 3rd anniversary of Hurricane Katrina’s devastating sweep across a wide stretch of the US Gulf Coast.
TechCrunchIT reported today that a Rackspace data center went down for several hours during the evening due to a power grid failure. Because Rackspace is a managed service provider (MSP), the downtime affected several businesses hosted in the data center.
One of the most substantial trends we expected to see in governance, risk, and compliance in 2008 is the tightening of regulations in response to major risk management failures. Yesterday, we saw a clear example of that, as the US Senate approved a bill that would nearly double the size of the Consumer Product Safety Commission, largely in response to the massive toy recalls that took place last year.
Also this week, the UK’s Medicines and Healthcare Products Regulatory Agency showed signs of cracking down on disclosure of drug trial results after problems persisted with certain anti-depressant drugs in relation to teenage suicide (even though criminal charges will not be filed).
The sub-prime issue may likely be the next major target for legislative changes, although most discussion seems to be focused on consumer protection at this point, not tighter control over lenders.
It has been a busy few weeks of news for whistleblowers. Earlier this month, former Merck sales manager H. Dean Steinke was awarded $68 million of the roughly $400 million recovered by states and federal agencies when the company settled a lawsuit he brought against it seven years ago. (This was part of a larger $671 million Merck paid to settle complaints of overcharging government health plans and offering inappropriate incentives to doctors to prescribe its products.)
While a number of whistleblowers have been lauded by the press over the years, Steinke’s $68 million presents the possibility of more tangible incentives to those aspiring to expose corporate crimes. Other recent, related news includes:
- Court extends SOX whistleblower protection. Last week, a US District Court judge in New York found that whistleblower protection under the Sarbanes-Oxley Act applies to employees outside the United States, helping empower virtual armies of international employees that may have something to report.
The media yesterday (Wall Street Journal, Associated Press, Economist, etc.) were all over 31-year-old Jérôme Kerviel, the trader at France’s Société Générale who has apparently confessed to fraudulent trades resulting in an estimated loss of roughly $7.2 billion.
In further coverage, we hear that the bank has apologized to share holders, filed legal claims against Kerviel, and promised the public that the incident does not suggest any larger issues with the company’s risk management. The Wall Street Journal however, follows up with a story questioning the effectiveness of regulatory oversight that can let something like this transpire despite Société Générale’s claims that controls were adequately tested and did not fail.
The Foreign Corrupt Practices Act (FCPA) has been seemingly more newsworthy than usual recently (even impacting Hollywood elite), with somewhat conflicting accounts of the US cracking down on bribery both here and abroad, and the rationale for the US to accept some level of bribery for the sake of broader national interests.