Has your organisation established an incident management plan that covers data breaches? Recent evidence shows that organisations are ill-equipped to deal with an attack.
Australian bulk deals website, Catch of the Day, suffered a security breach in 2011, with passwords and other user information stolen from the company’s databases. It took until 2014 to notify customers, suggesting there was no response plan in place.
The backlash was very severe for global retail giant, Target, which fell victim to the second largest credit card heist in history. Many customers were outraged about the retailer’s inability to provide information after the breach, and its failure to assure customers that the issue was resolved.
Consequences included settlement payouts of up to $10 million and the resignations of its CIO and CEO.
Organisations should have established and tested incident management plans to respond to data security breaches sooner rather than later. A solid response plan and adherence to these steps can spare much unnecessary business and associated reputational harm.
Here’s a five step plan to ensure you give your organisation the best chance of minimising financial and reputational damage following an attack.
Step 1: Don’t panic, assemble a taskforce
Clear thinking and swift action is required to mitigate the damage. There is no time for blame-shifting. You need a clear, pre-determined response protocol in place to help people focus in what can be a high pressure situation and your incident management plan should follow this protocol.
Having the right team on the job is critical. Bear these factors in mind when assembling your team: Appoint one leader who will have overall responsibility for responding to the breach. Obvious choices are your CIO or chief risk officer. This leader should have a direct reporting line into top level management so decisions can be made quickly.
Include representatives from all relevant areas, including IT, to trace and deal with any technical flaws that led to the breach; and corporate affairs, in case liaison with authorities is required, to manage media and customer communications.
Don’t forget privacy (you do have a chief privacy officer, don’t you?) and legal, to deal with regulators and advise on potential exposure to liability).
If you anticipate that litigation could result from the breach, then it may be appropriate for the detailed internal investigation of the breach to be managed by the legal team. If your organisation doesn’t have these capabilities, seek assistance from third parties at an early stage.
Step 2: Containment
The taskforce should first identify the cause of the breach and ensure that it is contained.
Steps may include:
Installing patches to resolve viruses and technology flaws. The ‘Heartbleed’ security bug identified in April 2014 at one time compromised 17 per cent of internet servers.
Although a security patch was made available almost immediately once it was discovered, some administrators were slow to react, leaving servers exposed for longer than necessary.
Resetting passwords for user accounts that may have been compromised and advising users to change other accounts on which they use the same password.
Disabling network access for computers known to be infected by viruses or other malware (so they can be quarantined) and blocking the accounts of users that may have been involved in wrongdoing.
Taking steps to recall or delete information such as recalling emails, asking unintended recipients to destroy copies or disabling links that have been mistakenly posted.
Take care to ensure that steps taken to contain the breach don’t inadvertently compromise the integrity of any investigation.
Step 3: Assess the extent and severity of the breach
The results will dictate the subsequent steps of your response. A thorough assessment involves:
Identifying who and what has been affected. If it’s not possible to tell exactly what data has been compromised, it may be wise to take a conservative approach to estimation.
Assessing how the data could be used against the victims. If the data contains information that could be used for identity theft or other criminal activity (such as names, dates of birth and credit card numbers) or that could be sensitive (such as medical records), the breach should be treated as more severe. If the data has been encrypted or anonymised, there is a lower risk of harm.
Considering the context of the breach. If there has been a deliberate hacking, rather than an inadvertent breach of security, then the consequences for the relevant individuals or organisations could be much more significant. This should inform how you respond to the breach.
Step 4: Notification
For serious data security breaches, proactive notification is generally the right strategy. A mandatory notification scheme has been proposed in Australia, with the government promising implementation by the end of 2015.
In any case, there are good reasons to consider voluntary notifications, which include:
Victims may be able to protect themselves, for example by changing passwords, cancelling credit cards and monitoring bank statements.
E-Bay was roundly criticised in 2014 for not acting quickly enough to notify users affected by a hacking attack, and only doing so by means of a website notice rather than by sending individual messages. Notices should be practical, suggesting steps that recipients can take to protect themselves.
The Privacy Commissioner may also be involved, particularly if personal information has been stolen. The Commissioner may take a more lenient approach to organisations that proactively address problems when they arise.
Other third parties may also need to be notified. For example, if financial information is compromised, you might notify relevant financial institutions so that they can watch for suspicious transactions.
Step 5: Action to prevent future breaches
Having addressed the immediate threat, prevention is the final step. While customers may understand an isolated failure, they are typically less forgiving of repeated mistakes. Carry out a thorough post-breach audit to determine whether your security practices can be improved.
This could include:
- Engaging a data security consultant, which will give you a fresh perspective on your existing practices, and help to reassure customers and others that you do business with.
- Promptly remedying any identified security flaws – changes should be reflected in data security policies and training documents (and if such documents don’t exist, create them.)
- Rolling out training to relevant personnel to ensure that everyone is up to speed on the latest practices.
- Reviewing arrangements with service providers to ensure that they are subject to appropriate data security obligations (and, if not already the case, make data security compliance a key criterion applied in the procurement process).
Cheng Lim is a partner at global law firm King & Wood Mallesons. Cheng leads KWM’s Cyber-Resilience initiative and has assisted clients over many years in dealing with privacy, data security and data breaches.
Michael Swinson is a partner in the M&A team at King & Wood Mallesons, specialising in commercial legal matters with a focus on technology, intellectual property and data protection. He works for clients across a wide range of industries including telecommunications, media, finance, energy and infrastructure.
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