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The Financial Impact of Cyber Risk 50 Questions Every CFO Should Ask

Learn about the economic significance of cyber security, understand financial risks, and discover a comprehensive methodology to mitigate cyber risk losses. Get insights on the costs of security failure, legal implications, reputation damage, and more.

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The Financial Impact of Cyber Risk 50 Questions Every CFO Should Ask

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  1. The Financial Impact of Cyber Risk50 Questions Every CFO Should Ask ANSI Homeland Security Standards Panel (ANSI-HSSP) October 2, 2008 3:00 to 4:15 PM U.S. Chamber of Commerce

  2. Presenters • Moderator  • Ty R. Sagalow, President, American International Group (AIG) Product Development, and Workshop Leader • Panelists • Michael Castagna, Chief Information Security Officer, U.S. Department of Commerce • Larry Clinton, President, Internet Security Alliance (ISA) • Harrison Oellrich, Managing Director, Guy Carpenter & Company, LLC • Regan Adams, Former Assistant Privacy Counsel, Goldman Sachs

  3. Agenda • Background: Setting the Scene • Development of an Action Guide to analyze, manage, and transfer financial risk for cyber security • Questions and Answers

  4. BackgroundSetting the Scene • Cyber security is vital to the economic well-being of the U.S. • What does cyber security really mean? • No standard definition, but one interpretation is the protection of any computer system, software program, and data against unauthorized disclosure, transfer, modification, or destruction, whether accidental or intentional • Cyber security attacks can come from internal networks, the Internet, or other private or public systems

  5. Background (continued) • Corporations use cyber systems for multiple purposes • Real-time tracking of supply chains • Inventory management • Improvement of employee efficiency • Generation of on-line commerce • Twenty-five percent of America’s economic value – up to $3 trillion a day – moves over network connections each day

  6. Background • While corporations appreciate the benefits of the Internet, they have often failed to properly account for its financial risks • 50% of Senior Executives said they did not know how much money was lost due to an attack • Congressional Research Service estimates that the economic impact of cyber attacks on business has grown to over $226 billion annually • Total average cost of a data breach grew to approximately $200 per record compromised in 2007

  7. Background • There is a substantial body of work dealing with the technical standards of cyber security • Plenty of attention paid to important technical issues, such as data encryption and best-in-class security technologies • BUT...to date, there has not been any comprehensive methodology for understanding and mitigating the financial losses associated with cyber risk

  8. Net Financial Risk Formula

  9. What Are Some of the Costs? • Failure of security can have costly consequences • Civil and criminal lawsuits • Lost trade secrets • Breach of contract, breach of privacy • Reputation damage • Business interruption, lost income

  10. Development of Financial Risk Action Guide • To promote understanding of financial risk, the American National Standards Institute’s (ANSI) Homeland Security Standards Panel (HSSP) and the Internet Security Alliance (ISA) launched a workshop

  11. Development of Financial Risk Action Guide • The Goal • Create an Action Guide to analyze, manage, and transfer financial risk for Cyber Security • The Team • More than 30 industry leaders and governmental partners • The key to understanding the financial risks of cyber security is to fully embrace its multi-disciplinary nature, covering many areas of a company

  12. Resolve: Multidisciplinary Feed to CFO • A CFO needs to know the key questions to ask to the major stakeholders in all corporate domains, including: • General Counsel • Chief Risk Officer • Chief Compliance Officer • Chief Technology Officer • Heads of Corporate Communications, Investor Relations, and Customer Service • Head of Human Resources

  13. Time Table • The Timetable • First Workshop held in March 2008 • Draft Action Guide prepared by teams representing the different disciplines • Subsequent Workshops held in May and July • Action Guide finalized in early August • Publication is being released this month, “National Cyber Awareness Month”

  14. Action Guide: How to get it The Financial Impact of Cyber Risk50 Questions Every CFO Should Ask Release date: October 20, 2008 Register in advance for a free electronic copy of the document to be e-mailed to you early that morning: webstore.ansi.org/cybersecurity

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