Cybersecurity and systemic risk are two sides of the same coin. As we saw recently with the CrowdStrike outage, the interconnected nature of enterprises today brings with it great risk that can have a significant negative effect on any company’s finances. Although it was not a security event, the symptoms and responses all fall into the various categories of the cybersecurity program for any company. The cost to Delta Airlines alone was $500 million, and it is just one of the thousands of companies affected by this single update by a single vendor. Systemic risk and overall cybersecurity posture require board involvement and oversight.
CISOs have the significant responsibility of helping their boards to understand the security posture of the company while providing them with adequate tools to determine whether the posture reflects the defined risk appetite of the organization, as determined by the board. Without clear understanding of the security posture — and what trade-offs are being made with regard to that posture — the board members are operating with less than full understanding. It is the responsibility of the CISO to present the risk posture to the board in a way that is clear and that outlines the accepted risks inherent in the security program implementation.
A 2024 PwC report found that 49% of directors see cybersecurity as a significant oversight challenge (“Overseeing cyber risk: the board’s role,” PwC, January 2024). This should be no surprise since the global average cost of a data breach is $4.88 million, per IBM, which represents a 10% increase over the prior year. Board members are recognizing that they are accepting risk through their cybersecurity programs, but they are not clear about exactly what those risks are or how they align (or don’t align) with their stated risk appetite. Consider only a few of the relatively recent issues we have all experienced from a systemic risk perspective; CrowdStrike, SolarWinds, and Log4J will certainly conjure up unpleasant memories in the minds of a majority of CISOs today.
A 2022 survey found that 41% of board members believed that email compromise was their biggest risk (a data point that I suspect CISOs would disagree with, given the examples above), and 24% of board members did not talk about cybersecurity regularly (Cybersecurity: The 2022 Board Perspective report, co-written by Cybersecurity at MIT Sloan (CAMS) and Proofpoint, May 2022). This must change, and quickly. That same report indicated that while 65% of board members felt their organization was at risk of a material cyberattack in the next 12 months, nearly half (47%) felt that their organization was unprepared to deal with such an attack. I suspect many CISOs may also disagree with this concern, although none would say they are fully prepared either. But the disparity between CISOs’ and boards’ perspectives seems to be a large gap that needs to be closed.
Boards are appropriately turning their attention to cybersecurity, and it is up to the CISO to find ways to report their cybersecurity posture to the board, as well as the threats, vulnerabilities, and mitigation strategies that help board members to recognize the risk that they are accepting. CISOs must also help board members assess whether this aligns with the risk appetite they have set for the company.
It has long been a challenge for CIOs and CISOs to distill the extremely broad cybersecurity activities, controls, and practices into a concise, understandable report that can be discussed, interpreted, and understood in the context of a board meeting. CISOs have very little time with their boards and need to ensure that everything they put in front of the board members is both comprehensive and concise. They need to be succinct yet complete. They need a visual representation of their cybersecurity posture that explains the systemic risk accepted by the organization.
As board members are gaining more understanding of the interconnected nature of complex IT ecosystems, they are recognizing that systemic risk exists within their enterprise. While they are advocating for digital transformation to enable more innovation and agility in support of increased revenue, they now recognize that this comes with additional cyber-risk. Because of the interconnected nature of IT ecosystems within the enterprise today, cybersecurity is extremely broad and complex. Ensuring that employees are trained in cybersecurity best practices, controls are established in both systems and workflows, and security tools are active and updated are common cybersecurity responsibilities that span departments and divisions. Correlating all of these activities into a single, easy-to-read, and easy-to-understand report for board members is complicated. This is the essence of cybersecurity posture reporting. Finding a simple way to present this information is the challenge. Templates and tools exist to help with this problem. An upcoming report by IDC, IDC PlanScape: Cybersecurity Posture Board Reporting, provides examples for you to follow.
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Dr. Ken Knapton is an adjunct research advisor for IDC’s IT Executive Programs (IEP). He is a thought leader in enterprise tech debt, big data governance, and agile delivery principles. And he is an accomplished technology leader with extensive experience in leading IT functions, driving efficiency, enabling workflow automation, and delivering improved business outcomes. He has held C-level IT roles in various industries for the past two decades, with a focus on regulatory compliance as well as modernizing, maturing, and securing IT organizations. With his strong focus on people, process, and technology (in that order) he has helped to elevate the IT operations in organizations such as Merrick Bank, Content Watch, Access Data, W.J. Bradley Mortgage Capital, Credit.com, and Avalon Healthcare. Dr. Knapton helped design and architect the global banking system that is currently in use for the Church of Jesus Christ of Latter-day Saints, supporting 127 different currencies in as many countries.
