Professional services firms and cyber risk
As repositories of sensitive information, they’re prime targets for hackers
Cyber attacks and costly accidental losses of sensitive personal and financial information are no longer confined to retailers like Target or Sony or banks and investment houses like JP Morgan. Professional services companies –including accountants, lawyers, financial advisors and insurance agencies – are prime targets for hackers and are experiencing disproportionately damaging breaches from employee mistakes.
Clients entrust their professional services providers with the most sensitive information about themselves and their family members, including financial and investment account data, tax returns, personal and business income, corporate and legal strategies, estate planning and family law materials, Social Security numbers, and driver’s license and other governmental identification numbers.
While housing these highly valuable repositories of sensitive information, professional services firms commonly have fewer resources than larger companies, and have devoted far less attention to their cyber vulnerabilities. Consequently, hackers recognize them as easy targets that generate significant yields of this prized information, and accidental losses of such information by employees can have disastrous effects.
Breaches of professional service companies can result in grave damage because the lost data is so immediately and directly useful for financial and identity theft, and their clients are commonly wealthy individuals and profitable businesses with well-funded accounts and valuable identities and credit.
Though hurtful to clients, such breaches can be catastrophic – even a killer – for a professional services company, which relies heavily on its reputation in the community and the trust of its clients for its welfare and future business.
To reduce the vulnerability to a cyber breach and mitigate the damage that results if such a breach does occur, every professional services company should engage in the following five step data security risk management process:
1. Retain an experienced data security attorney to conduct a comprehensive data security risk assessment of the company’s physical, technological and administrative infrastructure.
2. Prepare a risk assessment and vulnerabilities report, and implement a strategy to remediate the company’s data security vulnerabilities, including obtaining appropriate cyber liability insurance.
3. Create and implement a written data security policy, and formalize business practices and procedures that address cyber risks.
4. Train all employees about data security policies, practices and procedures, as well as common cyber threats faced by the company.
5. Conduct periodic reassessments and updated employee trainings.
Risk assessment: Risk assessment involves identifying the information the company has that is legally protected, for example, under state data security laws or federal laws or regulations such as HIPAA, the Gramm-Leach-Bliley Act, Securities and Exchange Commission regulations and Federal Trade Commission regulations. The fines imposed by regulators for failure to comply are significant – commonly several hundred thousand dollars or more for a moderate breach, increasing to over a million dollars for a larger breach.
The legally protected information is mapped through its lifecycle (e.g., from receipt and creation, through use and transmission, to disposal and destruction), and areas of noncompliance or risk are identified using the legal requirements and standards of applicable laws and regulations.
This is a highly collaborative process between the managers of the company, competent IT professionals (inside or outside the business, or both) and legal counsel experienced with this area of the law and qualified to understand technological, physical and administrative security matters.
Assessment and vulnerabilities report and remediation: Step two flows from the areas of noncompliance and risk identified in the assessment. Priority is assigned to items that are relatively easy to remedy, that do not comply with applicable law, or that embody significant risk. The company creates a timeline for addressing the issues, then identifies and implements solutions for those vulnerabilities.
Remediating vulnerabilities frequently depends on the availability and affordability of technological, physical or administrative solutions. As a result, it is common for a professional services company to require a year or more to properly address all vulnerabilities identified in an initial assessment. In addition, it is critical for professional services companies to obtain cyber liability insurance appropriately tailored to their particular businesses, as such insurance can cover a large portion of the direct costs incurred when responding to a breach.
Data security policy: The data security policy, and the formalized practices and procedures, are created from the information gathered during the risk assessment and the remedies implemented or anticipated for the vulnerabilities.
Policies, practices and procedures created in the absence of a comprehensive risk assessment are pure guesswork, and do not comply with state or federal law or accepted practice. No two companies’ policies, practices or procedures are the same because no two businesses are the same, and there is no boilerplate for this process.
Employee training: This is an integral component of data security compliance. Employees handle protected data on a daily basis, and therefore need to be taught about data security generally as well as the company’s specific policies, practices and procedures. Likewise, properly trained employees know better how to avoid breaches, how to recognize an actual or potential breach, and how to properly respond in such circumstances.
Reassessment and retraining: Security reassessments and periodic retraining are required and natural for any company committed to data security compliance. Reassessments are used to address vulnerabilities from new or different technology, changed physical or administrative systems, or novel external threats. Also, as a business becomes data security-aware, it frequently identifies previously unknown vulnerabilities and adopts remedies that enhance security beyond the measures implemented after the initial risk assessment and report.
Professional services companies are prime targets for cyber attacks as well as disproportionately vulnerable to damage from data loss due to employee mistakes, because of the repositories of valuable sensitive personal and financial information entrusted to them. Following the five steps outlined above will enable a professional services firm to reduce its vulnerability to a cyber breach and mitigate the damage that results if such a breach occurs.
Cameron G. Shilling is a director at McLane Middleton, where he is chair of the firm’s Privacy and Data Security Group. Kevin Lin, an associate in the practice, also contributed to this article. They can be reached at email@example.com.