Truth be told, while I’ve spent somewhere near seventy-five percent of my time over the past ten years working for financial institutions I’ve also done a fair amount of work for insurance companies, mostly centered on SOX with occasional diversions into general risk assessment work.  The drivers in the insurance industry are different in terms of oversight and requirements and so the volume of work isn’t nearly the same.  But that by itself begs a question: Why isn’t the insurance industry as regulated as financial institutions?

I’ve now done major audit and assurance work for financial institutions, insurance companies and health care providers and for most of them the risk profile is almost identical in terms of non-public personal information.  So why isn’t the level of scrutiny equal across all three of them?  While some might start spouting about how it is, about how states routinely audit insurance companies and how the health care industry has to comply with HIPAA the truth is that banks and credit unions are held to a much higher degree of accountability than any other vertical.  Why is that?

I’m fond of routinely, almost incessantly beating the drum about how it’s all about the risk.  I get my initial client opportunities because I have a deep resume with relevant experience but I generate repeat business because I tend to whittle things down to what matters most both to my clients and to their oversight providers (auditors and examiners alike).  Compliance exists because risks need to be addressed – if the risks aren’t credible or likely the work should be adjusted to reflect that.  But where the risks are real they’re really real.  The type  of data shared with an insurance company is in many ways even more sensitive than anything shared with a bank and most of what’s shared with insurance companies is also shared with health care providers.  Yet there’s no true Federal oversight for the insurance industry and HIPAA is about as much of a toothless tiger as anything I’ve ever encountered.

I recently completed a boatload of documentation to get my family on a new health insurance plan.  I turned over every piece of sensitive information I have for every member of my family minus my bank account information because that’s what was required.  I had to provide all of this online and follow that up by sending them an impressive array of hard-copy documents with even more sensitive information that should never be kicking around in the public domain.   In the past I’ve also been required to provide my bank account information because one plan in particular would only provide coverage if they could automatically deduct monthly premiums via ACH drafts.  So now the insurance industry has access to it all; name, address, social security number, date-of-birth, maiden name, medical history and banking information.  And yet there’s no true oversight agency that’s responsible for making sure they’re protecting all of MY information.

To compound my frustration, of the four insurance companies I’ve conducted work for since 2006 (two of which are Fortune 5oo’s) exactly none of them have something akin to a Chief Information Security Officer.  They all have risk people focused on the business side of things (because that’s necessary to protect profitability) but that’s it.  There’s typically an information security manager who’s part of the infrastructure team but who almost never reports right into the senior-most technology person (e.g. CIO, CTO).  Any audit work that occurs is coordinated across multiple IT managers and on rare occasions there will be an audit/assurance manager.  However in the one example I personally know of where that position exists the person in the role was really just a converted IT manager who obtained a CISA designation – no fundamental audit or assessment experience.

The question has to be asked:  Why is it that banks and credit unions are heavily regulated regarding protection of non-public personal information but other industries with similar risk profiles are  not?  Why aren’t insurance companies required to comply with FFIEC-type guidance?  Why isn’t there a Federal regulatory agency that is responsible for keeping an eye on the insurance industry the way the FDIC, OCC, FRB and NCUA do so for their financial institutions?  And trust me, whatever oversight exists for the insurance and health care industry is largely ineffective.   Why is my sensitive information considered more at risk within a banking infrastructure than it is within an insurance infrastructure?  Having been on site for both and examined their internal controls  I can’t answer that question, that’s for certain.

Of course the truth is much more complicated.  I don’t just focus on computers, my scope expands to include anything that involves sensitive information.  While that always includes a variety of devices it also includes paper-based and people processes as well.  I frequently share stories about the enormous amount of printed content that’s to be found throughout an institutions physical locations.  I occasionally tell stories about how careless people can be when on the phone or in conversation and sharing all manner of sensitive information.  It’s never just about computers, it is however always about information and how it needs to be protected.

Truthfully though what I really do is search for controls that protect information, identify those that I find and try and measure their effectiveness and more importantly identify where controls are missing and work with my clients to remedy that.  At the heart of the regulatory requirements I focus on it’s all about the risk introduced by the presence of information, from personally identifiable (PII) to non-public personally identifiable (NPPI).  Risk: It’s what drives every single project I work on, it’s what drives every product and process I help develop.  And really, if you take the time to read through the literature, it’s what’s behind just about every piece of regulation known to the banking world.  Risk, risk, risk and risk.

One of the reasons I’ve enjoyed spending so much time working with the community banking and credit union sector over the past few years is that it’s a simple enough argument to make with fewer people to convince; everything you do to comply with the regulations should be risk-based.  It doesn’t really make a difference if it’s complicated to do or time consuming, you prioritize based on where they are found and make decisions accordingly.  But that gets much more difficult to do as the institutions grow in size and complexity.  Over the fifteen years I’ve been building and supporting compliance initiatives I’ve worked with Fortune 50′s, 100′s and 500′s and a whole lot of financial institutions that merely read Fortune magazine.  But while their overall size varies widely risk is still risk and that never changes.

I wish more practitioners embraced this simple concept.  While some do, many still don’t.  There’s often a rush to come up with a standard set of decision criteria to drive the work based on factors not necessarily aligned with risk factors.   Those who have worked with or for me will tell you that when presented with questions about which vendors or applications to assess or what to look for when conducting any type of assessment my first line of logic is to try and figure out where the greatest possible exposures to be found.   Assessing a low risk application yields little value  no matter how complete it may be.  And reviewing a vendor where the dollar spend is high but the risk factors are low does little to protect the institution.

Beware the practitioner who wields a hammer for they only know to look for nails.

Your regulator doesn’t want you to blindly implement compliance programs, they want you to identify and manage risks, real risks.  They want to be able to understand the logic and approach being used and find credible evidence that you’re focusing your efforts on the right things.   Go back and read through the library of FFIEC documentation and pay close attention to the hooks inserted throughout where they talk about conducting assessments and talk about using approaches which are appropriate for the size and complexity of your institution.  Then scan through your related program inventory and figure out if you’ve designed things accordingly.  Are they actually protecting your institution from credible threats and risks or are they just filling binders on your compliance officers shelves?

For me, professionally I’d prefer to always only do meaningful work and in the audit and assurance world meaningful is code for risk-based.

That first experience has arguably tainted my opinion of the role played by internal audit for nearly twenty years.  Subsequent to that first encounter I’ve been audited a few more times, assisted clients in preparing for internal audits many times and have had hundreds of interactions either directly or indirectly with a variety of companies internal audit function.  And despite all of this experience and having eventually become an auditor myself I’m not sure I could present a credible argument as to where there’s real value being generated by the process beyond maintaining appearances.

The first problem is that for most companies there’s an unhealthy fear of auditors.  There’s often real concern that if any major issues are uncovered someone’s head will roll.  At the aforementioned Fortune 100 company, it was widely believed that if your group was found to have a material finding (or anything remotely resembling one) the highest ranking person in the group was doomed.  To their credit the company also had a mechanism in place so that if you figured out that you had a problem before anyone else and self-reported it you were allowed appropriate time to remediate.  But that wasn’t always effective enough because most application and business managers weren’t auditors and couldn’t always recognize when a control was either missing or failing and so there was still an enormous amount of work and panic leading up to a scheduled audit.  I remember thinking that the company should remove the threat of termination and encourage both auditor and auditee to work openly and honestly together so that in the end issues were surfaced, defined and repaired.  In the two decades since I’ve worked with and for a few companies who believed they had this healthier sort of dynamic in place between their internal audit department and its business and technology functions but really in the end it’s almost always the same problem.  Internal audit is viewed as an unforgiving and punishing agent and no one ever want them snooping around.

The second problem is that there’s a degree of incompetence found within many internal audit functions.  While conducting my first technical audit back in 1997 (my company was managing an outsourced audit plan) I identified a significant issue with the methodology used to make production changes in a certain database environment.  It resulted in there being virtually no clear or simple way for the DBA to back out a change if it didn’t work.  If a change failed it would require bringing down production for several hours in order to restore things to the previous state.  The first person who challenged my finding was the internal auditor who had audited the same platform for years and didn’t either understand or agree with the finding.  It took me nearly an hour to first educate him as to why the technical issue existed, prove that it did and finally to agree with the associated risks.  He had worked there for years, had never had the chance to see how other companies managed similar infrastructures and was way more concerned with his authority and capabilities being challenged than with the fact that his company had a significant risk to be repaired.  In the time since I’ve met many more people just like that one, auditors who stay at one company for years, fall into bad habits and fail to keep their skills relevant.  They wind up relying too much on the Internet to try and update their knowledge base, don’t have the perspective of understanding how other companies are managing similar challenges and are happy enough to bring out the same whipping stick and a feeling of empowerment to scare the daylights out of internal control owners while conducting their audits.  It results in poorly formed and often irrelevant findings that waste everyone’s time.  I wish I had a ten dollar bill for every instance I knew of where something was being fixed because it was easier to appease the auditor than it was to convince them their finding was flawed or even wrong.

Now I’m not saying all internal auditors are incompetent, they’re not.  I’ve met some brilliant and extremely effective internal auditors along the way.  And in those environments audits weren’t feared because there was a high degree of confidence that if an issue was identified it was something worth knowing about.  But in almost all of those cases the auditors involved had only been with their company for a few years, not decades.

The third problem is that audit needs to be seen as adding value, not creating unnecessary delays or work.  Practically speaking internal audit is playing for the same team as the control owners whose processes they assess.  Their primary goal shouldn’t be to notch as many findings as possible on the board but rather to identify weaknesses and deficiencies so that they can be remediated and help further harden the infrastructure and reduce risks.  I understand the need for the function to maintain independence and separation but only so they can remain objective not so they can operate as if though they’re the ultimate authority on right and wrong and beyond reproach.  If they’re invited to participate early in a project and find issues they should issue interim findings so that small problems don’t become bigger problems further on down the project road.  If you wait for the post-implementation audit to document early stage issues you’re not really helping anyone.  If they abuse being granted access to meetings and documentation long before the audit function is typically engaged the only predictable outcome is that access will be denied until someone forces the issue.  And one more major issue I routinely find with internal audit is that no matter how strong or weak a finding may be, no matter how poorly or strongly worded, no matter how relevant or irrelevant they all too often defend it as if though it’s gospel that’s beyond reproach.  Why is that?  Why can’t the control owner question the finding, demand clarity or try to frame it’s relevancy?  All auditors should feel an obligation to issue a final report which resonates with everyone involved as being accurate and hopefully fair.

Until internal audit is seen as part of the solution, not part of the problem it’s going to remain, well, a problem.  Until control owners gain a sense that by developing a healthy dialogue with their auditors it will only help things and not hurt them it will continue to be a problem.  And until all involved parties working for the company feel as if though they’re working towards a common goal it will remain a problem.

Doesn’t anyone remember the great Heartland breach of 2009?  Seriously, anyone?

I’ve never tried to quantify what percentage of the work we do within the regulatory compliance domain is focused on the safeguarding of customer data but off the top of my head I’m thinking it’s high.  And when you factor in that there’s an entire industry focused exclusively on protecting credit card information (PCI) you’d think that not only are breaches getting harder to pull off but that we’re becoming less tolerant as a society in accepting them.  But there’s a general lack of outrage exhibited when these incidents occur, the media doesn’t much care to cover it properly and really in the end they wind up being something of a non-issue.  And as I learned recently when my own bank card was compromised, the banking industry seems to simply accept that these things are going to happen.  Instead of getting better at preventing breaches they’ve instead managed to streamline the process where they shut down the accounts in question and reissue new ones.

You often hear that any security solution is only as good as its weakest link.  It seems to me that financial institutions are no closer to figuring how to truly lock everything down and with the constant evolution of technology where we’re always adjusting to new exposures, new threats and new challenges we’ll never actually get there.  There’s never a point where an infrastructure is truly hardened and where the weakest link is something so obscure as to not even present a credible threat.  Despite regulatory and industry requirements and sometimes intense scrutiny we’ve reached a point where the only thing that’s improved is in how quickly we repair the damage.  PCI hasn’t stopped things from happening (it hasn’t and don’t debate me on its merits because every time there’s an issue with a PCI-certified company there’s an excuse).  GLBA hasn’t stopped things from happening (too many moving parts and not enough pressure applied from the enforcement divisions).  It’s just not getting better and I can’t see that improving anytime soon.

I’ve long ago decided that vigilance on my part is my only true defense against identity theft.  I’ve written previously on how I check every physical detail of every ATM I ever use to make sure the equipment is legitimate, that there’s no hidden cameras recording my PIN and that I never use the privately leased machines you find all over the place.  I also double-check gas pumps to make sure a portable device isn’t scanning my credit card (I get strange looks all the time when I wiggle the card scanner to see if it’s loose).  And I’ve turned on every email alert possible to track activity on my checking account (much to my wife’s chagrin).  I almost never use a smartphone app or web-based solution to conduct my banking because I don’t completely trust the technologies (or rather the people who can exploit them).  And to be clear, none of my concerns stem from what I see while doing my day-to-day fieldwork.  It’s all based on what I know happens out in the real world.

Until breaches are treated as a true threat to our personal security and receives the scrutiny it so richly deserves none of this is going to get better.  When a breach of over one million credit card accounts is prefaced with the word “only” and that’s perfectly acceptable to all involved we’re still obviously a long way off from solving the problem.

So I called up in an attempt to resolve things and was informed that it wasn’t my spending that caused a problem, it was the fact that one of the vendors I completed a transaction with reported a breach.  Because my card number was potentially included in that breach I was shut down.  I was fortunate that my bank is setup to help customers manage these situations fairly effortlessly (I don’t love them most of the time but this event won them some points with me) and after a brief stop at a local branch I had a temporary card and was able to continue on my trip.

A few items of note surfaced as a result of this experience.  The first is that my bank would not reveal the vendor that reported the breach.  The customer service representative I spoke with claimed that she didn’t have access to the information which I sort of believed.  But when I asked how I could find that information out she replied that they typically don’t share it.  I thought that a bit odd.  Shouldn’t I as a consumer be able to make informed decisions about who I do business with?  I should be able to find out who the vendor is so that I can decide whether or not I’ll continue to give them any of my hard earned dollars.  The second thing that I found curious was how seamlessly the replacement process was.  They had a stack of temporary cards about five inches thick and a process so well defined and efficient that it almost seemed like I was asking to borrow a pen so I could sign something.  When I returned to the car my son who had been waiting for me assumed they weren’t able to help me because I was out so fast.  How often does this sort of thing happen?  And to make their degree of efficiency that much more notable a friend of mine experienced something similar and it took her bank over a week to get a new piece of plastic into her hands.

I recognize that this is a sign of the times we now live in.  We use plastic everywhere, our sensitive account information is digitized all over the place and security controls protecting that information are only as strong as their weakest link.  It’s why you’ve heard me say many a time that requirements like PCI are an excellent starting point but by no means the end-all to be-all for securing the perimeter.  All it takes is one USB storage device to go missing, one new appliance added to a network with default values unchanged, one person printing off a report with NPPI and forgetting to pick it up from the printer and viola, a breach is born.

I’m frequently onsite at clients of wildly varying sizes and I find something every day that makes me realize that sometimes the best weapon against a company being embarrassed by some sort of exposure is just dumb luck.  Regardless of whether they have a well formed team of risk and compliance folks working hard to protect information assets or just a single person serving in a related function it comes down to human nature both in terms of those not following the rules and those who are ready to exploit that fact.  A prime example is that when I find sensitive information left exposed I collect it and either dispose of it properly or lock it up to share with the appropriate party as a “for instance”.  However in those places where less honest people make similar discoveries  that same information becomes a commodity to be sold to those who indulge in things like identity theft.  Like I said, it comes down to pure dumb luck.

And so I’m left wondering if my now deactivated and defunct bank card was the victim of human nature, a sophisticated scheme to access otherwise properly secured sensitive information or just plain incompetence.  And while I’m glad that my bank was swift to react and protect me I wish they’d extend that to also inform and educate me as well.  I mean honestly, if I’m going to be forced to memorize a whole new series of numbers shouldn’t I at least be allowed to know who’s to blame?

My first thought was that it was just like what drug dealers do – they give you free product until you’re hopelessly addicted and then start making you pay to feed that addiction.  My second thought was that I couldn’t imagine anyone actually wanting to pay for the content.  While it’s better than nothing as a framework it’s not that much better.  I’m sure there are certain pockets in the GRC industry who think that the Shared Assessment is to vendor management what COBIT is to IT governance but I certainly don’t.

Since first encountering the Shared Assessment a few years back I’ve always thought of it as bloated, difficult to effectively apply and all at once redundant and oddly vague.  The very first time I reviewed the content I immediately thought that whoever was behind creating it must be people who get paid by the hour because any attempt at relying on it was going to be major league time consuming.  And of course once I started investigating the companies behind developing the questionnaire(s) I realized I was spot on.  I once commented to a colleague that the questionnaire looked as if though the purpose of the collective assignment was to think of every possible question you might ever want to ask a vendor, throw it into a spreadsheet and then try and organize it after the fact.  If I’ve ever truly liked it in any meaningful way it’s as a reference source when considering questions to include in customized questionnaires and assessment.

The folks running the show have made strides to truly make the questionnaire into a framework with accompanying methodology but in my experiences most companies simply want to leverage the content of the questionnaires and use it how they see fit.  Some have made the effort to dig through the massive pile of questions and whittle it down to something more manageable while others pretty much ship it out as is to their vendors including both the lite and full versions.  As someone whose practice often has to complete due diligence questionnaires I have to tell you that if we needed to fill out even the lite version it might be a deal breaker due to time constraints.

As I alluded to earlier, I think many practitioners who use the Shared Assessment think of it as being something more like COBIT.  I know COBIT and you sir are no COBIT.  It’s really intended to be used by large vendors who provide services to multiple clients as something akin to a SAS 70/SSAE 16 report.  They pay someone to complete it for them and sign off on it and when their customers look for annual proof that they’re properly controlled they can send along a copy of the completed questionnaire with managements approval stamped on the cover.  In theory it’s a good idea but I’d still prefer a proper audit instead.

And it’s heavily geared towards technology vendors and to a lesser extent those who host services.  When you try and use the Shared Assessment for non-technology vendors it becomes that much more difficult to apply and sort of forces your hand into coming up with something else.  Trying to whittle 900+ questions down to something smaller only to discover you need to write a bunch of new questions on top of that has to be something between depressing and outrageous I would think.

What I really don’t understand is why this was even needed to begin with.  My vendor management experience goes back several years and I’ve always been satisfied working with content from existing sources.  I think that when you combine content from COBIT and FFIEC you can adequately  cover what needs to be covered to assess vendors.  I would go so far as to say that most examiners would agree with me based mostly on the fact that there are more than 100 institutions using some version of a vendor management program my practice has designed and they always do well on that front, always.

For those of you who are going to stay the course, cough up the money and continue along with the Shared Assessment I wish you good luck.  I hope you’re able to glean something meaningful from the process and I pray you never wind up working for a vendor that needs to complete one of the resulting questionnaires.

Is it possible that this incredibly important and still developing concept known as GRC can be hijacked and used instead to almost marginalize the sum total of all it’s related parts?  Until this week I would never have even thought of something like this as possible but there it was, right in front of me and a bit of a shock.

There are likely two main drivers behind this disturbing trend: GRC software and the overwhelming volume of compliance-based activities.  So many of the GRC solutions currently on the market tend to be rather broad in their scope.  While most of them are oriented towards one particular point within the GRC spectrum they have all expanded to try and touch on as much as they can justify.  So whereas you have a product that may have been designed to manage policy content it now also offers risk assessment, audit and overarching governance features.  But still what it does best is manage policy content.  The license for the product isn’t cheap and senior management has been sold to some degree on the promise of automating much of the required work via this new and costly solution.  Thus we have the first driver behind the blurring of GRC lines: “We paid a lot for it so we better use the heck out of it”.  And so there’s a slow but steady march through the organization looking for things that can be brought into the fold.  However not everything belongs in every GRC solution because as noted previously, each offering no matter how effective tends to favor one specific location within the GRC spectrum.

But even when you have a solution that’s broad enough to accommodate most of what you need to accomplish there’s the other driver coming into play, massive compliance requirements.  I’ve had clients who don’t even care so much about if what they need to do to comply makes sense for them but will do anything to pass an exam.  And so there’s this mad, Lemming-like dash in a single direction to shoehorn everything and anything into this thing called GRC that might even be remotely related.  There’s little thought put into how best to get the work done with the primary concern being “we have to have something to show the examiner”.  The result is a hodgepodge of seemingly related activities being coordinated under a single function or initiative but with almost zero effort made to try and normalize the workload and gain the efficiency’s that GRC promises.  How thoroughly depressing for us practitioners.

And it’s fantasy to think that once things are setup to be done a certain way they’ll ever change.  Unless an examiner or auditor tells you something needs to change everything stays the same.  So a poorly designed GRC function remains poorly designed forever.  And an unnecessary GRC activity continues because no one typically cares if you’re doing too much, only too little.  It’s almost like people just want to stuff everything remotely related to the discipline into the GRC closet and then make sure guests never open that door.

I know we’re still early in the GRC life cycle (Michael Rasmussen recently noted in an article that it’s been ten years since he first conceived of the acronym and concept) but what if this trend isn’t derailed sometime soon?  What if because of the weak economy (I’m being polite, I should swap “weak” for “horrible”) companies continue to just sweep everything under the GRC rug and don’t exploit the benefits of the concept?

I’m reminded of the old joke about the immigrant who decides he’s going to use his lumberjack skills in the U.S.A. to make a living and invests his life savings in a chainsaw.  After repeatedly failing to achieve any appreciable gains in his productivity he finally returns to the store to find out what’s wrong with the machine.  Once they pull the ripcord and fire it up he jumps back in surprise asking “what’s that noise”.  I have this image in my head of some internal controls manager managing his/her company’s GRC program ten years from now stumbling across an OCEG document, reading it and jumping back in surprise and exclaiming “what a great idea, why aren’t we doing this sort of thing”.  Don’t laugh, I can all but guarantee it’s going to happen at this rate.

But these past four years has allowed me more than ample opportunity to rectify that heretofore unknown blind-spot in my career.  We don’t just sell a solution, we support it and that involves the establishment and maintenance of what can most aptly be classified as a relationship.  While we have a large number of clients we seldom hear from there are some who call us all of the time.  Often it’s to ask about how best to exploit functionality, sometimes it’s because they forgot how to do something (and we advocate calling to ask rather than reading through the user guides) and on more than one occasion it’s because they have an exam looming large on the horizon and they still haven’t quite finished setting everything up.  It’s the latter that has proven to be a revelation.

The entire reason for purchasing a solution is so that you don’t have to first figure out what needs to be done.  If the solution is designed right there should be a series of relatively basic steps that are clearly outlined and once followed have you up and running.  Instead of wasting precious time and effort getting started you can pretty much start focusing on conducting the related work so that everything is kept current.  That’s not to say that it’s easy, only simple.  And because most compliance-based work is spread out over the course of a full year it should never require herculean efforts to maintain.  Our vendor management solution pretty much requires a few hours of setup time then roughly a few hours per week going forward on average.  And when properly supported it works, it actually works the way it’s intended to.

But here’s the problem: Developing or purchasing the right solution to comply with any regulation or mandate is just the very first part of what’s necessary.  You actually have to properly implement and use that solution.  All too often that part is missed.

It’s not just with my current collection of clients but also with those that I’ve provided consultative support to over the years.  I have one client who has somewhere close to $2M in purchased software sitting locked in a file cabinet having never been implemented due to shifting prioritization by management.  Shocking?  Yes but also frustrating because some of the very problems that software was intended to address still existed.  I have another client I conducted a risk assessment for that had multiple solutions that were near identical to each other but were subsequently replaced by something different because as management changed they wanted only those solutions they already knew.  The result was hundreds of thousands of dollars per year being spent on maintenance costs because they needed to keep the data contained in each solution and there was no straight-forward way of extracting from one and merging with another.

Whatever solution you decide to go with from a simple spreadsheet all the way through to a seven-figure software package it makes little difference if nothing happens beyond setting it up.  Our advice to clients is that when they purchase one of our solutions they can often get a one-year pass with their examiners as long as they can actually display the solution and provide a real and credible plan on how they’re going to be using it.  Typically the examiner will give you points for taking a step in the right direction and will allow you the additional time necessary to get it up and running.  But that’s Year One – Year Two you’d better be able to show progress.

It’s why when I’m engaged with any implementation be it one of our own solutions or when I’m serving in a pure consulting role I often caution that it’s a good first step but only the first of many needed to be successful.  Everyone gets sort of caught up in the potential of the project and starts seeing their better selves once it’s fully implemented.  But I’ve witnessed too many projects where after the initial success fades and resources start getting pulled onto newer initiatives momentum is lost and progress stalls.  I was on one business continuity project where they all but had the plan updated to address an examination finding.  I left right before they submitted the BCP for Board of Director approval and found out a year later that although that part had been properly completed they never actually deployed the plan.  Someone in senior management felt that the plan itself would satisfy the examiners and because of resource constraints decided to delay the implementation and training necessary.  Management gambled and they were tattooed by their examiner the following year.  How frustrating is it to know that the hardest part of the project was already done but not enough so to make the finding go away?  It happens all the time.

I understand the pressures in play for most institutions, honestly I do.  Too few resources, too little time and trying to figure out the right balance between running a business and meeting regulatory requirements.  But that doesn’t explain why you’d implement a solution but not maintain it.  And does it ever make business sense to invest in anything but not leverage the benefits associated with that investment?  Besides, who want to be the one standing in front of the CEO explaining that while it’s true that the money was spent to solve the problem the problem still exists?

Seriously, go the distance, finish what was started and then put someone in charge of keeping the thing current.  In the end you’re going to have to anyway so why wait?  Oh, and before you run out and purchase a brand new solution check the file cabinets and make certain you don’t already own one.

This was someone who for all intents and purposes had nothing to gain from doing something so blatantly stupid.  As an auditor he was likely aware of the logging capabilities available on the host (mainframe system).  He also had direct knowledge of the audit culture and the degree of scrutiny they placed on certain internal artifacts and/or repositories.  But in the end his basic human nature created an override allowing him to indulge his curiosity.  For me that meant that you could never assume that any manner of stored information was ever truly safe and secure

Thus began my basic mistrust of storing sensitive information in electronic repositories.

With that in mind imagine my horror as technology began a rapid progression away from centralized storage and started spreading out first within the infrastructure to distributed applications and eventually breaching the walls of the data center and finding new homes elsewhere in other companies  so-called data centers.   Beyond the fact that you don’t truly know how secure your data ever truly is (notwithstanding reports and attestations to the contrary), it now also has to traverse communication lines that despite what you may want to believe are vulnerable in a number of very real ways.  And we’re not just talking business data, we’re talking social security numbers, bank account numbers, credit card numbers and, and, and……

I simply don’t trust that any sensitive data is ever truly protected anymore.  I operate under the assumption that there are two common states with regards to data security, known breaches and those yet to be discovered.  When I’m challenged with the logic that we’re always told about confirmed breaches eventually and so we know exactly how much has been exposed I laugh.  All that means is that the hackers and criminal element slipped up along the way; a confirmed breach indicates someone made a mistake.  I truly believe that a successful breach is never detected, that the perpetrators behind it figure out the proper balance between skimming data and moving it around for illicit gains so that it never hits the radar.

And I think the threat comes from all over the map.  I think it’s often internal, someone on the inside behind the firewall and locked doors or someone with legitimate access to databases.  I think it’s sometimes along the way between a transmissions point of origin and its destination.  And I think it’s often at points of exposure along the way.  I just don’t believe that there aren’t rogue employees at offsite storage facilities that know how to rig the system and grab media with all manner of PII and NPPI with no one ever the wiser.  I reject the notion that it’s impossible for employees of the popular SaaS companies to gain undetected access to a wide variety of information typically considered private and secured.  I think this happens regularly (if not often) and that as long as we remain blissfully ignorant this will continue to happen indefinitely.

I use only one rule when it comes to how best to protect sensitive data: if the human element is involved in any way your data is at risk.

And if you’re not truly yet at risk, if there’s been no concerning or inappropriate attempts to access your choice data that’s either because they haven’t gotten to you yet on their to-do list or your choice data isn’t as choice as you might think.

If I had it my way everything would be moved back to Big Iron in an internal data center and I’d go hog-wild slapping every conceivable monitoring tool and detection devices wherever possible.  Short of that I’d select solutions that could only be run behind my firewall and on telecom pipes that I directly controlled to further minimize my exposure.  Oh and I’d probably fire anyone who ever even mentioned migrating to the cloud just to set an example.

Does anyone know why vendor management is such a big issue for banking regulators?  I mean, I’ve long advocated that most of what GLBA covers makes sense and should be part of a healthy business strategy anyway.  But when working with clients I’m often surprised to discover that they just see it as another something they have to do and don’t fully appreciate why that is.  So does anyone know?

One of the basic tenets of GLBA, perhaps the MOST basic goal is to protect customers sensitive data.  Sure you can make the argument that it has hooks into disaster recovery and business continuity planning, both also covered by regulatory requirements.  And you can also claim it has to do with service level agreements and gauging the vendors performance.  But really in the end the primary driver behind why your regulator wants you to do a better job of managing your vendors is to make sure they’re protecting your customers where applicable.  Think about it, it’s so simple it’s almost too simple.

Which is why I’m always amazed how so many institutions fail to not only figure out what they need to do but also never really seem to get where they need to be.  It so often becomes about the document collecting game; do they have a SAS 70?  Do they have an Information Security Program?  Who cares?  That’s not what vendor management is intended to address.  What you’re really supposed to do is step back and assess the nature of the relationship, the types of products and/or services the vendor provides and try and identify where threats to your customers sensitive information may exist.  Vendor management is seldom a thinking exercise but rather an attempt to standardize on what artifacts are required in order to prove compliance with the program.  It blows me away how this important activity gets boiled down to something little better than a baseball card collection.

I offer for example my favorite blind spot in every vendor management program I’ve ever conducted a first ti me review of.  Where’s the information for the vendor who cleans the facilities? It’s almost always contracted out and the vendor who owns the contract is responsible for staffing the work.  Where’s proof that they properly screen the people they’re sending into your allegedly secure facilities to make sure they’re not convicted felons?  Where’s proof that they properly police their crews to make sure they’re not behaving in a reckless manner and perhaps letting their friends and family into your secured facilities to drop off dinner or stop by and say “hello”?  When I challenge the clients on this relationship they look at me like I’m nuts.  Almost all of them fail to even include that particular vendor (and those who do tend to include every single vendor they’ve ever done any business with – another big issue).  But all you’ll ever need to do in order to see why this is a potentially huge threat is to walk around the office after hours and see what’s been left out on desks, in printer and fax queues and examine what sort of documentation has been tossed in with the regular trash.

And because vendor management is never truly approached from the right angle it fails to address the very spirit of the exercise and why the three senators who authored GLBA wanted you to pay more attention to it.  But it really reveals a fundamentally bigger issue with most of the compliance domain – no one really approaches most of the work with a true risk oriented perspective.  Compliance isn’t simply about creating checklists and ticking off all the to-do’s – it’s about really trying to identify relevant risks and make sure your institution has controls in place to manage them properly.  And I know for those of you who read my blog with any regularity you’re thinking I’ve written about this before.   That’s true, I bring this up every chance I get because it’s still a huge issue and those of us who have any practitioners attention need to constantly bang on this particular drum.

This is one of the reasons why whenever I’m given a chance to discuss how any of my clients approaches vendor management I try never to tell them what they need to do but rather try and instead have a conversation about what they think they should be doing.  The back-and-forth often helps them expand on their thinking and come up with better, more effective ways in which they can properly categorize and assess their business relationships.

Oh and as for my “Who cares” comment about collecting documentation, there’s a place for that to be sure.  But when you tell your examiner or auditor that you’re OK because the vendor provided a recent SAS 70 and can’t really discuss any of the details you’ve fallen way short of what you needed to do.  Waving documentation in my face never convinces me you’ve done your job and it absolutely never proves that your customers sensitive information is protected.  Remember, SAS 70′s (and now SSAE 16) are subjective and what each one covers can vary wildly from one to another.  And it absolutely does not prove that they’ve successfully addressed all the items in your checklist either.  One of my favorite cut-through-the-weeds tricks is to pick a single checklist item and ask the person waving the report to show me where that’s addressed in the report.  I’ve met a few who could do it and prove to me they’ve actually read the thing but most just start flipping through pages like a poorly prepared student during an open book exam.

Why is this so hard for so many to do a reasonable job on?