Life Sciences, Pharmaceutical and Medical Device Companies Need to Trust Less and Question More to Keep High-Value Data Safe

 

By Sharon Lindstrom, Managing Director
Manufacturing and Distribution Industry Leader

and Scot Glover, Managing Director
San Francisco Life Sciences Practice Leader

 

Life sciences, pharmaceutical and medical device companies possess sensitive, high-value data that cybercriminals, hacktivists, unscrupulous competitors and other malicious actors aim to steal or otherwise expose. Personally identifiable information (PII), such as employee data and information about clinical trial participants, is a prime target for compromise. So, too, is intellectual property (IP), like drug formulas, proprietary software and manufacturing processes.

Adversaries are finding success with their campaigns: According to a 2016 study by the Ponemon Institute, which included pharmaceutical and medical device businesses, 90 percent of healthcare organizations (an all-inclusive category for all sectors participating in the survey) have suffered a data breach in the past two years. Ponemon estimates that those incidents cost the healthcare industry US$6.2 billion.

There are other cyber risks, too, that can be even more damaging. The recent, massive WannaCry ransomware attack, for example, shows how the interconnectedness of healthcare systems, and weak security practices, can put both organizations and patients at risk. The malware also affected Windows-based radiology devices at two U.S. hospitals, according to reports. The attackers took advantage of known vulnerabilities in the devices’ software. Many devices across the healthcare system use old software that is difficult to update, which means they are ripe for malicious actors to exploit.

Time to move cybersecurity from “top concern” to “top business priority”

Although cybersecurity is, and has been, a top concern for leadership at life sciences, pharmaceutical and medical device companies and their stakeholders, most of these businesses aren’t doing enough to ensure PII, IP and other vital data, and their critical systems and devices, are protected. There are several reasons for this, including:

  • Too much trust: Companies often outsource key critical functions, such as research and development, marketing studies and patient data analysis. Unfortunately, many companies feel that the risk of a data breach or hack is also outsourced to the business partner, and that the collaborative agreements they’ve established with their commercial or academic partners or contracted research organizations somehow guarantee security.
  • Lack of insight: Businesses may not dig deeply enough into their collaboration networks or supply chains when conducting cyber assessments to identify security gaps and other risks.
  • Too few resources: Many organizations in the industry are small and in startup mode, and therefore operate very lean. They devote most of their time and budget to research and development, which leaves them with little or no funding to put toward enhancing their cybersecurity. Also, many of these businesses rely on cost-effective and easy-to-access technology tools to store and share information, which means information could be exposed to malicious hackers if the tools are not configured and secured properly.

To improve cybersecurity, life sciences, pharmaceutical and medical device companies must stop viewing the issue as a top concern and treat it as a top business priority. As a starting point, these organizations should seek to answer the following questions:

  1. What information do we share with our strategic partners electronically and how is that data protected while in transit or stored? More companies than ever before, big and small, are now working with contract resource organizations (CROs). These CROs exchange sensitive and confidential data over electronic networks continuously, and the potential for loss, compromise or theft of PII or IP is high. Cybercriminals often will target the security weaknesses of third parties to gain access to a targeted company, using tactics such as phishing. Another risk area: Many businesses are relying on third-party vendors, i.e., cloud providers, to manage and store their data.
  2. How are our strategic partners handling our information physically at the research site? This question relates to the earlier point about companies’ lack of insight into their collaboration network. Organizations must understand how their information might be exposed in a lab environment or at a research site. The theft, by an insider, of a researcher’s notebook with details about a new drug formula or a medical device in development could spell the end for a company whose entire value is tied up in that irreplaceable IP.

Medical device companies have a third question they should consider (although, so too should the organizations and patients relying on these devices):

  1. What is the risk that our products could be hacked and/or controlled by malicious actors? The potential for medical device compromise is no longer in the realm of science fiction. And there were warnings that this would become a reality even as the Internet of Things was emerging. Back in 2014, for instance, the U.S. Federal Bureau of Investigation (FBI) issued a report warning that cyber attacks against healthcare systems and medical devices were likely to increase as more healthcare records were digitized and more medical devices were connected to the Internet.

Life sciences, pharmaceutical and medical device companies must think more critically about, and build a better understanding of, their cyber risk exposure and know what digital assets malicious actors would be most likely to target. When it comes to cybersecurity, these businesses would do well to trust less and question more. Failure to do so can put not only their brands and reputations at risk but their entire business — as well as, potentially, the lives of their patients.

Critical Condition: Cybersecurity in Healthcare

By Adam Brand, Director,
IT Security and Privacy

 

 

 

On June 2, the Health Care Industry Cybersecurity Task Force issued a draft of its Report on Improving Cybersecurity in the Health Care Industry, an analysis of how to strengthen patient safety and data security in an increasingly connected world.

The Congressional report, which sums up the state of healthcare cybersecurity to be in “critical condition,” may shock outsiders, but should come as no surprise to those in the industry, who are well-aware of the challenges and have been awaiting the report as a preview of potential future government regulatory action.

The report lists six imperatives, along with several recommendations and action items. The recommendations bring to the forefront several issues facing the healthcare industry — most notably the risk to patient safety. That’s a departure from the traditional focus on privacy and data protection, and suggests a regulatory gap that needs to be addressed quickly.

The release of this report could not have been timelier, coming on the heels of the debilitating worldwide “WannaCry” ransomware attack that forced hospitals in England to cancel surgeries. Last week we published a flash report that takes a deeper look into the Task Force’s document.

We think that organizations should not wait for the government to initiate solutions. Instead, healthcare providers and medical device makers should proactively increase efforts to bolster cybersecurity to avoid potentially overreaching or misaligned legislation.

In our flash report, we recommend that healthcare providers consider the following actions, tied to key themes of the report:

THEME: (providers) Existing efforts are not enough and patient safety is at risk.
ACTION: Expand cybersecurity efforts to include patient safety.

Healthcare leaders should note the emphasis on patient safety and ensure their cybersecurity program has fully addressed risks that could result in patient safety issues, not just a data breach.

THEME: (providers) Legacy devices are a significant problem.
ACTION: Create a concrete plan for legacy devices.

Develop a plan to phase out or update insecure legacy devices and operating systems, ideally over the next five years, and implement compensating controls such as network segmentation, enhanced monitoring and application whitelisting in the next 12 months to help address the near-term risk.

THEME: (providers) Lack of standard cybersecurity practices.
ACTION: Start formally aligning to a cybersecurity framework.

The report recommends that the Department of Health and Human Services (HHS) develop a health-care specific framework based on the minimum standard of security provided by the NIST Cybersecurity Framework and the HIPAA Security Rule. Health care organizations should begin now to think about how they would align their controls to the NIST CSF standard.

THEME: (manufacturers) Lack of cybersecurity focus; software development lifecycle (SDLC) gaps.
ACTION: Expand cybersecurity efforts, focus on SDLC.

Manufacturers should use the report as an opportunity to determine whether their medical device security program is adequate, given the increased attention on this area and the risks highlighted in the report. Specifically, manufacturers should be able to demonstrate clear security inclusion from new product model requirements through product retirement.

THEME: (manufacturers) Legacy systems are a hot-button issue.
ACTION: Increase activities for reducing numbers of in-use legacy devices.

To avoid negative impacts, manufacturers should work with healthcare providers to reduce the number of potentially compromised medical devices, through customer education and incentives.

THEME: (manufacturers) Minimum cybersecurity standards for medical devices.
ACTION: Work with industry peers to develop a standard.

We anticipate that future FDA device approvals will be contingent on meeting minimum cybersecurity standards. With the typical device development process of five to seven years, manufacturers need to collaborate now to get ahead of regulations and avoid business disruption.

The task force took a year to complete its report, and the result is a very thorough look at the challenges facing healthcare security today. Healthcare providers and medical device manufacturers would be well-served by a careful review of the report to determine how the adoption of these recommendations might affect their organizations.

Download the Protiviti flash report here.

Cyber Attacks Can Be Costly – Is Cyber Insurance the Answer?

By Adam Hamm, Managing Director
Risk & Compliance

 

 

 

The WannaCry malware attack in mid-May focused the attention of corporations around the world on escalating cyber threats. Our Flash Report released immediately after the attack noted that it marked a new and unsettling aggressiveness on the part of cyber criminals: No previous assault matched the breadth of impact of WannaCry, which affected hospitals, corporations and government offices in more than 150 countries around the world.

The cost of getting businesses up and running after the attack was expected to potentially add up to billions of dollars. Additionally, some organizations could face lawsuits over their failure to secure the previously disclosed Windows vulnerability that the criminals exploited.

In fact, news on May 23 that Target Corp. had agreed to pay $18.5 million to settle state and financial institution claims stemming from an enormous data breach should have warranted as much corporate attention as the WannaCry event. Hackers stole data from up to 40 million credit and debit cards belonging to the retailer’s shoppers during the holiday season in 2013, and the company disclosed that the total cost of its cyber security failure had amounted to $202 million so far. A settlement stemming from a consumer class action has yet to be finalized.

The grave consequences of weak cyber security – from business disruptions to the expense of repairs and lawsuit payouts – may lead some to believe organizations are scrambling to make cyber liability insurance part and parcel of their IT security protocols. Yet, according to recent surveys, roughly half of U.S. firms don’t have cyber risk insurance, and more than 25 percent of executives without a policy say they have no plans to add one. Among the companies that have insurance, only 16 percent reported that they have policies that cover all liabilities.

There are reasons many companies are reluctant to purchase cyber liability insurance or beef up existing policies, and the two main ones are cost and complexity. Certainly, insurers can improve clarity on their policies and enhance the ability for customers to compare different proposals. And, it may very well be the prohibitive cost of cyber insurance that is causing some companies hit by ransomware attacks to try and recoup their losses using kidnapping, ransom and extortion policies originally acquired to protect workers in dangerous locations.

Even so, a cyber liability insurance policy is a prudent course of action in most cases. Although it should never be a substitute for strong cybersecurity defenses, it can spell the difference between a severely affected and fairly unscathed bottom line in the aftermath of an attack. Before committing to a policy, however, it is important that management teams and their insurance brokers discuss three pivotal issues:

  • What kind of cyber liability insurance policy does the company need? Does it need a first-person policy to cover the cost of retrieving data critical to the operation, or does the company possess consumer information that requires protection against third-party lawsuits? Does it need both?
  • What amount of coverage does the company want to obtain? This figure will depend on a number of factors, including the size of the company and the type of coverage it needs. To mitigate third-party risk, for example, settlements like Target’s could provide useful benchmarks.
  • What is the premium an organization is willing to pay? A number of variables should be used to determine this figure, including a company’s earnings, the size of the IT budget, and the operations or data at risk.

Once a company has answered these questions, it can begin to shop for cyber liability insurance. As part of the process, the management team needs to fully understand what the policies cover. But perhaps most importantly, organizations need to understand what the policies don’t cover, which will ultimately indicate whether the policy is worth the expenditure.

Given the sophistication and prevalence of successful data breaches, it is now more important than ever for companies to analyze whether a cyber liability insurance policy should be a part of their overall cyber strategy.

Undetected Breaches and Ransomware Change How We Think About Cybersecurity

By Adam Brand, Director
IT Security and Privacy

 

 

 

As new possibilities in information technology continue to transform organizations, they may outpace any cybersecurity protections already in place. Controls that seemed adequate yesterday might not be equal to the challenges presented by new technology and ever-evolving threats today. Our recently-published issue of Board Perspectives: Risk Oversight (Issue 90) discusses eight of today’s business realities directors should consider as they oversee cybersecurity risk, and it is worth a read. We’d like to comment further on two of these realities here.

  • The first reality represents a change in thinking: Whereas the adage of yesterday was “It’s not a matter of if a cyber risk event will occur, but a matter of when,” we now know that it’s better to acknowledge that cyber risk events are already occurring, whether we’re aware of them or not.
  • The second reality revises the familiar advice to identify and protect the critical data assets and information systems, aka “crown jewels,” extending that advice to include being aware of the adverse business outcomes that result from the unavailability or compromise of business-critical but non-sensitive data.

Both of these realities have one thing in common: Boards must remain open to new ways of thinking about cybersecurity, because organizations’ information technology assets — and the ways criminals exploit them — keep evolving. Or to paraphrase the Greek philosopher Heraclitus, the only constant in cyber threats is change.

Hunting for Hackers

Thinking “cyber risk events are not a matter of if, but a matter of when” is no longer sufficient — unless you think of “when” as having happened already. Breach statistics show that the vast majority of breaches are not self-detected. In one example from our own incident response practice, a firm that had several threat detection measures in place was blissfully unaware of a credit card breach until they were informed about it by the Secret Service. The attacker had been in the environment for over one year! This example is not uncommon, as breach statistics also show that the average time between an attack and its detection is over six months.

In hindsight, the proper response to this kind of threat would have been a proactive one — a technique known as “breach assessment” or “threat hunting.” Rather than using in-place technologies and processes as a check on prospective cyber risk events, threat hunting searches proactively for attacks already in progress by asking, “Are we already breached, but unaware of it?” More organizations are now augmenting their cyber defenses with the creation of internal “threat hunting” teams or engaging third parties for periodic breach assessments. Support of ongoing threat hunting and regular third-party breach assessments are two ways for boards to ward off the possibility of a long-term, undetected breach.

More Than Crown Jewels

Just a short time ago, “identifying and protecting critical data and systems” — aka, crown jewels — was the standard measure of adequate cyber risk management. However, a narrow focus on sensitive data, rather than an outcome-driven approach to cyber risk management, could cause an organization to overlook real threats elsewhere — like those presented by ransomware, for example. In the past few years, ransomware has changed the risk equation for companies by targeting operational rather than sensitive data. Encrypting non-sensitive information for ransom may not be the exact high-risk data loss we’ve all been warned about but it will cripple business operations nevertheless until the ransom is paid.

Until recently, firms who possessed only non-sensitive data could rest easy knowing they had no “crown jewels” to protect. They should rest no longer, as all firms are vulnerable to ransomware. Boards should be vigilant about this risk, and ensure that safeguards are in place — as well as continuity plans. Shifting focus from warding off a specific data breach — like the loss of sensitive data via a specific application — to considering all adverse business outcomes leads to more comprehensive cybersecurity solutions.

While all eight new business realities discussed in our latest Board Perspectives warrant attention, these two in particular highlight the need for evolving an organization’s approach to cyber risk oversight, now and in the future. You can read our latest Board Perspectives issue here, and we’d love to hear from you in the comment section below.

Cyber Safety Tips for Private Equity Managers

By Michael Seek, Director
Internal Audit and Financial Advisory

 

 

 

Cybersecurity vendor FireEye, in March, reported an increase in fake emails targeting lawyers and compliance officers with malware disguised as a Microsoft Word document from the Securities and Exchange Commission. That, on the heels of a reported uptick in fake drawdown requests targeting private equity clients, prompted us to put together a list of ways private equity firms and portfolio managers can protect their clients from these increasingly sophisticated attacks. This list has applicability to other companies as well.

  1. Distributions – Protect investors (both internal and external) with controls requiring positive verification of the Investor’s identity prior to making any change to banking/wire instructions. The request should come directly from the Investor or from a contact that the Investor has provided written authorization to act on the Investor’s behalf. An independent email should be sent to the authorized email contact of record notifying them that a change was made and advising them to contact the firm if they did not request the change. This process should mirror those utilized by banks.
  2. Capital Calls/Drawdowns – Capital calls should be presented to Investors via a secure system or mechanism other than email. Note that hackers have been known to establish authentic-looking fake websites designed to capture LP account information. Protiviti recommends strong multifactor authentication routines (again, similar to banks) to thwart such efforts.
  3. System Security – Continuous monitoring for breach detection and a vigorously tested and rehearsed response/recovery plan have become the table stakes for operating any financial services business. If you have a proprietary system for investor distributions, that system should be secured on par with your ERP system.
  4. Deal Sourcing Data – At Protiviti, we emphasize the importance of knowing your “crown jeweIs” — that is, critical data that must be protected, such as investor account data. However, the protection of pipeline data, and information on target companies (e.g., potential deals), is at times overlooked. Data security must be established over systems, sites and network drives where confidential deal data is stored, including security over data rooms associated with due diligence activities. Additionally, employee communications should be monitored to ensure that no confidential information is being “leaked” via company networks.
  5. Board Members – Boards of directors need to ensure that the organizations they serve are improving their cybersecurity capabilities continuously in the face of ever-changing cyber threats. This point was mentioned in our recent Board Perspectives newsletter (Issue 90).That need also extends to the security of board emails and electronic communication of sensitive board materials. Of particular concern is the widespread use of “free” email services. Given the confidentiality of the information contained in many board emails, many organizations provide directors with in-house email addresses.

In a world rife with cyber crime, the incentives to commit it grow ever stronger as just about everything of value – whether an action or an asset – has a digital component. Vigilance continues to be the name of the cyber risk game – for private equity firms and portfolio managers in managing their clients, and for other sectors as well.

Cyber Vulnerabilities of Energy Companies’ Control Systems Can Be Addressed Safely and Successfully

 

By Tyler Chase, Managing Director
Energy and Utilities Industry Leader

and

Michael Porier, Managing Director
Technology Consulting – Security and Privacy

 

The realization is growing across the oil and gas industry that the major cybersecurity threats to upstream, midstream and downstream data and operations are often aimed at operational technology (OT) systems and equipment – usually older, legacy models – rather than at the information technology (IT) side. Those operational technologies typically include industrial control systems (ICS), supervisory control and data acquisition (SCADA) devices and other related technologies implemented at operational facilities, such as plants, pipelines, terminals and rigs.

A recent survey of more than 300 oil and gas companies found:

  • More than 60 percent of companies have suffered a security compromise in the past year, which exposed confidential information and disrupted OT systems and operations
  • Two-thirds of companies believe risks to OT systems have increased substantially in recent years, and 59 percent believe they face greater risks in OT than in IT
  • Only one-third of companies report that OT and IT are fully aligned in their organizations
  • Just 35 percent rate their readiness to address cyber threats as high
  • Close to half of all attacks on OT are going undetected

These survey findings appear shocking – but they are also consistent with Protiviti’s experience in performing cybersecurity assessments for energy and utility clients, particularly evaluating their OT systems. We often find unprotected field terminals with inadequate physical security of connection points, live ports that lack deterrents, and an absence of intrusion detection capabilities. We also commonly see flat networks that are not segmented to appropriately segregate the OT systems from the corporate network environment, making it easier for potential hackers to exploit vulnerabilities across the organization.

Obviously, OT systems with any of these shortcomings present significant cybersecurity risks for the energy and utilities industry. The threat is multiplied by the fact that energy and utilities organizations are deemed critical infrastructure, whose exploitation can have devastating effects to broad geographic regions affecting multitudes of people.

More and more ICS/SCADA technologies allow for the capability to connect (via IP) to the broader corporate network infrastructure. While this provides for certain efficiencies, it can also expose oil and gas systems to unprecedented risks that occur when the previously isolated OT systems are linked to sophisticated IT networks so data can be shared, managed and analyzed.

Despite this newfound connectivity, the industry has remained stubbornly reluctant to challenge legacy OT systems from a vulnerability perspective, for fear of creating interruptions or process errors. This reluctance often leads to a failure to adequately test or update systems to optimize security and minimize cybersecurity risks.

The concerns are legitimate, but only up to a point. In our experience, there isn’t sufficient justification to hold OT systems “off limits” for cybersecurity evaluation and upgrades, given the high potential for targeting by sophisticated opponents and the alarming numbers cited in the survey. To this end, assessments should still be performed, but they must incorporate a series of precautions designed to assure both operational continuity and a complete threat risk review. These precautions include:

  • Well-defined rules of engagement, including identification of the types of reports and system information to be compiled prior to conducting a vulnerability scan
  • Performing security evaluations in a test, rather than production, environment
  • Collaboration with both engineering and IT security personnel to define the scope of the review engagement
  • Reasonable limitations on initial tests so sensitive systems can be excluded if needed to allow for the development of workarounds
  • Establishment of clear lines of communications so any network or system irregularities are reported and evaluated during testing

Working within these parameters, the end goal of testing the security control environment of the ICS/SCADA environments should achieve the following:

  • Evaluate the key security risks prevalent in the ICS/SCADA network architecture
  • Identify the network vulnerabilities and test the connectivity to the enterprise network
  • Assist with the development of a vulnerability management program specific to the ICS/SCADA infrastructure

Ideally, what energy and utilities companies want is to ensure they have an ICS/SCADA environment that can function in a secure and effective manner, and that they can be highly efficient in detecting and responding to breaches and attacks. This requires technical expertise, collaboration between departments, appropriate planning, and leveraging vulnerability assessments to periodically test security.  Testing these systems requires more work, but it is not impossible, and it should not be considered “out of the question.” In fact, testing is an essential practice to preserving the integrity of any critical system.

Top Technology Challenges for Internal Audit: Results From Protiviti’s IT Audit Survey

By Gordon Braun, Managing Director
IT Audit

 

 

 

Process automation and digital transformation are near the top of most corporate agendas, and the IT audit function has never held a more crucial role. The results of the 6th Annual IT Audit Benchmarking Study from ISACA and Protiviti illustrate the increasingly integrated role IT audit leaders and professionals are assuming in regard to technology initiatives in their organizations.

I had the opportunity, along with my colleague David Brand and ISACA director Ed Moyle, to discuss the results at length in a recent webinar. You can view an archived version by registering here. In the meantime, I wanted to give you a quick rundown of the top technology challenges expressed by respondents, and how those challenges compare with the previous year’s results.

No surprise on the top tech challenge: Nearly all organizations are struggling with data privacy and cybersecurity. It’s an area where boards want assurance — even with an understanding that assurance can never be 100 percent, regardless of the amount of money spent. The challenge for IT audit, therefore, lies in determining the right amount of IT audit time and focus to be dedicated to cyber risk and ensuring coverage is in alignment with the risk appetite and priorities of the organization. Though cybersecurity is always a business issue, the risk is typically assigned to IT. IT audit’s effectiveness in this area is strongly related to the experiences and discreet knowledge that the IT auditors in the group bring to the audit. There continues to be a strong push for education and for using the right tools, frameworks, approaches and resources; all are critical elements to ensuring IT auditors to stay in front of the cyber risks they are auditing.

Emerging technology (automation, digitization, cloud, etc.) remains a top challenge for IT auditors, though not ranked as high as last year. Effective IT governance in the face of emerging tech remains a goal for many organizations, and those that ignore it or get it wrong are going to struggle. IT auditors can help their organizations in this area by challenging the effectiveness of IT governance from both a design and operating perspective — this healthy and critical evaluation of the  alignment between the business and IT is required in today’s environment. In organizations with enterprise risk management (ERM) functions, there may be a natural overlap in interest between IT governance and ERM and IT auditors are well-positioned to seek out this partnership to share and receive perspectives from the ERM group.

Infrastructure management, regulatory compliance, and budget/cost concerns all moved up the list this year — a risk triumvirate that I think contributed to the return of third party/vendor management as a top-ten challenge, after dropping below the top ten last year. Infrastructure management and third-party vendor management are closely related as organizations increase reliance on infrastructure as a service (IAAS) and software as a service (SAAS) providers in an attempt to reduce their IT footprint. To ensure maturity in third-party risk management and ease related challenges, IT audit should be involved in the early stages of significant infrastructure projects, evaluating the processes and controls around third-party vendor management, ensuring upfront due diligence activities are completed, and reviewing service level agreements (SLAs) and contracts before they are signed. There are a number of efforts in the market to provide IT auditors with more avenues for assurance for these relationships – an area I fully expect will continue to see growth.

Missing from this year’s top-ten list is big data — a surprise, to say the least. In all my conversation with colleagues, big data remains a top priority, and is closely tied to many of the other top ten challenges. Its absence on the list, in my opinion, has more to do with the temporary elevation of other priorities, and a growing familiarity with the features, risks and benefits of big data, rather than any lessening of focus. Big data also looms large in this year’s Internal Audit Capabilities and Needs Survey, so the conversations around it are certainly not over.

Last, but certainly not least, staffing and skills cut across every other top technology challenge mentioned. Although it dropped slightly from last year’s ranking, it remains a top-five challenge — a reflection of the critical need for internal audit functions to hire and train tech-savvy auditors capable of understanding IT risks. This is particularly relevant for addressing the top challenge of cybersecurity, where expertise is key to gaining the cooperation and trust of IT. Co-sourcing, or even outsourcing of IT audit, can provide that expertise without straining internal resources. Each organization must decide on whether and how to augment its skills based on its specific level of reliance on technology.

Clearly, there is much to unpack from this year’s IT Audit survey results, and we will continue to analyze the findings and track progress in how companies address them. For the full ranking of challenges and a more in-depth analysis, visit our 6th Annual IT Audit Benchmarking Study page.