New regulations have companies turning to risk management

Computerworld - Regulatory changes are causing financial services and health care companies to lead the way in rethinking the role of information security. The result is that security is finding a new home in the field of corporate risk management.

"We are seeing in financial services and health care a change in how organizations assign security responsibilities," said Gartner Inc. privacy and security analyst Arabella Hallawell, speaking at this week's Gartner Enterprise IT Security and Sector5 infrastructure protection conference in Washington.

In addition to the privacy impact of the Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act, the tighter financial controls levied by the Sarbanes-Oxley Act will force chief financial officers to take steps to guarantee financial information, she said. The result is likely to be the hiring of chief information security officers (CISO) who are independent of the CIO and who report to the CFO from within the corporate risk management entity.

"The trend is well established in the United Kingdom and Europe, with their more stringent privacy regulations," Hallawell said. Realigning the responsibilities of the CISO is a key driver in the growth in cyberinsurance, which Stamford, Conn.-based Gartner has forecast to grow from $100 million in 2002 to $900 million by 2005.

	Mark Willoughby, CISSP, is a 20-year IT industry veteran and journalist with degrees in computer science and journalism. For the past seven years, he has tracked security and risk management start-ups and is a managing consultant at MessagingGroup, a Denver-based content development specialist.

"Adopting risk management for cyberinsurance is a cultural shift" and will drive the cost for insuring a company against risk from $5.50 in insurance premium per $1,000 in revenue to $7.50 per $1,000 in revenue, Oliva said. "Cyberinsurance will become a best practice by most institutions by 2008," likely driven by precedents set in civil lawsuits, he added.

The toughened privacy regulations are also forcing customers to seek stronger contractual guarantees from their IT suppliers in the event they suffer unauthorized privacy disclosures as a result of software flaws. Most IT products are sold with "shrink-wrapped" licensing terms, in which customers are asked to accept software products "as is."

"We are encouraging customers to seek better security from vendors and security providers," Hallawell said. A routine part of every IT purchase should be an evaluation of the amount of security built into a supplier's product, as well as the supplier's security processes, and should include contract language that forces vendors to assume some of the risk for using their products, she said.