How to determine how much money to spend on security…

A question that many organizations struggle with is how much is the appropriate money to spend annually per user, per year on information security. While balancing security, privacy, usability, profitability, compliance, and sustainability is an art organization's have a new data point to consider.

Balancing – information security and compliance operations

The ideal approach that businesses take must always be based on internal and external factors that are weighted against the risks to their assets (assets in this case is generally inclusive of customers, staff, technology, data, and physical-environmental). An annual review identifying and quantifying the importance of these assets is a key regular exercise with product leadership, and then an analysis of the factors that influence those assets can be completed.

Internal and external factors include a number of possibilities, but key ones that rise to importance for business typically include:

  1. Contractual committments to customers, partners, vendors, and operating region governments (regulation)
  2. Market demands (activities necessary to match the market expectations to be competitive)

At the aggregate and distributed based upon the quantitative analysis above, safeguards and practices may be deployed, adjusted, and removed. Understanding the economic impact of the assets and the tributary assets/business functions that enable the business to deliver services & product to market allows for a deeper analysis. I find the rate of these adjustments depend on the business industry, product cycle, and influenced by operating events. At the most relaxed cadence, these would happen over a three year cycle with annual minor analysis conducted across the business.

Mature organization's would continue a cycle of improvement (note – improvement does not mean more $$ or more security / regulation, but is improvement based on the internal and external factors and I certainly see it ebbing and flowing)

Court settlement that impacts the analysis and balance for information security & compliance:

Organization's historically had to rely on surveys and reading of the tea leaf financial reports where costs of data breaches and FTC penalties were detailed. These collections of figures showed the cost of a data breach anywhere between $90-$190 per user. Depending on the need, other organizations would baseline costing figures against peers (i.e., do we all have the same # of security on staff; how much of a % of revenue is spent, etc…).

As a result of a recent court case, I envision the below figures to be joined in the above analysis. It is important to consider a few factors here:

  1. The data was considered sensitive (which could be easily argued across general Personally Identifiable Information or PII)
  2. There was a commitment to secure the data by the provider (a common statement in many businesses today)
  3. The customers paid a fee to be with service provider (premiums, annual credit card fees, etc.. all seem very similar to this case)
  4. Those that had damages and those that did not were included within the settlement

The details of the court case:

The parties' dispute dates back to December 2010, when Curry and Moore sued AvMed in the wake of the 2009 theft of two unencrypted laptops containing the names, health information and Social Security numbers of as many as 1.2 million AvMed members.

The plaintiffs alleged the company's failure to implement and follow “basic security procedures” led to plaintiffs' sensitive information falling “in the hands of thieves.” – Law360

A settlement at the end of 2013, a new fresh input:

“Class members who bought health insurance from AvMed can make claims from the settlement fund for $10 for each year they bought insurance, up to a $30 cap, according to the motion. Those who suffered identify theft will be able to make claims to recover their losses.”

For businesses conducting their regular analysis this settlement is important as the math applied here:

$10 x (# of years a client) x client = damages .. PLUS all of the upgrades required and the actual damages impacting the customers.

Finally

Businesses should update their financial analysis with the figures and situational factors of this court case. This will in some cases reduce budgets, but others where service providers have similar models/data the need for better security will be needed.

As always, the key is regular analysis against the internal & external factors to be nimble and adaptive to the ever changing environment. While balancing these external factors, extra vigilance needs to ensure the internal asset needs are being satisfied and remain correct (as businesses shift to cloud service providers and through partnering, the asset assumption changes .. frequently .. and without any TPS memo).

Best,

James

 

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