Here is a new reason to get your cybersecurity incident response program in order: federal banking regulators have issued a new rule requiring banks to notify regulators of “qualifying” cybersecurity incidents within 36 hours of recognition. This rule has the collaboration of the FDIC, the Federal Reserve and the Comptroller of Currency, and will be effective on April 1 of 2022.

It’s not as bad as it seems, though. According to the rule, a computer security incident is defined as an occurrence that “results in actual harm to the confidentiality, integrity or availability of an information system or the information that that system processes, stores or transmits.” However, a computer security incident that must be reported according to the new timeline is one that has disrupted or degraded a bank’s operations and its ability to deliver services to a material portion of its customer base and to business lines. Since this is somewhat nebulous, they also listed a number of examples of incidents requiring 36 hour notification. These include (but are not limited to):

• A failed system upgrade resulting in widespread user outage.
• A large-scale DDoS attack disrupting account access for more than four hours.
• A ransomware attack that encrypts core banking systems or backup data.
• A bank service provider experiencing a widespread system outage.
• A computer hacking incident disabling banking operations for an extended period of time.
• An unrecoverable system failure resulting in activation of business continuity / disaster recovery plan.
• Malware on a bank’s network that poses an imminent threat to core business lines or critical operations.

This same rule also requires banking service providers to notify at least one bank-designated point of contact at each affected customer banking organization “as soon as possible” when the service provider has experienced a computer security incident that disrupts services for 4 hours or more.

Although 36 hours seems like an adequate amount of time for banks to notify the FDIC, in reality this time is very short indeed. From having worked with financial institutions that have had various compromises in the past, we know that determining if the incident is real, determining exactly what happened, when, how and was perpetrated by whom are thorny problems that can take days to figure out. There is also the reality to consider that modern cyberattacks often have multiple stages in which one attack is used to obfuscate other insidious attacks that are launched during the confusion. The regulators have been working with banking industry to try to craft requirements that do not overly burden the affected financial institutions during times of crisis, but who knows how well that will work? Guess we’ll see next spring!

How good is risk assessment? Can a risk assessment actually identify all the risks that might plague a particular project, program or system? The short answer is no, not entirely.

Since humans became sentient and gained the ability to reason, we have been using our logical ability to attempt to see into the future and determine what may be coming next. We see what is going on around us, we remember what has happened in the past, we learn what others have experienced and we use that information as our guide to calculating the future. And that paradigm has served us well, generally speaking. We have the logical ability to avoid previously made mistakes and predict future trends pretty well. However, we never get it 100% right. It is a truism that no system ever designed to protect ourselves and our assets has not been defeated sooner or later. That is why a risk engineer will never tell you that their security measures will provide you with a zero-risk outcome. All you can do is lessen risk as much as possible.

One reason for this is an imperfect understanding of all the factors that contribute to risk for any given system or situation. These factors include understanding exactly what we are attempting to protect, understanding threats that menace the asset, understanding mechanisms that we have in place to protect the asset and understanding weaknesses that those threats may be able to exploit to defeat our protection mechanisms. If any one of these factors is imperfectly understood and integrated with the other factors involved, risk cannot be wholly eliminated.

Understanding what we a trying to protect is the factor that is easiest to accomplish usually, especially if it is something simple like money or our home. However, even this task can become daunting when you are trying to entirely understand something as complex as a software application or a computer network. These sorts of things are often composed of parts that we ourselves have not constructed, such as standard bits of code or networking devices that we simply employ in our bigger design but do not have a complete understanding of.

Understanding threats that menace our assets is more difficult. We are pretty good at protecting ourselves against threats that have been employed by attackers before. But the problem lies in innovative threats that are entirely new or that are novel uses and combinations of previously identified threats. These are the big reasons why we are always playing catchup with attackers.

Understanding the mechanisms we have in place to protect our assets is another area we can accomplish fairly well, but even this factor is often imperfectly understood. For example, how many of you have purchased a security software package to protect your network, but then have trouble getting it to work to its greatest effect because your team doesn’t have a handle on all of its complexities? We have seen this often in our work.

Finally, understanding weaknesses in our protection mechanisms may be the hardest factor of all to deal with. Often, security vulnerabilities go unrecognized until some cleaver attacker comes up with a zero-day exploit to take advantage of them. Or sometimes simple vulnerabilities seem easy to protect against until someone figures out that you can string a few of them together to affect a big compromise.

So, to get the most out of risk assessment, you need to gain the greatest understanding possible of all the factors that make up risk. In addition, you need to guard against complacency and ensure that you are not only protecting your assets to the greatest extent your ability and budget will allow, but you need to be prepared for those times that your efforts fail and security compromise does occur.

Twenty years ago, the world of network security was a whole different ballgame. At that time, the big threat was external attackers making their way onto your network and wreaking havoc. As hard as it is to believe now, many businesses and organizations did not even employ firewalls on their networks at that time! The big push among network security professionals then was to ensure that everyone had good firewalls, or “network perimeter” security, in place. This is the time when vulnerability assessment of distributed computer networks became big.

Vulnerability assessment entails examining networks for weaknesses such as exposed services and misconfigurations that could be exploited by attackers to gain access to private information and systems. This type of testing was encouraged by professionals to give businesses and organizations information about the weaknesses that were actually present at the time of testing. At first, vulnerability assessment was usually only conducted against the external network (that part of the network that is visible from outside the business, usually over the Internet).

Most businesses and organizations embraced the need for firewalls and external vulnerability assessments as time progressed. This was not only because doing so made good sense, but because of regulatory requirements penned to meet the requirements of modern laws such as HIPAA, GLBA and SOX. However, many did not see the need for other security studies such as internal vulnerability assessment (VA). Internal VA is like external VA, but looks for weaknesses on the internal network used by employees, partners and service providers that have been granted access and privileges to internal systems and services. The need for internal VA became increasingly important as cybercriminals found ways to worm their way into internal networks or the networks of service providers or partners. As more time passed, and network attacks increased in volume and competency, internal VA became more commonly performed among businesses and organizations.

Unfortunately, despite the increase in vulnerability studies, networks continued to be compromised. One of the reasons for this is the limited nature of vulnerability assessment. When a VA is performed, the assessors usually employ network scanning tools such as Nessus. The outputs of these tools show where vulnerabilities exist on the network, and even provide the consumer with recommendations for closing the security holes that were found. But it doesn’t go so far as to see if these vulnerabilities can actually be exploited by attackers. Also, these tools are limited, and do not show how the network may be vulnerable to combination attacks in which cybercriminals combine various weaknesses (technical, procedural and configurational weaknesses) on the network to foment big compromises. That is where penetration testing comes into play.

Penetration testing is not automated. It requires expert network security personnel to undertake properly. In penetration testing, the assessor employs the results of vulnerability studies and their own expertise to try to actually penetrate network security mechanisms just as a real-world cybercriminal would do. Obviously, the smarter and more knowledgeable the penetration tester is, the more valid the results they obtain. And for the consumer this can be a great boon.

It is true that penetration testing costs more money than performing vulnerability studies alone. What is little appreciated is the money it can save an organization in the long run. Not only can penetration testing uncover those tricky combined attacks mentioned above, it can also reveal which vulnerabilities found during VA are not presently exploitable by attackers to any great effect. This can save organizations from spending inordinate amounts of time and money fixing useless vulnerabilities and allows them to concentrate their resources on those network flaws that present the most actual danger to the organization.

Many different types of organizations and businesses are required to undertake risk assessments and audits, either to satisfy some regulatory body or to satisfy internal policy requirements. But there often are questions about why both must be undertaken each year and what the differences between them are. These processes are very different, are done for different reasons and produce very different results

A risk assessment in reality is a way to estimate, or make “an informed guess” about the kinds and levels of risk facing just about anything. From a business perspective, you can perform a risk assessment on an individual business process, an information system, a third-party supplier, a software application or the enterprise as a whole. Risk assessments may be performed internally by company personnel, or by specialist, third-party security organizations. They can also be small-scale assessments conducted among a group of interested parties, or they can be large-scale, formal assessments that are comprehensive and fully documented. But whatever type and scale of risk assessment you are undertaking, they all share certain common characteristics.

To perform risk assessment, you first must characterize the system you wish to assess. For example, you may wish to assess the risk to the organization of implementing a new software application. “Characterizing,” in this case, means learning everything you can about the system and what is going to be entailed with installing it, maintaining it, training personnel to use it, how it connects to other systems, etc.

Once you have this information in hand, the next step is to find out what threats and vulnerabilities to the application exist or may appear in the near future. To do this, most organizations look to government and private organizations that keep track of threats and vulnerabilities and rate them for severity such as DHS, CERT, Cisco or SAP. In addition, organizations look to similar organizations and use groups to learn from them what threats they have experienced and what vulnerabilities they have found when implementing the software application in question.

The next steps in risk calculation are ascertaining the probability that the threats and vulnerabilities found in the previous steps may actually occur, and the impacts on the organization if they do. The final step is then to take into account the security controls that the organization has in place and the effect these countermeasures might have in preventing attackers from actually compromising the system. Thus, the formula for calculating risk is (threats x vulnerabilities x probability of occurrence x impact)/countermeasures in place = risk.

Looking at the above, it is obvious that there is much room for error in a risk calculation. You might not be able to find all the threats against the application, nor may you be able to determine all the vulnerabilities that exist. Probability of occurrence is also just an estimate, and even impact on the organization may not be fully understood. That is why I said that risk assessment is really just an estimate or educated guess. Audit, on the other hand, is something entirely different.

The goal of an audit is to ascertain if an organization is effectively implementing and adhering to a documented quality system. In other words, an audit examines written policies and processes, and records of how they are actually being implemented, to see if the organization is following the rules and to see if the processes they are following are effective. Auditors should be disinterested third-party professionals and in the case of IT audits are usually CPAs.

Most often, such as in the case of an audit by a regulatory body, a group of auditors will come on-site to the organization and start the process of records examination and interviews with personnel. This is an exhaustive process and contains little or no guesswork. Audits can be limited, such as an audit of an accounting system, or can look at all the business practices of an organization. You can even have an audit done to test the quality and effectiveness of your risk assessment and risk management processes. This is probably where some of the confusion between the two arise. Although both may be mandated for a single organization, they remain very different processes.