About Us | Contact Us
View Cart

Four Risk Appetite Statements

By Dan Hadaway | Thursday, June 6, 2019 - One Comment


Another one of those Dan’s New Leaf Posts, meant to inspire thought about IT Governance . . . .


For all the same reasons a board of directors would want to establish a risk appetite statement on loan risk or other major risk categories, the 2015 Cybersecurity Assessment Tool gave us the ability to establish a statement based on perceived inherent risk of information assets, and the risk of not being at the “appropriate maturity” related to, at least, cybersecurity controls.  Most banks are now establishing board-approved statements that say something along the lines of:

  • “When introducing new assets that represent a (usually moderate*) level of cybersecurity risk according to the FFIEC Cybersecurity Assessment Tool, management will inform the board prior to putting the asset in production.”

This allows management to freely bring in products and services that are not worth the board’s attention, but when one is, it provides a mechanism for ensuring the board, and not management, accepts the risk.

This “inherent cyber-risk appetite statement” is usually accompanied by:

  • “Whenever the bank cannot declare itself at the (usually baseline) level of maturity,  the board will be notified in the next board meeting.”

But the cybersecurity assessment tool leaves room for improvement.  For one, it’s only about cybersecurity, and most community banks face far more information security risk than cybersecurity, buzzwords and hoopla aside.  But more importantly, it does not address a couple of risk appetite factors we believe would be easily addressed:

The board should decide where, on Everett Rodgers’ Diffusion Theory of Innovation curve, the bank should be.  In other words, do we want to be an innovator (first 10%), early adopter (second 15%), early majority adopter (second 25%), later majority adopter (third 25%, or laggard (final 25%).  (See chart).  The third statement could be written as,

  • “In general, the board wants the bank to be an (usually early-adopter) of security-related technologies, but a late majority adopter of all other technologies.  Thus, the board will be notified anytime a new product, service, or technology is not perceived to fall into the above guideline.

Typical Technology Adoption

A final, and well-loved statement if the board has the courage to make it, would be how to address low-risk non-technical audit findings.  Most banks do not have a well-designed approach to this.  It’s usually left up to the auditor.  It’s based on the notion that anybody can find at least a thousand non-technical issues . . . where we may not be TECHNICALLY dotting every regulatory ‘I,’ or crossing every FFIEC ‘t.’  Here’s my favorite example:  The OCC’s guidance on contract review requires the bank to have the right to audit its vendors.  How often do you see that?  (Never?)  If an auditor was to find this, it would surely be “low risk” for most banks.

So, maybe a statement like this may be a good addition to the bank’s risk appetite statement:

  • “All audit findings will be risk-ranked.  Low risk non-technical IT audit findings should be documented in a Workpaper provided to management and the audit committee.  However, unless the auditor feels there is a need, low risk non-technical audit findings will not be tracked in the audit tracking program, and closure of these findings will be at the discretion of the Information Security Officer, based on a risk-reward calculation.”

Original article by Dan Hadaway CRISC CISA CISM. Founder and Managing Partner, infotex

“Dan’s New Leaf” is a “fun blog to inspire thought in the area of IT Governance.”


same_strip_012513


 

One Response to “Four Risk Appetite Statements”

Comment from Roger Chalkley
Time 06/10/2019 at 5:26 pm

Great ideas and suggestions to fully cover the bank on Risk Appetite!

Latest News
    Community Banking and their layers of security. . . Michael Hartke’s first post as Executive Vice President! Thinking back to my first talk to security professionals in community banking almost 10 years ago, the question continues to this day. First some background… infotex was moderating the Indiana Bankers Association Security Conference when one of the […]
    Reasons why we should be considered! infotex provides a number of services that can be checked out if you click over to offerings.infotex.com! We even made a movie with all the reasons why infotex should be your next MSOC!  
    infotex and GoTo To all infotex managed security service Clients: As recently reported by major news outlets there was a data breach affecting GoTo (formerly LogMeIn) wherein attackers stole encrypted backups containing customer information in November 2022.  Based on the advisory from GoTo the products they offer that are affected include LogMeIn Pro, LogMeIn Central, […]
    An option for increasing security for ALL organizations. . . The threat landscape is evolving daily, and it is becoming increasingly difficult for even large organizations providing cyber defense services to keep up. As Brandao (2021) notes, it is important for organizations to adapt holistic technologies that can correlate all attack events. Therefore, developing XDR […]
    Another awareness poster for YOUR customers (and users).  Now that we have our own employees aware, maybe it’s time to start posting content for our customers! Check out posters.infotex.com for the whole collection! Download the large versions here: Awareness Poster (Portrait) Awareness Poster (Landscape) You are welcome to print out and distribute this around your […]
    A relic of the internet’s less secure past, many small firms struggle to secure their email systems… An article review. With a great deal of cybersecurity related news focused on new threats and similarly new techniques aimed at combating them, it can be easy to forget some of the older threats that have never gone […]
    Seven Trends . . . …that small bank Information Security Officers face in 2023 Another one of those Dan’s New Leaf Posts, meant to inspire thought about IT Governance . . . . Welcome to the Magnificent Seven, my annual predictive article about the seven trends in technology that will impact the Information Security Officers of […]
    System Security and Cybersecurity are not the same thing. . . Another one of those Dan’s New Leaf Posts, meant to inspire thought about IT Governance . . . . Regarding “information security,” the last thirty years have seen an evolution of frameworks, laws, and assessment approaches which intimidate the management team with their complexity.  […]
    The cryptographic algorithm is vulnerable to attack and is no longer considered secure… An article review. NIST has announced that it plans to retire the SHA-1 cryptographic algorithm by the end of 2030, citing multiple vulnerabilities in the standard, effectively ending its use after nearly 30 years.  Introduced in 1995, SHA-1 used a 160-bit hash […]
    Another awareness poster for YOUR customers (and users).  Now that we have our own employees aware, maybe it’s time to start posting content for our customers! Check out posters.infotex.com for the whole collection! Download the large versions here: Awareness Poster (Portrait) Awareness Poster (Landscape) You are welcome to print out and distribute this around your […]