Cyber Security: It’s Everyone’s Job

HBK is in the cyber security business. Our Risk Advisory Services group exists to serve our clients and help ensure they remain healthy, active and viable. That is our business, ethical and moral purpose. We also realize that we alone cannot entirely handle your cyber security needs, because so much of cyber security is a function of business culture and self-awareness.

Here are five reasons cyber security starts and ends in the business setting:

1. Laws put the burden on your business to protect cyber data. If you peruse the California Consumer Privacy Act, the New York Department of Financial Services Cyber Security Regulations, the Ohio Cyber Security Safe Harbor Law, the Florida Information Protection Act, and the mother of all data regulations, the General Data Protection Regulation of the European Union, you will find two common denominators: none of them make it illegal to steal data and all of them make it incumbent on the business to protect data.

Each regulation sets forth actions businesses must take to protect data. This type of law used to be reserved for national security matters—power plants, national emergencies, disaster recovery—but state governments in the U.S. and foreign sovereigns are delivering a clear message that these laws apply generally. You are responsible for protecting data, and if you do not you will be punished.

2. The burden to protect cyber data is being pushed by big businesses to small and medium businesses (SMBs) under contractual mandates. Large multinational businesses are being attacked through their vendors. Target took a data breach hit because of an HVAC vendor. Capital One just announced a data breach allegedly caused by an employee of one of its vendors.

Large businesses are now insisting that their vendors adopt safe cyber hygiene practices or risk losing the business. The role of “vendor risk manager” has risen to the top of the charts as supply chain logistics expand and state laws mandate cyber security measures. SMBs risk losing their best customers if they do not tow the line on cyber security.

3. Blind Faith in outsourced IT and cyber security measures does not work. Pay close attention. Pushing problems to a third party does not solve problems, it merely hides them. Many SMB’s outsource IT and presume that their vendor has cyber security covered. This is flawed for two major reasons. First, IT vendors are only one part of the cyber security solution. Second, IT companies are particularly susceptible to data attacks because they are an entry point into your systems. SMBs must be assured that the people they pay are addressing cybersecurity. As one CFO recently told me, he is afraid of what he doesn’t know. That type of self-realization is healthy. Have your vendors demonstrate their cyber security.

4. Cyber Insurance underwriting guidelines will not accept cyber security indifference from management. Financing a cyber data breach or a ransomware heist is a big financial deal. CEOs, COOs, CFOs and BODs are tasked with managing the business vessel. Running afoul of cyber insurance guidelines can deprive a business of the requisite financial resources provided by insurance during a cyber data calamity. Good business management practices as well as operating agreements, by-laws and partnership agreements entrust these levels of decision to management. If C-level management and boards do not fulfill their obligations, they place the financial status of the business in peril. Study the cyber security laws and regulations listed in item 1 of this article. They are aimed directly at management.

5. Fiduciary Duty of Company Officers. Talk to your business lawyers about the respective duties owed to companies by their officers. Most state laws place this high level of responsibility upon the company officers. Fiduciary duties are non-delegable.

We do not have the luxury of cyber police patrolling the data streets of homes and businesses. Security always begins with the individual. Never confuse law enforcement with security. It is incumbent upon each person to do their part in cyber and data security because each person is a link in the cyber data chain. HBK understands this reality and bases its cyber security services on understanding the human, technical and management elements as being inextricably intertwined. In the end, you are only as secure as your weakest link.

For more information or to review your cyber security responsibilities and readiness, contact Steve Franckhauser at 614.228.4000 or sfranckhauser@hbkcpa.com.

About the Author(s)

Steven Franckhauser is a Senior Director working out of the Columbus, Ohio and Pittsburgh, Pennsylvania offices of HBK. He joined HBK in 2011 and works with both the Risk Advisory/Cybersecurity and Energy divisions of the firm.

He is an adjunct Professor of Law at the Duquesne University School of Law, where he teaches business planning and cyber security courses. Steve contributes to the Penn State Extension programs on Shale development, is an adjunct Professor at Penn State University's Beaver campus in Monaca, Penn., and has been a guest lecturer on shale energy and renewable energy at The Ohio State University Fisher School of Business and the School of Arts and Sciences. He is also a past recipient of the “Who’s Who in Energy” by the Pittsburgh Business Times.

He serves on various industry-related boards and is a frequent lecturer and speaker on the economic development and opportunities provided by shale energy, as well as on topics related to the importance and development of Cybersecurity best practices, regulations and standards as they relate to businesses and individuals.

Matthew J. Schiavone is a Senior Manager in HBK’s Quality Control department and works primarily in the Pittsburgh, Pennsylvania office. He specializes in risk advisory services, system and organization control (SOC) reporting, internal controls, IT audit, information security, and cyber security for all types of industries.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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