IT Risk Management – Page 2 – J. Howard, CDO & CPO

The role of the Chief Data Officer is evolving quickly, and has been compared to the CIO of the early 90’s, in that the CIO role was just starting to take shape, companies were just beginning to appoint CIOs and they were struggling to define responsibilities. The similarities don’t end there. Consider:

Early CIO’s had strong IT backgrounds, but often didn’t truly understand the business they were supporting. In some other cases, it was the exact reverse – the CIO was a business person with limited (or no) understanding of IT
The CIO was a “second tier C-level executive”, often reporting to the CFO. This was often because in those days, the CFO was thought of as the principal consumer of IT, and companies failed to recognize how computers – notably PCs – were penetrating and enabling other areas of the business. This lead to frustration among users, “shadow IT” lacking formality and control, and an incomplete understanding of the overall IT portfolio and spend.
Every CIO was different, and every IT mission was different, and highly tailored to each company. In hindsight, the industry was “fumbling” (a term not meant in a disparaging way) as the IT industry went through a massive evolution; some may remember Tom Watson’s prediction that there would only ever be a market for maybe five computers.
The CIO’s senior staff were often technically proficient in their respective areas, but not very aware of the needs of the business they were supporting – and they lacked the tools to build the necessary bridges.
There was very little interface with “users” (a new term at the time) because most systems under the CIO’s purview were specialized and vertical, or were infrastructure – and end-user computing was evolving on its own, outside the CIO’s scope of responsibility.
Numerous “disasters” have taken place tied to IT (whether failed initiatives, outages, breaches or hacks) and the post-event analysis often failed to properly address the underlying issue, perhaps due to lack of understanding, or a desire not to reveal the extent of the issue, or because the business was not fulfilling their responsibility relative to IT governance.

In 1994, Charles B. Wang published the book “Techno Vision: An Executive’s Survival Guide to Understanding and Managing Information Technology”. In the book, Mr. Wang shines a light on the “disconnect” between IT and the business they support, as it relates to understanding the role technology can play, and he makes suggestions on how to address the gap.

Now in 2018, the CIO is a universally accepted role, but there are still plenty of examples where the CIO has limited (or no) understanding of the business, and the business leaders’ eyes glaze over when any technology topics arise. And IT is one of the largest line items on corporate budgets.

Enter the CDO

Conservative predictions foresee a massive increase in number of information-related products and services, as well as company spend on information-related initiatives. Not to mention the exponential growth of information itself. It’s helpful to look at the “typical” CDO in 2018, as a way to anticipate trajectories and avoid similar pitfalls that were seen with the evolution of the CIO. Consider for comparison:

Most organizations are recognizing the transformative potential that exists in leveraging information, but the majority have not appointed CDOs. And some organizations have appointed CDOs internally who don’t have an information management background.
Many organizations have emphasized the technical aspects of information leverage, and have appointed Data Scientists as the top leaders in information management, who in turn have flushed out their teams with data scientists and analysts.
Certain segments of the market – insurance, for example – seem to view information management as an “IT thing” and often place the CDO under the CIO, which immediately limits their ability to be successful.
Many companies are reacting to steps taken by their peers, and have appointed “me too” CDOs with limited thought to their responsibilities, scopes and measures. As a result, vision and strategies are incomplete or non-existent.
Upon arrival, many CDOs are dumped on, getting assigned responsibilities that are at best loosely tied to information, but weren’t necessarily part of the scope originally envisioned. This immediately interferes with their ability to deliver, even if the new responsibilities are appropriate and legitimate.
CDO’s teams are often thinly staffed, and are expected to transform the organization by exerting political influence on other leaders, often who have conflicting agendas or are protecting their turf.
Many business leaders speak about, but don’t understand, the strategic role that information leverage can play in their organizations, due to a lack of data literacy.

To be sure, none of these should be seen as evidence that the CDO is a passing fad or a failure. Quite the opposite: there is a recognized need for a CDO, who is emerging as the executive who must pull together and execute a strategy to gain benefit from leveraging information. Unlike other trendy business fads, the CDO is tasked with making use of a resource that is already there – and growing – increasingly recognized as key to greater prosperity. By investigating the challenges faced by many early CIOs, there are opportunities for the CDO to learn from the past, and avoid similar issues.

Support and Empowerment

For most forward-looking organizations, the CDO should be a company-wide role. The CDO should be seen as a senior executive, should report to the highest levels of the organization, and have broad authority to effect policy and influence behavior. They should have visibility and accountability to the Board of Directors. In terms of support, the CDO should have resources to execute in a credible way, including personnel and tools.

Scope and Responsibility

If an organization believes that information is their lifeblood, and that leveraging information is key to continued success (or relevance), then they are acknowledging the strategic importance of information. The CDO’s scope should align with the role information plays — both in terms of opportunity and obligation. Meaning, they should be tasked with deriving benefit from information in a way reflective of their business, but should also be responsible for ensuring obligations are met and risk is managed for that data.

Qualification

The CDO is not a technician; they are a business executive. While it is difficult to imagine there are enough CDO’s in the market who have deep understanding of the businesses of their employers, a good CDO should be able to bridge their skills as an information leader to the businesses they are tasked with enabling. Just as a banking or manufacturing executive knows banking and manufacturing, the CDO knows information management. And just as that banking or manufacturing executive doesn’t understand every technical nuance of their business, the CDO needs to know enough to direct and guide their specialists.

Structure

Charles Wang, in his book, discussed the disconnect between IT and the business they support, and the risk of this occurring with the CDO is just as real. In the 24 years since he published the book, some business leaders are just as illiterate in IT as they were then, but the breadth of tools is immeasurably wider. Data Science is maturing at an incredible pace, and businesses are struggling to understand the intersection between what they do and the potential value data can add. To help address this, the CDO needs to establish strong relationships with the business counterparts, and help develop data strategies. They need to work with the data scientists to identify potential use cases and opportunities with data, getting the business leaders on board. While the CDO has a high degree of responsibility for helping execute the data strategies, ultimately the business leaders are accountable to their own stakeholders for the success of the data initiatives within their areas.

One model to establish and maintain the relationships is through a governance council or steering group, chaired by the CDO and attended by senior leaders across the organization. The members are responsible for their own information investments, and attend the council to help ensure alignment to vision and consistency of strategy.

Scientific Method

WikiPedia tells us that:

Scientific method is an empirical method of knowledge acquisition, which has characterized the development of natural science since at least the 17th century, involving careful observation, which includes rigorous skepticism about what is observed, given that cognitive assumptions about how the world works influence how one interprets a percept; formulating hypotheses, via induction, based on such observations; experimental testing and measurement of deductions drawn from the hypotheses; and refinement (or elimination) of the hypotheses based on the experimental findings. (before the reader dismisses this for having come from Wikipedia, the definition is pretty consistent with other sources)

The adoption of Data Science in business frequently takes a very different approach, where data scientists are empowered, and ask for more and more data to “play” with to see what they can come up with. Perhaps this was the result of companies moving directly to the technical solution without first establishing a business vision and strategy, in coordination with their own business leaders. While some very interesting discoveries were probably made, there is likely there were a high degree of false starts, or developments that served no business purpose, or instances where the obligations limiting use of data were violated. And without an appropriate degree of skepticism, can they be certain the algorithms really work?

Perhaps a more structured approach makes sense, taking a page from Scientific Method. The data strategy should be articulated by the business, and transformed into a series of initiatives, some of which require research and experimentations. Certain of these should be treated like research endeavours with hypotheses formed – with significant participation by both the data scientists and the business stakeholders – which are proven in a lab setting before productizing and deployment.

Relationships

The CDO is going to have to rely on relationships to a great extent for several reasons, including (1) the role is new and evolving, (2) many of the responsibilities the CDO should take on are initially held by others, leading to political turf-wars, and (3) at least initially, the responsibility for execution of initiatives is shared with other business stakeholders.

Certain key relationships stand out, including:

CIO: The CDO’s initial scope probably most closely overlaps with the CIO, partly because up until the CDO’s appointment, many information-related initiatives were likely assigned to the CIO by default. It’s critical that the relationship evolve more to a service-provider/client model, where the CDO looks to the CIO to develop technology solutions to meet business requirements for information management, and the CDO has to be careful not to overstep and attempt to drive the architecture of the solutions.

CISO: A key responsibility for the CDO is information protection. Whereas the CISO has historically been responsible for blanket IT security, the CDO should have greater insight into the relative value of information sets, as well as how they should be accessed, transmitted and processed. Moreover, the CDO should have greater insight into unique handling obligations tied to particular information sets. Meeting those obligations and protecting the information is likely achieved by a combination of controls — administrative, technical, manual, policy, physical, etc., responsibility for which may initially be spread across the organization. So the CDO should emerge as a stakeholder for the CISO, where the CDO provides requirements and the CISO implements controls to address those requirements.

CPO: Much of the information leveraged by an organization might be subject to regulatory requirements, and some of those my fall into the category of PII, generally managed by the CPO. Whereas the traditional scope of the CISO overlaps with the CDO, in the case of the CPO, the CPO’s scope is entirely contained within the scope of the CDO (after all, the second “I” in “PII” stands for “Information”). The privacy rules are only one set of obligations, and apply to only a portion of an organization’s overall information portfolio. So logically, the CPO should move into the office of the CDO — with appropriate relationships with legal counsel to ensure regulations are interpreted properly.

Regulators: In organizations beholden to regulatory oversight (banks, insurance companies, accounting firms, government contractors, healthcare institutions), analysis reveals that a key concern driving the regulations is the handling of information. And since the CDO’s objective is to manipulate and leverage information, it follows that it’s critical for the CDO to ensure that proposed data-use initiatives conform to regulatory requirements by design. Moreover, everyone — including regulators — are grappling with the new ways information can be used, and the appropriate ways regulations apply. So it’s critical that the CDO establish a relationship with their regulators, so the regulators see the organization’s use of data through a clear lens and react fairly. This also provides common ground and language in the event regulators identify potential issues — or if data incidents occur.

Risk Management: Most larger organizations have recognized the importance of proactively measuring, monitoring and mitigating risk along lines appropriate to their business structure and objectives. These evolve from time to time as the business environment changes – for example, the formation of IT Risk Management functions over the last 10 years. They are very useful for a variety of reasons, including establishing a common understanding of what can go wrong, potential consequences, and agreement on appropriate mitigating steps to take. Given the rapid emergence and evolution of data science — algorithms, AI, cognitive, etc., — the market has limited experience with assessing data risk, grappling issues, and establishing a balanced risk acceptance/mitigation model. And this evolution is taking place at a pace far greater than control and risk management techniques. In the past, implementing formal Risk Management usually follows a catastrophic event that serves as a wake-up call, and the pendulum swings hard back toward the conservative end of the spectrum. That in itself is a risk, since organizations might overcompensate, lose momentum, give up favorable market position, and miss opportunities while the re-trench. A much better approach is for the CDO to incorporate risk management into processes, by design. Risk should be assessed during design phases and mitigated during development phases, not after the fact. This strengthens the argument for embracing Scientific Method during the development of data initiatives.

Conclusion

These are exciting times to be involved with information management. The science is evolving and technology is becoming powerful enough to allow organizations to do incredible things. Companies are scrambling to invest and exploit the opportunities created by data, and are placing sizeable bets on what they hope will return profit, with some degree of luck. But “hope” is not a business strategy, and some argue there is no such thing as “luck”. Appointing, supporting and enabling a CDO is a significant step to help ensure success of the program, and applying lessons learned from other new classes of executives can help ensure the success of the CDO.

Contact me at james@jhoward.us

Information Management and Governance, Information protection, Uncategorized

The Role of the CDO in Counter Industrial Espionage

August 2, 2018September 26, 2018 James Howard

When one thinks of spies and espionage, our imaginations usually turn to James Bond and Jason Bourne stories. But with the end of the cold war, many former intelligence officers found more lucrative opportunities in the private sector, offering their services to non-government organizations that were perfectly willing to leverage the research and development capabilities of their competitors.

Fast forward to a time where the economic competition between companies affects political tension between nations, where some nations see nothing wrong with applying techniques developed during cold and shooting wars to provide their own companies with ill-gotten advantages – even at the expense of political allies.

Politico recently published this article that discusses how companies in the Bay Area have become targets for industrial espionage originating from China, Russia and other nation-states. The article touches on the breadth and depth of the problem, including making a very interesting point that many companies choose not to prosecute espionage cases. Its remarkable that even when faced with irrefutable evidence, many corporate leaders choose to ignore the facts and fail to notify stakeholders, for fear of how it will reflect on them or affect share price.

There is no doubt that building defenses against industrial espionage is a complicated task, made harder because (1) information has to remain available and usable by the organization, and (2) the organization has to anticipate a wide range of attack “vectors” whereas the intruder only needs one to work. And if this wasn’t complicated enough already, industrial spies don’t just target computer systems, they target people. If truly successful, the organization won’t know they’ve been hit until they see a foreign version of their new product, far too similar to the original to be coincidence.

This is not an IT problem

Most organizational leaders equate information to technology, conclude this is an IT problem, and assign responsibility to the CISO to implement appropriate protections. This logic is flawed for many reasons, not the least of which is the CISO typically has little to no ability to enforce security policies for systems not “owned” by the CIO, nor have the organizational scope to address the behaviors of people.

Although information theft frequently include IT and cyber vectors, people are often near or at the epicenter of an espionage case. People enable the theft either by actively participating, or by carelessly allowing it to happen. Professionals who study espionage have determined that people are motivated to betray their employer (or country) for one of 4 reasons, using the acronym “MICE”:

Money – the actor either sees this as a way to get rich, or are financially distressed (in debt, recently divorced, have a gambling problem, etc).
Ideology – the actor believes the organization is somehow evil, and betrayal is a way for the actor to cause harm or suffering, thinking it was deserved,
Coercion (or Compromise) – the actor has a secret that makes them vulnerable to extortion, or are threatened with physical harm to themselves or their loved ones,
Ego – the actor thinks they are smarter than the organization, and can get way with it, or are enticed to spy believing it makes them more important.

None of these touch the ways in which people through their actions, innocently permit espionage to occur. People are helpful and hold the door for others – especially if their hands are full. Or take calls wanting to assist the caller (who they assume are authorized to ask what they are asking). People are reluctant to challenge strangers in the hallways, and a startling number of companies don’t require employees and visitors to display ID badges while on-site. Doors and drawers are left unlocked and clean-desk policies are seen as burdensome. There is widespread belief that “it can’t happen to us.”

Where does the CDO fit in?

Industrial spies seek to steal information to gain economic or competitive advantage, and work tirelessly on creative ways to get it.

In basic economic terms, its worth stealing information if theft is cheaper than developing it — assuming ethics aren’t an issue, and the risk of getting discovered is acceptable. So defending against the theft can be thought of as making it more expensive to steal information than it is to develop or acquire it through other means.

The CDO fits in because they are at the intersection of information use, protection and quality. They should be in the best position to understand what information is most valuable, or put another way, what information, if lost or stolen, would cause what degree of harm to the organization. And by understanding where and how information is stored and processed, they are in a good position to provide input on how to protect it.

The CDO’s strategy includes elements that are helpful to guard against industrial espionage. Some steps the CDO can take include

Classify information as an asset (even if informally, and not captured in the financial statements), and assign economic value, so that protections can be developed that are proportional to the value.
Inventory information and work with the Data Governance Council to identify those broad categories that are most vulnerable and attractive to a spy. They might include the obvious — patents, methods, formulas, algorithms — as well as some less obvious — executive contacts information, network diagrams, or even payroll information (knowing how much people are paid help know who may be vulnerable to financial pressure).
Liaise with corporate security to gain an understanding of how they are working to protect the organization. Many of these leaders are former law enforcement professionals, often don’t have an appreciation of the relative value of information within the organization, and will welcome allies on the “business side” to help raise awareness and improve corporate posture.
There is no doubt that nowadays, cyber is a vector frequently exploited to steal information. Liaise with the CISO to convey proper information protection requirements that need to be reflected in IT systems, proportional to the value of the information in question.
Again, working with the CISO and compliance groups, adjust data loss prevention (DLP) tools to monitor for exfiltration of the most sensitive information. These procedures need to include investigative and response processes, and may already exist (e.g., privacy rules often include requirements for breach management procedures, and these are very leverageable for this purpose).
A significant part of a risk mitigation plan includes raising awareness among the organization’s people — employees as well as contractors and third-parties. The CDO can spearhead this themselves, or collaborate with the group responsible for promulgating policy and procedures covering actions and behavior.
Some spies have figured out that if their primary target (say, a high-tech company) is too hard to penetrate, they will instead shift focus to the target’s advisors (legal, auditors, consultants, professional services), since they are trusted by the primary target, but are often more vulnerable and may have weaker controls. The CDO should understand what business partners and third parties have access or custody of information and — and along with the TPO (Third Party Oversight) function — can mitigate the relative information risk associated with them.

Protecting an organization against industrial espionage is very difficult for a wide range of reasons. And since the asset sought after by the spies is information, the CDO is central to implementing protections and managing risk. Success can’t be measure in absolute terms, but instead in increments — implementing small steps puts the organization in a better position than not having the small steps.

Contact me at james@jhoward.us

CDO, Information Management and Governance

CDO: Leveraging AND Protecting Data

June 15, 2018January 28, 2019 James Howard

A lot is written about the important role the CDO has in promoting, monetizing and leveraging data in an organization. There is no doubt this is their primary function, and failing to fulfill the role can cost the organization in terms of revenue, competitiveness and market position. But the CDO has an equally important role in overseeing governance of data, and failing to embrace that part can lead to similarly negative outcomes.

I’m going to make a provocative statement: the data leverage market is charging ahead and the data governance disciplines are not keeping up. We will continue to see headlines describing data-related issues. Like opposite ends of a rubber band being pulled tighter and tighter, we are facing an increasing risk of a significant, potentially catastrophic, event. The risks aren’t only that data might lost or breached, but also that the organization might fail to gain full benefit from their data. The CDO plays a key role in managing the risk, avoiding issues, which in turn positions the organization to move faster and more nimbly.

Lets talk about the data:

A majority of companies are leveraging Big Data, with Financial Services and Healthcare leading the charge, and nearly 80% of executives believe that failing to embrace Big Data will cause companies to lose their competitive edge. Use cases range from customer and clickstream analysis, to fraud detection and predictive maintenance. The statistics go on and on, all pointing to an accelerating pace of growth and adoption.

Tools are becoming more sophisticated, and evolving to where increasingly, end-users can can pursue data tasks without involvement of IT staff. The analytics software and services market is $42B this year, expected to grow to $103B over the next 9 years.
And 59% of executives believe that their use of Big Data would be improved through the use of AI – often itself dependent upon the quality of data.
How much data? One estimate puts at 44 zettabytes by 2020 (44 TRILLION gigabytes)!

Point being, we are continuing the trajectory of very high growth in the use of data, and no end in sight as far as how much data there is to manipulate and leverage.

OK. So how is it being managed?

Increasingly, where in place, responsibility to establishing the vision and executing the strategy for data use falls to the Chief Data Officer. However, less that 20% of the top 2,500 companies have named CDOs, and they are often focused on the market-facing and revenue aspects of data. But even for those CDO’s whose responsibilities include governance (covering data protection and quality), there are no standard frameworks to employ to manage data.

By framework, I mean the mechanisms to manage data through it’s lifecycle the way one would manage any other asset. Gartner observes that while the traditional business disciplines provide some analogs to manage information as an asset, nothing has emerged tailored to information, let alone adopted as a standard. In fact, accounting standards don’t even include “information” on financial statements.

Within any governance framework should be Protection against reasonably foreseeable threats. There should be a model where protection of data is proportional to data (asset) value, relevant risks and threats, and which takes into account compliance obligations. To be sure, there are many sets of obligations, supporting methodologies with varying levels of adoption and maturity to address data protection along verticals (e.g., GDPR, HIPAA/HITECH, etc), and respectable frameworks to help ensure information security (ISO27001, for example). But these are rarely within the responsibility scope of the CDO. The CDO has to navigate different organizations to engage with one or more CIOs, CISOs and/or CPOs to help implement protections — and those other leaders’ priorities are often on other imperatives, and politics frequently interfere. So it’s difficult to see how an organization can simultaneously position itself to leverage data as a key asset, while also ensuring proper and proportional protection.

Stepping back looking at the bigger picture, I’m describing a market environment where opportunities for leveraging and profiting from data are exploding, while the mechanisms to manage and protect that data are lagging.

What can go wrong?

This pattern points to scenarios where data is breached, questionable data becomes over relied-upon, or where momentum builds to leverage and profit from data, but due to the lack of proportional governance, an event occurs (or worse, issues go undetected until outsiders raise the alarm) resulting in a loss or process failure, leading to financial and/or brand damage and regulatory intervention. A quick review of headlines reminds us this happens on an all too regular basis, leading to the inevitable questions such as, “how could this have happened?” or “you should have seen that coming”.

Is it avoidable?

Black swan events are – by definition – unanticipated. However, organizations can take significant steps to anticipate and either avoid or plan for these events, and prepare for potential outcomes by embracing information management and governance techniques. Remember, a data event – whether a breach or a perceived abuse of data – affects not only the organization in question, but also those around it, emanating outwards.

Data leverage and data management can be thought of as opposing forces pulling opposite ends of a rubber band — they will reach a breaking point, and the tension needs to be released in a controlled fashion. The CDO plays a key role, since they should be looking at the “big picture” of “big data”.

The CDO needs to be empowered and adopt a posture that balances pursuit of opportunity with proper governance – protection, quality, accuracy.
The CDO should be prominent in an organization, to begin addressing the many cultural barriers to information management.
The market needs to settle on a framework to manage information as an asset, recognizing it has value and utility to be exploited.

We are living in a world where data is everywhere and the ability to manipulate it for benefit is growing at an incredible pace. Market disruptions are occurring on a daily basis, often enabled by creative use of technologies that analyze data. Forward looking companies wanting to play in this space are looking to CDOs to help, and they need to be properly enabled. Now is the time to engage.

Tag: IT Risk Management

Role of the CDO: Learning from the Past to Enable the Future