I’m assuming the author wants us to read the title as “Things to Look Out For in Performing Risk Analysis” and not “Risk Management is Folly - Stop, Stop, Stop!” The former is fine, the latter isn’t supported by the evidence presented by the subjects of the article.
The subjects of the article are a good study from Wade Baker & Co. at Verizon, and a report from RSA’s Security for Business Innovation Council. Let’s take a look at each of these and examine why what they’re saying might contribute to poor risk management, shall we?

1.)  THE VERIZON REPORT

The Verizon report is an analysis of some 530 forensic investigations their company performed.  It is well worth your time as it’s chock full of interesting information.  As it relates to the Dark Reading piece, a coarse summary would be that “likelihood” is “different” for different people and so you can’t use the same “likelihood” across different industries.

Distilled through the lens of FAIR:

“different threat communities may be applicable based on Probability of Action factors which include: Value, Level of Effort and Risk (of Getting Caught).”

Or, even further distilled and in the words of my six year old son,

“Duh-uh”.

With regards to what I assume is the purpose of the article (What Doesn’t Work in Risk Analysis) this concept  seems just to rehash the old GIGO argument regarding risk analysis.  Great.  Can’t argue with that, nor it’s corollary QIQO (quality in, quality out).

But let me ask you -  is this really a problem common in your analysis?  Did reading this article make you go “Crap, we’ve been using data normalized across multiple industries in our analysis! They’re all wrong!”  Or have you already been accounting for the unique value proposition your company has to the specific threat community you’re worried about?  See, maybe I’m just not your average analyst, but even in my NIST/OCTAVE days, this has *never* been an issue for me.

Let me be specific, this is not a problem with Verizon’s very cool report.  It’s just that I don’t see what the big deal is.  This article is starting to feel like someone is running through the motions, trying to play the ” a crazy title gets people to read a boring article” game.

Speaking of cool reports - You know what would be cool?  I think it would be interesting to see is the quality of these companies’ “risk management process” established using good criteria,  and then correlated to the frequency and magnitude of real-world losses across the aggregate sample.  In other words, can we establish evidence that strong risk management practices not just reduce “risk” but also reduce actual incidents.

2.)  THE RSA COUNCIL “EXPLORES WHY LEGACY METHODS OF EVALUATING INFORMATION SECURITY RISK DON’T WORK IN TODAY’S CONNECTED WORLD, IN WHICH ANY NEW BUSINESS INNOVATION INHERENTLY CARRIES SOME LEVEL OF RISK TO INFORMATION.”

This report from the RSA council puts forth a seemingly obvious proposition, that risk must be balanced by reward.  Why is this news?  Now as I read the article it’s not clear if:

• The RSA Council is claiming that the CISO’s office should be the ones determining reward.  Absurd.

or

• Businesses aren’t doing a good job at determining risk and reward.

Let’s go with the latter.  So I’m pretty sure (good) businesses do a good job at estimating reward.  Businesses I’ve been a part of?  We LOVE(D) estimating reward.  We don’t tend to start projects all willy-nilly. No we tend to be careful to identify the size of the market and what it will cost to address the market.  So what could the problem be that this RSA council is trying to address?  Maybe it has to do with something like the following:

Yesterday, I got a demo of an IT-GRC application that shall remain nameless.  It seemed to be very good at the “C” bits - lots of information on regulations and expectations and even what sorts of controls would answer the regulations (which is goofy, but we’ll have to talk about that later).  It also gave you the ability to build workflow quite nicely.  But it measured NOTHING.  There really was no observable “G” and “R” was really Medium X Low X Low = High sorts of stuff.  So let’s use this relatively expensive tool as evidence of what your average CISO is armed with going into a Risk/Reward sort of meeting.  I imagine a nice board room with wood-grain paneling and glass bowls filled with little chocolate covered mints designed to give everyone involved in the meeting (CEO, CFO, CIO, CSO, VP S&M, etc…) a little sugar rush when needed and fresh breath.  The conversation goes a little something like this (apologies to Rich):

Business Guy Who Wants to Make Money Because That’s What Businesses Do: Based on market studies, we believe that initial gross revenues from the new product and technology rollout will be eleventy gazillion dollars based on a 37% market penetration in Scandinavia, alone.

CSO: Well now, we have a likelihood of “High” and a “C” impact of Medium, and an “I” impact of Low, and an “A” impact of “High” and because we are a (bank/hospital/retailer/basically any business that breathes anymore) we weight “C” by a factor of 2 - we multiplied those all together and got a “High”.

So can you guys delay the product rollout by 9 months and give me a bunch more money that’s not in the budget so that I can get this thing down to a “Medium”, please?

Again, I just don’t see the problem with Information Risk Management being that our businesses have no idea what the rewards of business might be.  Now maybe we need get a seat in that boardroom just to be able to talk about our “Mediums”, sure.  And maybe we’re infantile in our ability to describe our problem space.  But I cannot fathom that “Risk Management Doesn’t Work” because businesses haven’t been considering “reward”.

WHY RISK MANAGEMENT MAY  NOT BE WORKIN’ FOR YOU

Two meta-categories of causation:

• No skills

and/or

• No resources

Any ancillary “cause” can be mapped to one of these categories.  You could have significant resources but crappy models, and have conversations like our imaginary CSO, above.  You could have really good models and people trained and motivated to use them, but scarce time & money, so no conversation happens.

Now my question for you is - which does it make sense to acquire *first* to solve the “Why Risk Management Doesn’t Work” problems, skills or resources?

Here we talk to John Proctor, who started out as one of our first customers (and the first MSP customer). And he believed in it so much, he eventually became part of the ScienceLogic team. (Remember “I’m not only the President, I’m also a client” from the Hair Club for Men?)

John shares his perspectives about the service provider world and why he took a chance on a little-known product called EM7.

ScienceLogic: What is your background? How many years have you worked as a service provider and for what types of companies?

John Proctor: I have been working with Service providers for over twelve years. I worked at a major regional service provider for six years and before that I designed and built national and international networks for ISP’s and Fortune 500 companies as a consultant for PriceWaterhouseCoopers and WorldComm.

ScienceLogic: You were one of the first customers of EM7 – why did you choose it and how did you get over the hurdles associated with using a start-up company’s product?

John Proctor: We were actually customer number five. Back in 2004 when we evaluated and purchased EM7 we could see that EM7 provided about 80% of what we were looking for in one integrated solution right out of the box. One of the things that sold us on EM7 was that the ScienceLogic founders had all previously worked for a service provider, so we knew they understood our business and our challenges. But in the end, it comes down to features. Once we compared EM7 functionality to the alternatives, it was clearly a “no brainer.”

ScienceLogic: What other alternatives were being considered?

John Proctor: Well, we had started with a few point solutions, but as our business and product offerings matured, this resulted in a growing number of point solutions. What started with 3 or 4 ended up as 14 separate tools. They all had strengths but what they didn’t have was integration and because of this they could not scale. And, if the tools could not scale, our business could not grow.

So, naturally we started looking at framework solutions, but they are expensive to buy, expensive to implement, and expensive to maintain. At one point, we even considered some open source projects. There were several that showed promise, but we would still be stuck with tools that were not integrated. So then we considered hiring developers to cobble something together that would work for our business. The only problem with this alternative was that we felt it would take 6 to 8 months before we could have something viable to work with.

ScienceLogic: What products were you using before EM7? What were your goals?

John Proctor: Before we purchased EM7 we used 14 different point solutions to deliver our products and services to the marketplace. Tools like NetCool, Openview, Argent, Heat, What’s Up Gold as well as several other point solutions, vendor specific applications and manually updated spreadsheets. And, as I mentioned before, this does not scale. This also adds a great deal of complexity when you begin to consider business continuity and disaster recovery. All these tools were vital to the delivery of our products and services. Any service provider will tell you it is all about uptime. So if the product is uptime, the tools used to deliver it have to be available 24×7x365.

Our goals were simple: scale and redundancy. As it turns out, the solution was simple as well. EM7 provided a tool that could replace the functionality of almost half of the existing point solutions and the applications that could not be replaced were integrated with EM7 to provide our staff with a “single pane of glass” to see the status and performance of each area of the business from one application. We had visibility into everything from facility systems to applications using EM7.

ScienceLogic also delivers an extensible configuration that addressed uptime and redundancy. We deployed collectors throughout our network that reported back to a central pair of redundant database servers and with this configuration we were able to perform backups and add capacity without taking the system down.

ScienceLogic: Why are service providers different from enterprises? How are their needs different?

John Proctor: First and foremost, service providers face the same challenges that only the largest enterprises ever face and they also have many unique challenges that only service providers experience.

One challenge we faced was that we had multiple datacenters in different states. They were all interconnected with plenty of bandwidth between each site, but the tools were not designed to be used across the WAN. Our staff in our remote data center did not have the same access as our staff in the corporate office. Since EM7 is web-based, it immediately eliminated this problem.

Another challenge is that service providers must manage systems across multiple domains. Back in the early version of a specific tool we were using before EM7, the only way you could implement it across multiple domains was to put the same username and password on every computer that you monitored. Beyond the security concerns, maintenance was a nightmare. Anytime we had to change the password, we would get locked out of dozens upon dozens of systems. When the password was changed on the monitoring server, it would attempt to login to the remote machines and fail. Repeated attempts would result in the account getting locked. I think that vendor eventually addressed this issue, but service providers seldom find tools that were designed for their unique situations.

ScienceLogic: How is EM7 geared to service providers?

John Proctor: Enterprise IT is a trusted part of the business; they are one of the team. Service providers are outsiders that must earn trust by showing the customer exactly what they are doing.

EM7 provides a multi-tenant environment that allows service providers to manage systems across many different customers while at the same time providing the customer access to see the same information but only what’s relevant to them.

EM7 was built by service providers and even includes a few features just for them. Two of my favorites are bandwidth billing and the emergency notification system. Take bandwidth billing, for instance. EM7 provides a way to collect bandwidth utilization, store subscription information, and calculate a bill from any one of about 10 different methodologies. And at the end of the billing period, EM7 sends the completed report out to whomever you chose via email.

Another unique service provider feature is the emergency notification system. EM7 allows the provider to track what customers used their unique infrastructure components. If they have to perform maintenance on the infrastructure component or have a problem they can send an email to all of the impacted customers in a matter of minutes.

ScienceLogic: What trends do you see for service providers? What about big trends such as virtualization and cloud computing – how will they impact service providers?

John Proctor: Virtualization is really hot for service providers right now and for the same reasons as in the enterprise. Service providers run data centers and data centers must be powered and cooled. So, anytime they can use a virtual server instead of adding physical equipment it is a good thing. But then you add the complexity that multiple customers reside on the same host and you must track things like bandwidth utilizations by guest OS, and it all gets a little harder. Lucky for us this is not a problem for EM7.

I still think it’s early days for cloud computing. Depending on who you talk to, much of what service providers (especially the big ones) have already been doing with SAAS offerings and hosted applications could be described as cloud computing already. In which case, service providers are ahead of the game. But whatever the “final” definition, cloud computing actually shares many similarities with virtualization – in that service providers (or enterprises) will need to be able to manage far more “devices” in real-time with “zero downtime” expectations by customers. What this really means is that you’re going to see much more automation in provisioning and IT monitoring tools to handle the scale and speed with which things can change in the data center given vm migration and the talked-about switching between “clouds” that can be used for high availability.

Charlie Rose:  
And so when you look at where we are going, there seems to be two issues that are apparent to me at least, risk and leverage.  We just lost sight of risk and leverage of what was appropriate?

Warren Buffett:  
Yeah.  Again, because it pays off for a while.  You know, you can lose leverage, and it's the only way a smart guy can go broke.  If you owe money, you can't pay them out.  You just pay for everything, you do smart things, you eventually get very rich.  If you do smart things and use leverage and do one wrong thing along the way, it could wipe you out, because anything times zero is zero.  But it's reinforcing when the people around you are doing it successfully, you're doing it successfully, and it's a lot like Cinderella at the ball.  I mean you know at midnight everything is going to turn to pumpkins and mice; right?  But if the evening goes along, I mean, you know, the guys look better all the time, the music sounds better, it's more and more fun, you think why the hell should I leave at quarter of 12.  I'll leave at two minutes to 12.  But the trouble is, there are no clocks on the wall.  And everybody thinks they're going to leave at two minutes to 12.

Charlie Rose:  
And should wise people have known better?

Warren Buffett:  
People should always know better.

Charlie Rose:  
Yeah.

Warren Buffett:  
I mean people -- people don't get -- they don't get smarter about things that get as basic as greed and you can't stand to see your neighbor getting rich.  You know you're smarter than he is, and he's doing these things, you know, and he's getting rich, and your spouse is getting unhappy with you because you aren't doing -- pretty soon you start doing it.  And so you get what I call the natural progression, the three Is.  The innovators, the imitators, and the idiots.  And that's what happens.  Everybody just kind of goes along.  And you look kind of silly if you disagree.  I mean, you know, you could have these crazy Internet valuations in the late 1990s, but they prove themselves out in the market.  The next day they were selling for more than they were the day before, and people said, you know, you're crazy if you don't get in on this.  So it's very human.  Now, with housing it's something even more dramatic than that, because most people aspire to own their own home.  And if you really think that houses prices are going to go up next year and the year after, you feel if I don't buy it this year, I'm going to have to buy it next year.  That's not true of an Internet stock.  But it's true of a home.  And when somebody makes it very easy for you to do it by saying you don't really have to put up my money, you can lie about your income a little, or we'll give you 100 percent mortgage, you're going to do it, because everybody that's done it has been proven right.  You have what they call social tools, and, you know, you're going to feel like an idiot if you didn't do it, because the house cost more.

Warren Buffett:  
Oh, I think confidence will come back.  I will tell you this.  This country is going -- be living better ten years from now than it is now.  It will be living better in 20 years from now than ten years from now.  The ingredients that made this country, you know, the miracle of the world -- I mean we had a seven for one improvement in the average American standard of living in the 20th century.  Now, we had the great depression, we had two world wars, we had the flu epidemic.  You know, we had oil shock.  You know, we had all these terrible things happen.  But something about the American system unleashed more and of a potential to human beings over that hundred years so that we had a seven for one improvement in -- there's never been any -- I mean, you have centuries where if you've got a 1 percent improvement, then it's something.  So we've got a great system.  And we've got more productive capacity now than we ever have.  The American worker is more productive than he's ever been.  We've got more people to do it.  We've got all the ingredients for a sensational future.  It's just that right now the athlete's on the floor.  But we -- this is a super athlete.

I’m sure you already know about the other “network management” – where ISPs and carriers get their hands publicly slapped for limiting bandwidth to high-traffic offenders. But when is this kind of “network management” a good thing? At a panel sponsored by the FCC in DC, reps from carriers and ISPs discussed what steps they’ve been taking to prepare for a pandemic or other major global crisis – that would force workers to stay at home or work from more remote locations to limit exposure.

Are people paying attention to ICANN? They’re saying that IPv4 will be fully allocated in the next two or three years. Does anyone care? In their bid to make people care, ICANN talks about the state of IPv6 adoption and touts Africa as the most rapid adopter.

SOA soon part of the ‘cloud’? No, please no.

Microsoft – The Silver Lining in Every Cloud. Joe Wilcox over at eWeek’s Microsoft Watch, has been following Steve Ballmer around and collecting some nice quotes on how the company is transitioning. “For many years, we had kind of what I would call the all-encompassing mission, vision and scorecard statement: a computer on every desk and in every home. …Well, our footprint and portfolio is broader than that. “ [In every hand and of course, in every cloud…] “So, as a vision statement we talk about creating seamless experiences that combine the magic of software, the power of the Internet across a world of devices.” The magic of software – something I haven’t thought about for a while. And:

“You need a real platform in the cloud. When we wanted to go after the PC, we built an operating system. When we wanted to go after the phone, we built an operating system. When we wanted to go after the enterprise, we built an operating system. We’ll announce a new operating system, one that runs in the cloud and has a wide variety of capabilities.”

When a data owner's (a business) sensitive data is breached it is difficult to quantify the monetary loss. According to respectable survey sources, the average cost of sensitive data breach for a large size company is about $50,000. I am attempting here to think about this in simple mathametical terms:

There is a data breach. From the data owner's perspective the loss is:

Loss = Cost to protect data + Loss of business due to data theft aka cost of competitive disadvantage

From the data thief's perspective

Net Gain= [Cost of producing the data  *  Data freshness factor] - Cost to steal the data + Profit of business due to data aka gain of competitive advantage

From the above two equations it is very clear that this is not a zero sum game. There is a clear cost asymmetry for a data owner and for a data thief. When there is an asymmetry there is an opportunity. Data owner would not even know that the data is lost because the original copy of the data may be still intact - data thief could have simply copied the data. Data theft does not look like a car theft, there is no vacuum left behind. 

This motivates a data thief to keep the cost to steal low, steal highly valuable data that has a long shelf life and in a way that data owner will never even be aware of theft.

From a data thief's perspective, the cost to steal data if kept high would disincentive him. Moreover, Data freshness factor, i.e. how valuable this data is over period of time plays an important role. A good example is content of today's newspaper is hardly valuable tomorrow, but the content of newspaper two days ahead (if can be procured)would be invaluable. Data relevance is a function of time and other marketplace variables -  Data freshness Factor accounts for that variable. A good way to discourage data thief is to increase his/her cost to steal the data. There are other inferences from the above equation. If there exists no competitive advantage with the stolen data, hardly any thief would even venture to steal the data in the first place. If the cost of producing data is very low, then probably thief can just produce the data himself and would not attempt to steal the data. If the cost of theft is kept high, it would definitely deter the data thief from stealing data using technical mechanisms, then the data thief would exploit weak links in data security such as use of social engineering to get access to the data.

From data owner perspective protecting data becomes very important. How much would the owner be willing to spend? Not definitely the cost equal to cost of producing the data. 1% to 10% of cost of producing data is considered prudent. For a data owner it is difficult to estimate cost of data protection of a specific data, because it is not easy to chunkify data protection costs. Moreover, as Dan Geer says in his book, a data owner has to protect himself from number of intruders not just one.

It pays for a data owner to: be aware of data breaches (or data leaks), employ appropriate mechanisms to protect the data; the cost of protection which is fractional cost of the valuable data and enhance information security awareness of personnel who handle the data.

Data loss is not a zero sum game. The advantage is in favor of a data thief (data thieves rather). Data owner does not give much thought on the value of data unless there is a data theft. But, a data thief has every reason to think about economics of data theft before he acts to steal the data else data thief won't survive in this game and he is very well aware of his advantageous position.

The problem is self-signed certificates.

A CA is not a great solution:

Using a Certification Authority (CA) could solve the attack but at the same time introduces a new set of attack vectors:

1. The CA becomes a single point of failure. It becomes the juicy/high-value target for the attacker. Single point of failures are not good. Attractive targets are not good.

   Any person with access to the CA key can undetectably fake passports. Direct attacks, virus, misplacing the key by accident (the UK government is good at this!) or bribery are just a few ways of getting the CA key.

2. The single CA would need to be trusted by all governments. This is not practical as this means that passports would no longer be a national matter.

3. Multiple CA's would not work either. Any country could use its own CA to create a valid passport of any other country. Read this sentence again: Country A can create a passport data set of Country B and sign it with Country A's CA key. The terminal will validate and display the information as data from Country B.This option also multiplies the number of 'juicy' targets. It makes it also more likely for a CA key to leak.

   Revocation lists for certificates only work when a leak/loss is detected. In most cases it will not be detected.

So what's the solution? We know that humans are good at Border Control. In the end they protected us well for the last 120 years. We also know that humans are good at pattern matching and image recognition. Humans also do an excellent job 'assessing' the person and not just the passport. Take the human part away and passport security falls apart.