Solving Cyber Risk Protecting Your Company and Society

The non-technical handbook for cyber security risk management

Solving Cyber Risk distills a decade of research into a practical framework for cyber security. Blending statistical data and cost information with research into the culture, psychology, and business models of the hacker community, this book provides business executives, policy-makers, and individuals with a deeper understanding of existing future threats, and an action plan for safeguarding their organizations. Key Risk Indicators reveal vulnerabilities based on organization type, IT infrastructure and existing security measures, while expert discussion from leading cyber risk specialists details practical, real-world methods of risk reduction and mitigation.

By the nature of the business, your organization’s customer database is packed with highly sensitive information that is essentially hacker-bait, and even a minor flaw in security protocol could spell disaster. This book takes you deep into the cyber threat landscape to show you how to keep your data secure.

• Understand who is carrying out cyber-attacks, and why
• Identify your organization’s risk of attack and vulnerability to damage
• Learn the most cost-effective risk reduction measures
• Adopt a new cyber risk assessment and quantification framework based on techniques used by the insurance industry

By applying risk management principles to cyber security, non-technical leadership gains a greater understanding of the types of threat, level of threat, and level of investment needed to fortify the organization against attack. Just because you have not been hit does not mean your data is safe, and hackers rely on their targets’ complacence to help maximize their haul. Solving Cyber Risk gives you a concrete action plan for implementing top-notch preventative measures before you’re forced to implement damage control.

ANDREW COBURN is senior vice president at Risk Management Solutions (RMS) and a director of the Cambridge Centre for Risk Studies, University of Cambridge. The architect of the leading cyber risk model in the insurance industry, he is coauthor of Earthquake Protection, Second Edition.

ÉIREANN LEVERETT is the founder of Concinnity Risks and a senior researcher on cyber risk at Cambridge Centre for Risk Studies. An ethical hacker, he was on the multidisciplinary team that built the first cyber risk models for insurance.

GORDON WOO is a catastrophist with RMS who helped create the conceptual framework for the RMS Cyber Accumulation Management System. An authority on cyber and insurance risk, he is the author of The Mathematics of Natural Catastrophes and Calculating Catastrophe.

About the Authors ix

Acknowledgments xi

CHAPTER 1 Counting the Costs of Cyber Attacks 1

1.1 Anatomy of a Data Exfiltration Attack 1

1.2 A Modern Scourge 7

1.3 Cyber Catastrophes 12

1.4 Societal Cyber Threats 19

1.5 Cyber Risk 21

1.6 How Much Does Cyber Risk Cost Our Society? 24

Endnotes 30

CHAPTER 2 Preparing for Cyber Attacks 33

2.1 Cyber Loss Processes 33

2.2 Data Exfiltration 34

2.3 Contagious Malware Infection 41

2.4 Denial of Service Attacks 56

2.5 Financial Theft 63

2.6 Failures of Counterparties or Suppliers 68

Endnotes 78

CHAPTER 3 Cyber Enters the Physical World 81

3.1 A Brief History of Cyber-physical Interactions 81

3.2 Hacking Attacks on Cyber-physical Systems 83

3.3 Components of Cyber-physical Systems 86

3.4 How to Subvert Cyber-physical Systems 88

3.5 How to Cause Damage Remotely 91

3.6 Using Compromises to Take Control 92

3.7 Operating Compromised Systems 93

3.8 Expect the Unexpected 95

3.9 Smart Devices and the Internet of Things 99

Endnotes 101

CHAPTER 4 Ghosts in the Code 103

4.1 All Software Has Errors 103

4.2 Vulnerabilities, Exploits, and Zero Days 104

4.3 Counting Vulnerabilities 108

4.4 Vulnerability Management 113

4.5 International Cyber Response and Defense 118

Endnotes 122

CHAPTER 5 Know Your Enemy 125

5.1 Hackers 125

5.2 Taxonomy of Threat Actors 127

5.3 The Insider Threat 143

5.4 Threat Actors and Cyber Risk 145

5.5 Hackonomics 147

Endnotes 151

CHAPTER 6 Measuring the Cyber Threat 153

6.1 Measurement and Management 153

6.2 Cyber Threat Metrics 158

6.3 Measuring the Threat for an Organization 162

6.4 The Likelihood of Major Cyber Attacks 170

Endnotes 182

CHAPTER 7 Rules, Regulations, and Law Enforcement 183

7.1 Cyber Laws 183

7.2 US Cyber Laws 186

7.3 EU General Data Protection Regulation (GDPR) 190

7.4 Regulation of Cyber Insurance 192

7.5 A Changing Legal Landscape 194

7.6 Compliance and Law Enforcement 196

7.7 Law Enforcement and Cyber Crime 199

Endnotes 205

CHAPTER 8 The Cyber-Resilient Organization 207

8.1 Changing Approaches to Risk Management 207

8.2 Incident Response and Crisis Management 208

8.3 Resilience Engineering 212

8.4 Attributes of a Cyber-resilient Organization 214

8.5 Incident Response Planning 218

8.6 Resilient Security Solutions 219

8.7 Financial Resilience 225

Endnotes 234

CHAPTER 9 Cyber Insurance 235

9.1 Buying Cyber Insurance 235

9.2 The Cyber Insurance Market 244

9.3 Cyber Catastrophe Risk 248

9.4 Managing Portfolios of Cyber Insurance 251

9.5 Cyber Insurance Underwriting 258

9.6 Cyber Insurance and Risk Management 263

Endnotes 264

CHAPTER 10 Security Economics and Strategies 267

10.1 Cost-Effectiveness of Security Enhancements 267

10.2 Cyber Security Budgets 271

10.3 Security Strategies for Society 276

10.4 Strategies of Cyber Attack 283

10.5 Strategies of National Cyber Defense 289

Endnotes 294

CHAPTER 11 Ten Cyber Problems 295

11.1 Setting Problems 295

1 The Canal Safety Decision Problem 298

2 The Software Dependency Problem 300

3 The Vulnerability Inheritance Problem 301

4 The Vulnerability Count Problem 302

5 The Malware Overlap Problem 303

6 The Vulnerability Lifespan Problem 304

7 The Binary Similarity Problem 304

8 The Virus Modification Problem 306

9 The Cyber Criminal’s Dilemma Problem 306

10 The Security Verification Problem 307

Endnotes 308

CHAPTER 12 Cyber Future 309

12.1 Cybergeddon 309

12.2 Cybertopia 315

12.3 Future Technology Trends 321

12.4 Getting the Cyber Risk Future We Want 328

Endnotes 331

References 333

Index 355

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