eDiscovery Risk: The Marketing of Privacy...

Operational Risk Management (ORM) professionals from London to Paris, Berlin to Brasilia and Silicon Valley to Washington, DC are quietly smiling these days.  It is ironic, that now privacy is the new vogue marketing strategy.  After so many years of trying to explain to executives the risks that exist around confidentiality, integrity and assurance of data--now a rogue U.S. citizen charged with espionage, finally has convinced some senior business executives of the value of marketing increased privacy of their technology products and services.  Chris Strohm explains:

While Google, Yahoo, Microsoft and Facebook Inc. provide data to the government under court orders, they are trying to prevent the NSA from gaining unauthorized access to information flowing between computer servers by using encryption. That scrambles data using a mathematical formula that can be decoded only with a special digital key. 

The NSA has tapped fiber-optic cables abroad to siphon data from Google and Yahoo, circumvented or cracked encryption, and covertly introduced weaknesses and back doors into coding, according to reports in the Washington Post, the New York Times and the U.K.’s Guardian newspaper based on Snowden documents. He is now in Russia under temporary asylum.

Mitigating the risks of being hacked by a group of criminals stealing personal identifiable information from consumers on a transnational basis has not motivated these same executives to move towards investing in more effective data and information assurance strategies.  Yet now that the adversary has been described by the mainstream media as the U.S. Government, industry executives have started to listen.  Go figure...

What are the industry executives motivation for now improving the confidentiality, integrity and assurance of customers information?  Improved market share and presence.  The payback will be rapid and those organizations that have been in denial that customers expect and demand more systems and tools to protect their information, are now doing an about face.

As we quickly approach Cyber Monday and the commerce of the Internet is at a peak of annual transaction volume, some servers will be talking to each other on encrypted networks for the first time. All seamless to the end user and consumer, yet not to the adversary.  So who really is the adversary these days; the criminal organizations or the U.S. Government?  The strategists mitigating risks at commercial private organizations unfortunately in many cases, see both in the same category.  This is a real mistake and one that should be evaluated, discussed and agreed upon.

You see, U.S. based companies must have an effective symbiosis with it's legal system and rule of law. What does that mean?  Operational Risk encompasses the risks to the institution from a legal perspective.  That means that the process of processing, storing, archiving and retrieving information is subject to the laws of electronic discovery and forensic evidence.  It means that as an organization, having an effective way to encrypt information to stay ahead of the criminal organizations simultaneously requires that your organization is also adaptive to current legal statutes.  Tomorrow, you may need to identify, decrypt and produce evidence to the U.S. Government or as a result of another legal order.

As organization executives embark on the "new new" trend of marketing privacy to their customers, they should also be working along side the legal staff.  The risk management and information technology professionals should be briefing both corporate executives on the implications of being responsive to their consumers and non-responsive to plaintiff lawyers, or the U.S. Attorney or State Attorney General:

Fearful of adverse consequences if they inadvertently discard electronic documents that are deemed to be relevant in litigation, some of the biggest companies in the U.S. are simply saving all documents, including email sent via employees' electronic devices. 

A minority of federal courts say companies can be sanctioned even if they discard documents without intending to. All allow sanctions, which can mean the loss of a big case, when documents are intentionally destroyed. So companies including Exxon Mobil Corp. and Microsoft Corp. are asking the federal Judicial Conference to recommend a new rule that would provide uniform standards for document retention and allow sanctions only when documents are destroyed willfully or in bad faith, reports the Wall Street Journal(sub. req.).

So this is where the marketeers and the legal staff need to get their heads together.  The privacy vs. government legal requests space is still not widely understood inside corporations let alone the average John Q. Citizen, who has never even heard of eDiscovery:

Microsoft General Counsel Brad Smith said yesterday that there are "significant inaccuracies" in last week's news reports. He added in a blog post, referring to Outlook.com: "When we are legally obligated to comply with demands, we pull the specified content from our servers where it sits in an unencrypted state, and then we provide it to the government agency."

operational risk

Insider Threat: Corporate Integrity Culture...

In August 2011, this Operational Risk Management (ORM) blog posted the following.  In light of the increasing impact of "Insider Incidents" in 2013, this is worth revisiting:

Does your organization have a culture of "Corporate Integrity?" The depth and breadth of Operational Risks are apparent in the 2011 CyberSecurity Watch Survey by CSO Magazine, USSS, CERT and Deloitte.

46% of the respondents said damage caused by "Insider Attacks" is more damaging than "Outsider Attacks". The most common insider e-crime at 63% is unauthorized access to / use of corporate information. Here are the others:

• 57% - Unintentional exposure of private or sensitive data
• 37% - Virus, worms or other malicious code
• 32% - Theft of intellectual property

When asked which electronic crimes were most costly or damaging the results were:

• 38% - Outsiders
• 33% - Insiders
• 29% - Unknown

Regarding the "Insiders," the reasons that were given for not referring for legal action, the one that stands out in our mind is this one:

40% could not identify the individual(s) responsible for committing the eCrime.  And maybe even more astonishing is that 39% did not have enough information or a lack of evidence to proceed with either civil or criminal litigation.

So what is really going on with the facts presented so far? Even though the respondents say that "Insiders" are the most damaging, they have done little to collect enough evidence to identify who the responsible parties are to the incident. This may be for several reasons including the lack of internal expertise to preserve evidence and conduct timely investigations.

We have addressed the "Insiders" that make up one third of the digital incidents but what about the "Unknowns," who add an additional 29%. The combination of the two make up 62% of all the incidents in the study. This is where Operational Risk professionals can have a significant impact within the enterprise.

The unauthorized access to information and use of that information is at the center of this issue. When an organization realizes that this "information" has impacted them, the funds have been stolen, the trades have been placed or the press has published a trade or national security secret. To narrow this down further, you might say the Fraudsters and the WikiLeakers are bringing the institution into a torrential storm of criminal activities.

Regardless of the high tech tools utilized or the systems and controls within the organization there are always methods and processes that if properly implemented, will reduce the number of "Unknowns" and "Insiders."

 

In your particular case, it just may come down to developing more effective situational awareness with your employees. This particular educational and awareness building process may indeed also uncover the individuals within your company, who may be already down a path of fraud, embezzlement, insider trading or corporate espionage.

Suppose you create a mandatory program for all employees that is focused on corporate integrity and each year the CEO kicks off the first session with their own attendance and their own direct reports, including the Board of Directors.

 

No one that we know of can explain the basis for this process better than Martin T. Biegelman:

"Obviously, a poor working environment provides a motive and rationalization to commit fraud. Here's a quick health check: does management appear not to care about their employees? Does it have unreasonable expectations or financial targets? Is the organization autocratic or participative? Is there a lack of training or promotion opportunities? Does management say one thing but do another? Are senior executives treated differently than rank and file employees when it comes to discipline?" 

Employees must understand the ethical behavior expected of them. New employee orientation should detail the organization's mission, values and code of conduct, types of fraud, compliance, their responsibility to report violations of ethical behavior and impropriety, and details of the hotline or other ways to report fraud and other integrity concerns. Periodic training throughout an employee's career reinforces fraud awareness and the cost of fraud to an entity."

So what?  

 

If your organization does not currently have a program as we have described earlier, then maybe it's time to start one. If you already have one in place, how effective is it in detecting the "Insider Threat" and the spectrum of Operational Risks within your organization?

operational risk

Veterans Day: Operation Stigma Continues...

One year ago on the Marine Corps Birthday, 10 November 2012, we raised our glasses to celebrate.  It had been a long day, and here is that post from this Operational Risk Management (ORM) blog, from the front lines of Hurricane Sandy:

On Sunday morning, observing Veterans Day in the United States began with a few words from a leader from the American Red Cross at a local shelter near North Brunswick, NJ  USA.  We heard his words of recognition and what it felt like for him to return to our country after serving in Vietnam and being ridiculed and spit upon.  The veterans in the room were all gearing up for another day on the front lines of a new domestic battle with the aftermath of Hurricane Sandy.  Team Rubicon and it's growing presence of agile, selfless and highly skilled professionals have been working along side other national and international NGOs.  They are projecting a rapid and significant force on the ground, from New York to previously unrecognized communities such as Union Beach and Montoloking, NJ.

Serving along side veterans with Team Rubicon (TR) in the face of a major disaster zone is one honor.  The journey this past year has been a rewarding one, working with and to support veterans.  Five months after this first hand experience, one of our TR colleagues in NJ committed suicide.  Neil was not alone.  The numbers are staggering at this point.  Here is the post soon after, on May 11, 2013:

Invisible Wounds: Risk to the One Percent... 

There is an alarm bell ringing within the ranks of Operational Risk Management executives in the United States.  As brave, experienced and motivated veterans enter the U.S. civilian work force, it is growing louder by the hour.  Our "One Percent" who serve in the military, leaders returning from over a decade of war and those who have earned the Global War on Terrorism Expeditionary Medal (GWOTEM), now have a new adversary.  Does your organization hire veterans or spouses of vets?  How are you taking an active role in the veterans hiring, career goals, aspirations and training?  What are the potential indicators of an employee at risk? 

Almost once an hour – every 65 minutes to be precise – a military veteran commits suicide, says a new investigation by the Department of Veterans Affairs.  By far the most extensive study of veteran suicides ever conducted, the report, issued Friday, examined suicide data from 1999 to 2010.

Melanie Haiken, Contributor - Forbes

Since then, this blogger has been serving in another veteran focused non-profit.  One that fills the gaps between natural disasters.  And for good reason.  The wounded, injured and ill can't wait for the next tornado, hurricane, earthquake or tsunami to get out of the basement of their house.  The thousands with Traumatic Brain Injury (TBI) or Post Traumatic Stress Disorder (PTSD) are living their lives each day, until they end up like our colleague Neil.  There is not a cure.  Only treatment.  Only living with an outcome from serving your nation.  This is a global epidemic for all those who have served in and around the conflicts across the globe.

In order to really understand this, you have to get close to it.  For the past six months, serving those wounded, injured and ill has assisted in the education of what is missing and how to fill the gaps.  The biggest gap we face, is the one that took Neil from us.  The Stigma.

stig·ma 

noun, plural stig·ma·ta [stig-muh-tuh, stig-mah-tuh, -mat-uh] Show IPA , stig·mas.
1.a mark of disgrace or infamy; a stain or reproach, as on one's reputation.
2.Medicine/Medical .a.a mental or physical mark that is characteristic of a defector disease: the stigmata of leprosy.b.a place or point on the skin that bleeds during certain mental states, as in hysteria.
3.Zoology .a.a small mark, spot, or pore on an animal or organ.b.the eyespot of a protozoan.c.an entrance into the respiratory system of insects.
4.Botany . the part of a pistil that receives the pollen. See diag.under flower.
5.stigmata, marks resembling the wounds of the crucified body of Christ, said to be supernaturally impressed on the bodies of certain persons, especially nuns, tertiaries, and monastics.

Yes, the stigma surrounding PTSD and TBI is now our Operation.  Our target.  Ending it, is our mission. You see, this blogger has identified "Stigma" as a likely adversary.  How can we say this? One only has to read the heart felt prose of Sgt. Jeremy Conway from his blog, started a few months ago:

Who Dwells Within
November 8, 2013 PTSD &  TBI PTSD, TBI, Army, Veterans, Navy, Depression, Family,Civilians, Soldiers, Marines, Medical, Anxiety, Health, Memory loss, TBIAir Force, fellow Veterans, the Veteran Community, Conditions and Diseases, Charity, Donate 

Who Dwells Within 

Day to day
I wait to see
What awaits and what I’ll be
Who dwells within
To all who care
For those I love
No answers come from Heaven above
Who dwells within
Never understood
Read every book
About what overpressure and shockwaves took
Who dwells within
Each day I wake
Where darkness resides
I become whatever my mind decides
Who dwells within
Day to day
To all who care
Never understood
Each day I wake
Who dwells within 

--Jeremy Conway

We know people like Jeremy Conway are out there and may also want to raise the awareness of "Operation Stigma".  Sgt. Conway has the continued courage to face this vital mission and we look forward to reading his blog for years to come.  He is a true "Quiet Professional"....

This Veterans Day 2013 as we lay a wreath in Arlington Cemetery at the Tomb of the Unknowns, we will be remembering Neil and praying that we all continue to "Bridge the Gap."

operational risk

Hidden Lynx: Transnational Group for Hire...

The current state of organized transnational criminal and cyber espionage groups are becoming more robust. CIO's and corporate "Active Defense" teams are gearing up for a continuous barrage of new exploits and phishing vectors. Operational Risk Management is more of a priority than in recent years.

A Symantec report by Stephen Doherty, Jozsef Gegeny, Branko Spasojevic, Jonell Baltazar highlights the latest:  

The Hidden Lynx group has been in operation since at least 2009 and is most likely a professional organization that offers a “hackers for hire” service. They have the capability to attack many organizations with concurrently running campaigns. They operate efficiently and move quickly and methodically. Based on these factors, the Hidden Lynx group would need to be a sizeable organization made up of between 50 and 100 individuals.   The members of this group are experts at breaching systems. They engage in a two-pronged strategy of mass exploitation and pay-to-order targeted attacks for intellectual property using two Trojans.

The Bit9 incident is one of a few documented targets by this organized team known as "Hidden Lynx."  They are no different than those known "Base" groups in 2001 who have attacked our nation by hijacking airplanes.  Hidden Lynx exploits the little known weaknesses in the design, implementation or configuration of ICT systems, instead of our transportation and border protection controls.  Their trade craft for cyber espionage and potential sabotage is characteristic of an organized set of professional fraudsters, bank robbers, special operators and intelligence professionals.

So what does this mean to the average Fortune or Inc. 500 company with a dedicated IT and Information Security Task Force?  It is time to call in reinforcements and to realize that you are already behind the curve of the OODA Loop.  The enterprise executives who are now tasked with reporting material losses and other adverse events to shareholders, understand the magnitude and the expenses involved to remediate a significant breach.

The cyberspace narrative is changing in the U.S. after the transparency of significant requests by law enforcement for intelligence information on U.S. persons.  Private sector companies will be more open about how many times information was requested.  An open public debate will heighten the dialogue to a level not possible before and will produce a faster response to the necessary change in policies, both public and private.  The citizens rights and the equilibrium necessary to protect those same citizens will be the crux of the dialogue.

While the debate continues, "Hidden Lynx" will continue to operate and this transnational criminal group will grow stronger.  Our U.S. critical infrastructure assets may be subjected to new attacks that produce additional losses and damage to shareholder equity.  Policy makers continue to work in joint sessions with public agencies and private enterprise to craft the right mix of new disclosure requirements.  Operational Risk professionals know one thing for certain.  The pace and magnitude of the attacks will increase.  How and when we counter is still in major debate.  In the mean time, "Hidden Lynx" will continue to be in the cross hairs of the professionals in Ft. Meade, Chantilly, Pittsburgh and Orange County.

operational risk

Privacy 3.0: The Genesis of EarthCom...

Information classification in the private sector is gaining traction again as the nature of sensitive national security leaks are published in the popular press.  Data breach laws and cyber legislation is a daily discussion on Capitol Hill.  CISOs and CSOs even at the Washington Post are in "Incident Response Mode" after a successful phishing exploit by the Syrian Electronic Army.  These Operational Risk Management (ORM) challenges are not only on the rise because of the amount of information that is exchanged each day in an era of the "Internet of Things"; these risks are now front and center as "Privacy 3.0" evolves in the Cloud.

Andrew Serwin of The Lares Institute puts it all in context:

The question confronting modern-day privacy scholars is this: Can a common law based theory adequately address the shifting societal norms and rapid technological changes of today’s Web 2.0 world where legislatures and government agencies, not courts, are more proactive on privacy protections?

As private sector companies produce the technology solutions to accomodate the exponential expansion of our global ICT ecosystem, we must acknowledge the genesis of it's origin.  Human beings.  The products, systems, software and patents are the result of inventions by mankind.  Yet there is evidence that the evolution of ICT, whether it be in hardware, software or the data itself has similarity to biological evolution.  For decades scientists have studied the similarity of the ecosystems of information to the biology of immune systems.  These same smart and bold people have written books, journals and peer tested papers on the subject of transformational systems thinking.  Growth and change in the digital universe follows a biological path found in nature.

The organizational growth cycles are:

• Forming = entrepreneurship
• Norming = production
• Integrating = diversification

This cycle of growth has many labels, yet systems and organizational experts will say that the integrating phase of growth will encounter a bifurcation point, where it is necessary for the system to again innovate and form something new.  To adapt to its new environment.  If the system does not break away and create a new forming stage of the growth cycle, it will eventually perish.  This is why organizational change experts invented such innovations as the "Skunk Works" or why a private sector company breaks off a business unit and creates a whole new company.

Privacy 3.0 is now four years old.  Are we now at the bifurcation stage of the societal information growth cycle and the speed of business is leaving existing government rule of law in the rear view mirror?  Andy Serwin from his 2009 paper said:

Given the changes in society, as well as the enforcement mechanisms that exist today, particularly given the FTC's new focus on “unfairness,” and the well-recognized need to balance regulation and innovation, a different theoretical construct must be created--one that cannot be based upon precluding information sharing via common law methods. Instead, the overarching principle of privacy of today should not be the right to be let alone, but rather the principle of proportionality. This is Privacy 3.0.

As information flows through the manmade veins of supersonic light or invisible waves of zeros and ones around our planet, we are approaching a "Breakpoint."  A place in time, where the system will need to bifurcate in order to survive.  The system of privacy proportionality in government circles has been four levels of classification:

• Restricted = For Official Use Only (FOUO)
• Confidential
• Secret
• Top Secret (TS)

In the years ahead, as you hold your IP Phone (iPhone) to update Twitter, Foursquare, Facebook or WordPress App, you are behaving in the Privacy 3.0 ecosystem.  While you are at work in the public or private sector using Google Business Apps in the cloud, your behavior and your words including personal data such as your semantics or GPS coordinates, are entering one of four levels of sensitivity.

In order to make the leap to our next systemic "Breakpoint", we will need to design in proportional privacy to our Operational Risk Framework.  Without it, the system will decay and ultimately cease to exist.  Is privacy an after thought in your organization?  What information governance education takes place on a continuous basis?  How do you monitor and measure?  Have you tagged the information into four levels of sensitivity?  These are just a few of the questions that the Privacy 3.0 enterprise is encountering, at the genesis of an ICT "EarthCom."

operational risk

The Franklin Project: Preserving Certain Unalienable Rights...

On this July 4th, 2013 in the United States we reflect on a declaration.  The Operational Risk Management (ORM) of the nation was a priority in 1776 and the "word smiths" surrounding Thomas Jefferson penned our most precious document.

The information contained in the "Declaration of Independence" has withstood 237 years of debate, rule of law and service to the Republic to defend all that it stands for.  However, only 1% of U.S. citizens now serve in the military defense of what the country believes in and preserving our "certain unalienable Rights".  This is a failure of leadership and the Operational Risks of our nation will continue to increase from within our borders, without a substantial solution to comprehensive civilian service.

There are however a few brave people across the United States who have served not only as leaders of the 1%, but as future leaders of the 100%.  You see, the "Franklin Project" is the ideal way for our country to manage a spectrum of current and future risks upon us.  Even a way for the thousands of 501(c)3 charities to converge and share a single and cohesive strategy for not just a few people to serve, but for all those U.S. citizens able to serve, early in their lives:

What is the Franklin Project?
The Franklin Project is a new venture by the Aspen Institute to marshal the best case for a voluntary civilian counterpart to military service in the United States. At the 2012 Aspen Ideas Festival, General Stanley McChrystal called for large-scale civilian national service to engage more Americans in serving community and country. We believe national service can and should become a common expectation and common opportunity for all Americans to strengthen our social fabric and solve our most pressing national challenges. To realize this vision, the Franklin Project engages outstanding Americans from the private sector, higher education, government, the military, the faith community, the philanthropy, and nonprofit organizations, to develop innovative policy ideas and to build momentum around advancing a new vision of civilian service for the 21st century. Our goal is to create one million new opportunities for large-scale civilan national service. 

What is national service? Why now?
National service has always been in the DNA of Americans. By committing to spend a year or more serving our nation full-time, we have the opportunity to strengthen our social fabric, improve on individual skillsets, and solve some of the nation’s most pressing challenges. Today, application numbers for national service programs such as AmeriCorps, City Year, and Teach for America, are higher than ever before. The Corporation for National and Community Service, which supports AmeriCorps programs, reported that there were 582,000 applications for just 83,000 national service positions last year. This means that nearly 500,000 people who were ready and willing to commit themselves to full-time national service were turned away. The current capacity for national service opportunities is thus outpaced the incredible demand.

- See more at: http://www.aspeninstitute.org/policy-work/franklin-project/about-us#sthash.J3m9HyFj.dpuf

So America, what are we waiting for to change the way our youth serves and our nation treats national service?

Each citizen has the opportunity to give back to the improvement of our nation through non-profit charities, religious institutions and especially our military.  What we have accomplished so far is only a start and still years away from what America is capable of achieving.  Civilian National Service will someday be a way for our youth to establish their sense of leadership, philanthropy and strong moral foundation.

God speed to the Franklin Project on our national birthday celebration!

operational risk

Invisible Wounds: Risk to the One Percent...

There is an alarm bell ringing within the ranks of Operational Risk Management executives in the United States.  As brave, experienced and motivated veterans enter the U.S. civilian work force, it is growing louder by the hour.  Our "One Percent" who serve in the military, leaders returning from over a decade of war and those who have earned the Global War on Terrorism Expeditionary Medal (GWOTEM), now have a new adversary.  Does your organization hire veterans or spouses of vets?  How are you taking an active role in the veterans hiring, career goals, aspirations and training?  What are the potential indicators of an employee at risk?

Melanie Haiken, Contributor - Forbes
Almost once an hour – every 65 minutes to be precise – a military veteran commits suicide, says a new investigation by the Department of Veterans Affairs. By far the most extensive study of veteran suicides ever conducted, the report, issued Friday, examined suicide data from 1999 to 2010.

The fact is that about 31% are vets, who are under 50 years old and in the prime of their lives and careers.  The Operational Risks associated with a growing workplace with veterans comes in different areas of concern and opportunity.  The awareness building program within a workplace, that is focused on mitigating risks to the enterprise, should be focused on behaviors and pre-incident indicators.  Especially when it comes to humans.  "Invisible wounds" are just that.  They are hard to see.

Has your organization been faced with an employee, who was a veteran and took their own life?  The cues and clues may not be so obvious.  Human Resources departments, Organizational Development management, senior executives are starting to hear that alarm.

There are people walking around your organization at this very moment, who are at risk and you may be naive to the indicators.  Begin the process today to change this growing epidemic.  Create a mechanism for awareness building, of the potential pre-incident indicators.  More importantly, what are you doing to proactively evaluate and monitor employees who are veterans?

60 Minutes - Invisible wounds of war by David Martin
An estimated quarter million servicemen and women have suffered concussions over the past decade of war. Tens of thousands -- no one knows the precise number -- are dealing with lasting brain damage. The Pentagon, which did not recognize the problem until the war in Iraq was almost over, is now scrambling to treat these invisible wounds. And soldiers suffering from them sometimes end up wishing they had a wound people could see.

There are programs for building awareness with employees and even a growing number of non-profit organizations that are making a difference.  The point is, what is management doing to proactively engage fellow executives to be more proactive on multiple fronts?  Here is one example that you should be investigating immediately.  Pretend for a moment that you as a CEO, are a veteran that is applying for a job at your company.  Go to your own career web site page and apply for a job at your company.  Why?  See how easy it is.  See what happens next.

The reason is clear.  You don't have any idea what a veteran goes through to first apply for a position with your company.  Second, you do not fully understand, how your own HR and recruiters follow-up and provide any feedback to the applicant, once they have navigated the vast maze of your latest outsourced online job platform.

We would also request, that you investigate your organizations process for doing periodic assessments of employee performance?  How is this the same or different for a veteran?  Has it been modified or is it done with a trained professional, who may be able to use substantial experience to provide an early warning system for vets, who may be at risk in your workplace.

Whether you are in the military ranks now as a commander or you are an executive in the government, business or part of a non-profit, you think you know the stakes.  You think you understand the Operational Risks associated with the hiring and employment of veterans.  You do not, because no one does completely.  This complex mosaic of laws, health care and human psychology issues may very well be, one of the greatest operational risk challenges before us as a nation.

Begin your journey to better understanding this, by visiting this U.S. Department of Veteran Affairs web site:  http://www.veteranscrisisline.net

This Memorial Day, we will remember all those heroes who have fallen, especially here at home.  In our own town.  We can and must do better...

operational risk

Offshore Strategies: Global Integrity Risk...

Global 500 organizations are managing Operational Risks across their respective enterprises, utilizing a portfolio of controls, tools and strategies.  One of those strategies, is getting more attention by nation states and treasury departments.  Larger than Wikileaks, this ICIJ investigation, is a digital peek behind the offshore strategy that is legal in many jurisdictions across the world:

An anonymous source has provided extensive insights into a worldwide network of tax evaders. 

Media in more than 30 countries are currently sifting through a mountain of data.
260 gigabytes of documents - that's the printed equivalent of 500,000 copies of the Bible. 

This is the massive amount of data that was passed on more than a year ago by an anonymous whistleblower to the International Consortium for Investigative Journalism (ICIJ) in Washington. More than two million emails and other confidential documents sketch a picture of a dubious shadow world. More than 130,000 people from 170 countries are alleged to have secreted their money in tax havens. Analyzing the data is a mammoth task that is still nowhere near completion.

The governance and the transparency that a global enterprise displays to its shareholders, employees and the governments is continuously at stake.  Some countries are considered more corrupt and global organizations operating in that part of the world, shall be more aware of the risks of doing business there.

Some other interesting revelations:

• The largest shares of the people setting up offshore accounts live in China, Hong Kong, Taiwan, Russia or another former Soviet republic. 
• In turbulent Greece, both the upper and middle class are increasingly keeping their money in undeclared accounts — a situation that finance officials have since vowed to investigate.
• A number of the world’s largest collectors use offshore accounts to buy and sell art without paying taxes. 
• Offshore accounts are popular in Russia, where President Vladimir Putin has repeatedly asked politicians to stop using them: the deputy prime minister’s wife and top managers of Russian military contractors and government-controlled companies are thought to have secret offshore investments. 
• Offshore accounts are a major source of investment in China and Russia. China’s second-largest source of capital investment is the British Virgin Islands.
• You can read the full ICIJ report here.

Billionaires and politicians are hedging risks on the advice of tax attorneys, accountants and the financial strategies that are as old as tax laws.  Inside the private business compliance and legal departments, lie a vast staff of dedicated personnel who are tasked with mitigating risks to the organization.  Some global enterprises such as Siemens AG have paid the price, of a governance architecture that was in failure.  Today, those lessons learned are still being taught even as others are implicated in alleged wrong doing:

IBM Says Justice Department Investigating Bribe Allegations
By Sarah Frier on May 03, 2013

International Business Machines Corp. (IBM) is being probed by the U.S. Justice Department over corruption allegations in Poland, Argentina, Bangladesh and Ukraine, adding to bribery charges from the Securities and Exchange Commission. 

The Justice Department is investigating whether IBM violated the Foreign Corrupt Practices Act, the company said in an April 30filing (IBM). In Poland, the department is focusing on a transaction that the Polish Central Anti-Corruption Bureau already was studying, the company said. It involves allegations of a former IBM employee selling to the Polish government. 

The Justice Department probe adds scrutiny in new territory as IBM tries to settle with the SEC over activity in China and South Korea. The global reach of the investigation indicates that this isn’t an isolated matter, said Charles Elson, corporate-governance professor at the University of Delaware. 

“If it happens in one country, you can say it’s an individual,” Elson said. “If it happens in multiple, you have to ask, is it systemic? And how well was the compliance program put in place to prevent it?”

So what can a General Counsel, VP of Operational Risk, Chief Risk Officer or even the Audit Committee do, in light of these continuous incidents?  The trust that any person or organization has with its bankers, outside counsel, compliance subject matter experts, accounting advisory and management consultants is at stake.  The integrity of the entire global payments and economic ecosystem is at risk.  This source of systemic risk to governments, global enterprises, stock markets and average consumers is growing beyond control.

What can be done?  The serious conversation going on right now between your independent counselors  continues to focus on trust and the people who are behind that trust.  You have got to have that serious conversation as a CEO, not with your first line of management Vice-Presidents, but several layers below them in the corporate hierarchy.  Believe us when we say, as the CEO, you can't see two layers below you, where all of the real work on daily transactions is getting done everyday.  You are not on the front lines, where deals are being made and information is being exchanged that can have a material impact on daily business.

You see, it really all still comes back to people communicating information ethically.  How and when people act on that information.  Why people behave the way they do when they learn the information.  As a CEO in charge of a global enterprise you will never have the transparency or the integrity being controlled from HQ on the executive floor, or on your executive analytic GRC dashboard.  Your only chance is to reach those people, who are at the source of doing business in your line processes, not staff, but "line".  The "line" is the life blood of daily business commerce and the power base for making a difference on how business is done and the integrity behind it.  The future of your enterprise depends on these people, communicating information that is true, validated and researched to uncover any possible errors, omissions or other ethical issues.

The power base of the global economy is constantly changing.  The risks to the economic enterprise continues and the investigations are just beginning.  Offshore strategies are at the core of global integrity risk.

operational risk

Social Media Risk: Situational Awareness on Wall Street to Main Street...

It has been a wild few weeks for Twitter and the Operational Risks associated with account hijacking and "Tweets" that may compromise the positions of active police activities. The Boston Police were
warning people via their official Twitter account:

The first official announcement that law enforcement agencies had concluded their manhunt for Boston Marathon bombing suspect Dzhokhar Tsarnaev didn’t come at a press conference by police commissioner Ed Davis or Mayor Tom Menino. It didn’t come from a press release or a dispatch over a police scanner. It came instead from two tweets:

Boston Police Dept. ✔ @Boston_Police#MediaAlert: WARNING: Do Not Compromise Officer Safety by Broadcasting Tactical Positions of Homes Being Searched.   8:52 AM - 19 Apr 2013 

Boston Police Dept. ✔ @Boston_Police#MediaAlert: WARNING - Do Not Compromise Officer Safety/Tactics by Broadcasting Live Video of Officers While Approaching Search Locations 1:14 PM - 19 Apr 2013

Social Media and a hacked AP Twitter account were the catalyst for a sudden drop in the financial markets. As the news service realized what had occurred they contacted their employees in the White House briefing room to refute the information:

Twitter Inc. plans to bolster security on its site after the account of the Associated Press news service was hacked and an erroneous post triggered a stock- market decline, according to a person familiar with the matter. 

Two-step authentication will be introduced to make it harder for outsiders to gain access to accounts, said the person, who declined to be identified because the information isn’t public. In addition to a password, the security measure requires a code sent via text message to a user’s mobile phone, or generated on a device or software. 

Twitter’s defense against password theft came under scrutiny this week after a hacker sent a false post about explosions at the White House, triggering a drop that wiped out $136 billion in value from the Standard & Poor’s 500 Index.

Social Media is becoming a way of real-time situational awareness and organizations that have ignored the potential impact on its Operational Risk are now paying attention. Proactive steps are now being taken to not only monitor the daily feeds on official company twitter accounts and also upgrade the security of those feeds by using multi-factor authentication.

Companies such as Duo Security are going to start seeing an uptick in their web site activity as a result of these latest hacks on Twitter and others. Why? Because it works.

Corporate integration of public relations and information security are not anything new per se. What is getting more attention is how social media has become a catalyst for changing human behavior. Even more revealing is how automated trading systems react to a false tweet on Twitter. Have the algorithms gone too far in high frequency trading? Not really. HFT professionals don't let Twitter change their strategies. Here is a dose of reality:

There is little predictive value in the events of the, "Hack Crash." However, there are some key takeaways for traders. First is the importance of protective stops. One never knows what could happen next. Second, verify news reports. I have the AP's iPhone app, which alerts me to breaking news and had no mention of the tweet until after the fact. Therefore, the corporate disconnect between Twitter and their app was my first clue it was bogus. Finally, cut the high frequency traders some slack. Their programs are based on risk and reward just like our own and the liquidity they provide in times of dramatic events is exactly what allows us to get out of the market and keep some powder dry until the smoke clears.

What will continue to be an ongoing trend in corporate ranks is the need to continuously monitor social media and to spend the time on due diligence to determine what is real and what is simple "Information Operations." (IO) in the corporate ranks and across Wall Street is the name of the game. Those who understand how to manage their monitoring and deal with the daily anomalies will be able to mitigate the major risks to the enterprise.

Our only hope is that the thousands of major law enforcement agencies across the globe, are doing the same. @Boston Police is a good place to start with any lessons learned.

operational risk

BCOT: Insuring Privacy and Civil Liberties...

The U.S. Nationwide SAR Initiative brings the conversation of privacy and intelligence collection to a point of convergence. Guidance for local, regional and state agencies can be found in the "Building Communities of Trust" (BCOT) program being rolled out across the country.

The continued priority is to safeguard the privacy, civil rights, and civil liberties of United States citizens (including the assurances that not only is information shared appropriately with authorized personnel but that the information that is exchanged is “quality” information). Can a nation continue to increase it's daily home town "Situational Awareness" while simultaneously preserving the constitutional rights and trusted relationship with its own citizens?

The Suspicious Activity Reporting (SAR) initiative is about Homeland Security Intelligence (HSI) engineered for the United States, to insure privacy and civil liberties of its citizens. Governance of vital intelligence data is at the core of the program design, combining the correct process for access and compartmentalization and the retention policies on certain types of relevant information.

The BCOT Guidance describes the challenges that must be addressed by fusion centers, local law enforcement agencies, and communities in developing these relationships of trust. These challenges can only be met if privacy, civil rights and civil liberties are protected. For fusion centers, this requires strong privacy policies and audits of center activities to ensure that the policies and their related standards are being fully met. For law enforcement agencies, it means that meaningful dialog and collaboration with communities needs to occur in a manner that increases legitimacy of the agency in the eyes of that community. Law enforcement must establish legitimacy in the communities they serve if trusting relationships are to be established. For communities, their leaders and representatives must collaborate with law enforcement and share responsibility for addressing the problems of crime and terrorism prevention in their neighborhoods.

Relationships of trust will not be established until key community leaders understand the intent of the information sharing environment and the preventive role that fusion centers and the SAR process plays in protecting the community from crime and violence. A fully transparent explanation can be the foundation for broad community understanding of the importance of these initiatives as well as the critical privacy, civil rights, and civil liberties protections that are in place.

The issue of trust is paramount in any relationship, whether it be personal or a JTTF working in concert with the local Metropolitan Police Department. In either case, the "Four Cores of Credibility" are necessary for humans to operate at the "Speed of Trust":

Integrity - is deep honesty and truthfulness. It is who we really are. It includes congruence, humility and courage. To increase your integrity, make and keep commitments to yourself. Stand for something and then live by it. Be open. Do you seriously consider other viewpoints? 

Intent - is your fundamental motive or agenda and the behavior that follows. It includes motive, agenda and behavior. To improve your intent, examine your motives. Are everyone's interests being served? Share the "why" behind the "what" wherever possible. 

Capabilities - is our capacity to produce and accomplish tasks: talents, attitudes, skills, knowledge and style. To build your capabilities run with your strengths. Match your strengths to unique high-value opportunities. Know where you are going and keep the vision in front of you. 

Results - is your track record. People evaluate you on three key indicators of performance. Past, current and anticipated. To improve your results take responsibility and adopt a "results" mind-set. Expect to win and create a climate of high expectations. Finish strong and avoid the "victim mentality." 

Trust in a relationship and an environment of trust in the economy, national security or the stock market makes all the difference. The behaviors that you exhibit in public and behind closed doors with your stakeholders will set the tone for everyone inside and outside the organization. Can you think of any companies or people over the past two years that you have lost trust in?

When a person loses trust in another person, a company or its government, in many cases it comes back to information governance. The time, place and method for information dissemination or sharing will in many cases, become the basis for the reason why trust is maintained or eroded in the eyes of the other.

Suffice it to say that more than ever, "Open Source" information is becoming the starting point for all intelligence collection activities. In the context of the corporate policy regarding the use of systems, most if not all companies have the right to monitor all applications for "Red Flag" indicators of fraud, espionage or other violations of state and federal laws. Corporations are using "Open Source" information to determine the initial profile of potential candidates for open positions including the analysis of FaceBook or LinkedIn social networking sites.

Executive Order 12333 emphasizes US citizens rights:
The Executive Order maintains and strengthens existing protections for Americans' civil liberties and privacy rights. The Executive Order retains and reinforces the provisions in place in the original Executive Order 12333 to ensure that all intelligence activities are conducted in a manner that protects the civil liberties and privacy rights of Americans. All collection, retention, and dissemination of information regarding United States persons must be conducted in accordance with procedures approved by the Attorney General.

The future of "Building Communities of Trust" in the United States will require significant investments in building awareness, training front line officers and implementing effective oversight mechanisms. It will be achieved without the sacrifice of the rule sets established in 1791.

operational risk

Legal Risk: Over-The-Horizon Digital Radar...

Operational Risk Management is a primary responsibility with an organizations General Counsel. Why?

"The definition includes Legal risk, which is the risk of loss resulting from failure to comply with laws as well as prudent ethical standards and contractual obligations. It also includes the exposure to litigation from all aspects of an institution’s activities."

So if you are a General Counsel or the Chief Legal Officer, your radar is consistently tuned to the "Over -The-Horizon" (OTH) risks that may impact your company, right?  The fact is that managing risk from the General Counsels office may be significantly different than what managing risk means from the CIOs office.

Loss events associated with peoples workplace behavior are many times treated differently than those events associated with a computer "intrusion" or a data breach, that was also caused by human behavior.  The law is a battleground that continues to keep an entire industry busy with offensive and defensive activities and the transfer of risks from one party to another.

What is the legal risk difference between the diversion of company funds to pay bribes in a foreign country and the theft of company trade secrets?  You see, the laws associated with these loss events have different statutes, penalties and legal risk:

On December 17, 2012, Germany-based insurance and asset management company Allianz SE paid more than $12.4 million to settle with the SEC over violations of the books and records and internal control provisions of the FCPA. The activity in question concerned improper payments to government officials in Indonesia. Following common FCPA procedure, Allianz did not deny or admit the SEC’s inquiry. The company disgorged $5.3 million in profits, paid a penalty of $5.3 million, with $1.8 million in prejudgment interest. 

The SEC stated that it uncovered 295 insurance contracts on government projects that were obtained or kept by improper payments totaling $650,626. The payments were made by Allianz’s Indonesian subsidiary. 

The conduct occurred from 2001 to 2008, at which time Allianz was considered an “issuer” under the FCPA because of its activity on the New York Stock Exchange. Even though it was not listed on the exchange, the presence of its bonds and shares on the market made it an issuer and subjecting it to the jurisdiction of the FCPA. The investigation was initiated internally using outside counsel after a whistleblower complaint in 2009.

On December 28, 2012, President Obama signed the Theft of Trade Secrets Clarification Act. S. 3642 (112th). The Clarification Act is a direct response to the Second Circuit’s decision in U.S. v. Aleynikov, 676 F.3d 71 (2nd Cir. 2012). (See details below.) In Aleynikov, the Second Circuit overturned a criminal conviction under the Economic Espionage Act 18 U.S.C. § 1831, et seq., after the court determined that the stolen source code was only used internally for a high-frequency trading system and was not “related to or included in a product that is produced for or placed in interstate or foreign commerce.” The Clarification Act expands Section 1832(a) to cover internal trade secrets “related to a product or service used in or intended for use in” commerce. In addition to the source code at issue in Aleynikov, this expansion could include internal processes of doing business or gathering information that may not qualify for traditional patent protection. More broadly, the quick reaction shows the importance that Congress attaches to this area of the law and puts individuals and companies on notice that increased indictments may occur down the line.

The ethics, compliance and legal components of Operational Risk Management comes down to "Achieving a Defensible Standard of Care" in your organization.  The risk exposures that face your organization will also occur from a more immediate impact, due to a loss of reputation and potential loss of market value.  On all fronts, the stakes remain high.

The modern day legal enterprise is still reactive and slow to respond to the changing environment around it.  The daily battle with legal risk is slow, compared with other risk management fronts within the institution.  The speed of response and the focus on preventive, preemptive or proactive actions is what sets apart the mental states of all of your security risk professionals.  Some people have seconds or minutes to decide and act, others have the luxury of days, months and years.

Unfortunately, for most the costs associated with legal risk are high, no matter who prevails in an incident or case. This fact alone, is why the introduction of a new generation of automated tools and the memory of computer-based evidence is so important.  Decision Advantage.  The law and the law industry is quickly playing catch up.  Practitioners from the technology and legal industry are now even more integrated, while the courts interpret the implications of their rulings on an accelerating mobile digital global society.

You and your team have a tremendous amount of new knowledge to gain, or your enterprise will be consumed by the volume of new Operational Risks unfolding before it.  How complex could this be?

From 'WarGames' to Aaron Swartz: How U.S. anti-hacking law went astray

The 1983 movie "WarGames" led to an anti-hacking law with felony penalties aimed at deterring intrusions into NORAD. Over time, it became broad and vague enough to ensnare the late Aaron Swartz.

operational risk

Team Rubicon: Bridge the Gap...

On Sunday morning, observing Veterans Day in the United States began with a few words from a leader from the American Red Cross at a local shelter near North Brunswick, NJ  USA.  We heard his words of recognition and what it felt like for him to return to our country after serving in Vietnam and being ridiculed and spit upon.  The veterans in the room were all gearing up for another day on the front lines of a new domestic battle with the aftermath of Hurricane Sandy.  Team Rubicon and it's growing presence of agile, selfless and highly skilled professionals have been working along side other national and international NGOs.  They are projecting a rapid and significant force on the ground, from New York to previously unrecognized communities such as Union Beach and Montoloking, NJ.

Operational Risk Management was practiced and observed as disaster first responders descended on the front lines of the Hurricane Sandy disaster area.  Highly equipped, veteran war fighters and first responders are deployed each day to tackle and mitigate substantial risks to homeowners, businesses and communities.  Working in concert with city, county, state and federal authorities to provide the most effective response results, where other NGOs stood by in amazement.

City officials, emergency management, law enforcement, community associations, religious organizations all working in coordination to provide their citizens and members what they needed, when they needed it and more.  The destruction and the aftermath of this disaster was significant and will be recognized as one of the most costly economic impacts to the nation.

Yet this is more about a mission by those who know they want to continue to "Bridge the Gap".   To serve beyond what they have already done in life.  To be hugged by perfect strangers for rescuing a loved one trapped in their home or assisting in the mitigation of operational risks to life and property in their neighborhood.  The mission is clear and each day a whole new example of a purpose driven life is explored and realized.

As our U.S. veterans and their families are returning to our cities and communities remember this.  1%.  They represent only 1 percent of our U.S. population and deserve our respect and continued devotion to their service.  They have been making a difference in uniform and will continue to do so if we leverage the leadership, knowledge, wisdom and courage they all possess:

Team Rubicon Saves Lives. 

Since its creation in January 2010, TR has impacted thousands of lives – in Haiti, Chile, Burma, Pakistan, Sudan, and here at home, in Vermont, Maryland, Missouri, and Alabama.  TR reaches victims outside the scope of where traditional aid organizations venture; victims on the fringe. 

Team Rubicon Engages Veterans. 

Hundreds of US military veterans, many returning home after fighting ten years of war, find a renewed sense of purpose for their skills and experiences through TR. 

Team Rubicon Sets Itself Apart In the Nonprofit World. 

Is it a disaster relief organization? A veteran-focused enterprise?  The truth is it’s both. TR pioneered a new paradigm in disaster response while redefining the meaning of veteran reintegration into society. 

Team Rubicon Pioneered the Concept of Veteran-Focused Disaster Response. 

On the streets of Port-au-Prince, in the immediate aftermath of the Haiti earthquake, TR’s military veterans realized a simple truth – natural disasters present many of the same problems that confront troops in Iraq and Afghanistan: unstable populations, limited resources, horrific sights, sounds and smells.  The skills cultivated on those same battlefields – emergency medicine, risk assessment and mitigation, teamwork and decisive leadership – are invaluable in disaster zones.

This Veterans Day remembrance will never be forgotten.  It has been an honor to serve along side so many dedicated professionals to continue to mitigate operational risks to our friends, family and loved ones.  Continue to "Bridge the Gap"!

operational risk

U.S. Resilience: Hurricane, Terrorism, Political Risks...

One week ago today, Hurricane Sandy was making her way up the Eastern seaboard of the United States with a wind field 800 to 900 miles wide.  There are estimates of $50B. in economic damages to the country and that tells you only part of the impact story.  The direct impact in lives lost, people displaced and the continuous risks to the Whole Community unfolds in real-time.  Business Resilience and consumers patience is being tested by the hour, ever since the reality of the crisis started to reach the Executive Suites of critical infrastructure sectors such as Financial, Energy, Telecom, Transportation, Maritime, Retail, and the other thirteen or so others.  All have been exercising their COG, COOP and DR plans as part of the their organizational Operational Risk Management programs.

sandy.locative.us will provide you with a snap shot from aerial imagery of the Hurricane Sandy aftermath and geographic locations that could have a spectrum of damage from light to heavy.  This is just one example of how crowdsourced apps are being used to assist, with the ongoing situational awareness and damage assessments but also the long term recovery of those most impacted areas.  At the same time, resources are in high demand for certain areas such as gasoline.  The power companies are making progress and as the supply chain mobilizes and the electricity comes back on, the commodities shortages will soon begin to dissipate.

The Sunday Washington Post and New York Times are telling stories of heroism, tragedy and the effect on the Presidential election on November, 6 2012.  The politically charged atmosphere is primed for more of a perfect storm as the fiscal cliff approaches, regardless who becomes the next President of the United States of America.  This minute, there are tens of thousands of people wondering where they are going to live and stay warm this week in the Mid-Atlantic and Northeast region.  Simultaneously, the September 11, 2012 terrorism investigation continues and in the next few weeks, the world will better understand the timeline and the vulnerabilities that still remain to U.S. assets in the Middle East.  The Associated Press reports:

WASHINGTON (AP) — The deadly military-style assault on the U.S. Consulate in Benghazi, Libya, has raised numerous foreign policy and national security questions and fueled a fierce, partisan election debate over the Obama administration's handling of the attack. 

The strike that killed U.S. Ambassador Chris Stevens and three other Americans is either proof of President Barack Obama's leadership failures or a tragic event that occurred despite the administration's best efforts to protect the compound and respond in the aftermath of the attack, according to highly charged arguments on both sides.

Administration officials have warned against drawing conclusions from individual documents that have leaked into the public sphere. They maintain that a full picture of what happened and any assessment of blame can only be determined after a complete review of all the evidence. But as documents continue to surface in the final days of the presidential campaign, the intensity of allegations of administration impropriety or incompetence has risen. 

A look at what is known, what is still unanswered and who is investigating the incident that has called into doubt Washington's ability to predict such events, secure American personnel in dangerous places and track down those responsible.

Courageous people who have special skills, talents and subject matter expertise are activated or being deployed at this minute, on billets to address a set of continuous operational risks across the globe.  These American first responders and long term recovery professionals all have one thing in common.  A desire to close their eyes each night, with the confidence that they did make a difference that day.  The peace of mind, that they did their small part to add to the tremendous challenges of securing the safety and long term security of their loved ones and those in need.  God, Family, Nation.

operational risk

Dark Pools: OPS Risk of Rogue Algorithms...

When you begin to think about the potential Operational Risks we face everyday, they are so wide and so numerous that each organization has developed their own methods for Enterprise Risk Management.  Depending upon the industry you are in and the speed of your business will determine the subject matter expertise that is required to deter, detect, defend and document your particular operational risks.

This is business as usual in the Financial Services industry.  Yet what about those low probability and high consequence incidents that are looming over the horizon?  The "Black Swans" as they have been defined in the past few years.  What if these "Black Swans" were known to exist everyday and could be witnessed swimming around in what are known as "Dark Pools."  You know, the places where the "Algo Bots", Quants and those who win, are doing so at the speed of light.  In the milliseconds of time it takes, for one algorithm to buy and another to sell within the trading exchanges, we can only continue to pray that the mathematics does not go rogue:

A news-breaking account of the global stock market's subterranean battles, Dark Pools portrays the rise of the "bots"- artificially intelligent systems that execute trades in milliseconds and use the cover of darkness to out-maneuver the humans who've created them.
In the beginning was Josh Levine, an idealistic programming genius who dreamed of wresting control of the market from the big exchanges that, again and again, gave the giant institutions an advantage over the little guy. Levine created a computerized trading hub named Island where small traders swapped stocks, and over time his invention morphed into a global electronic stock market that sent trillions in capital through a vast jungle of fiber-optic cables.  
By then, the market that Levine had sought to fix had turned upside down, birthing secretive exchanges called dark pools and a new species of trading machines that could think, and that seemed, ominously, to be slipping the control of their human masters. 
Dark Pools is the fascinating story of how global markets have been hijacked by trading robots--many so self-directed that humans can't predict what they'll do next. 

Managing Operational Risk with the underground "Dark Pools" is a stretch.  No different than trying to understand something as easy as CDO's or a tranche of sub-prime mortgages from a zip code in Las Vegas all packed up in a Wall Street product you now recognize as a Mortgage-Backed Security (MBS):

Low quality mortgage-backed securities backed by subprime mortgages played a major role in the 2007–2012 global financial crisis. By 2012 the market for high quality mortgage-backed securities had recovered and was a profit center for banks in the United States.

High Frequency Trading (HFT) is not new.  It has been evolving for years.  The battle for speed, has even changed the way organizations think about buying their circuits for telecommunications and data communications, between these increasingly complex and sophisticated computing critical infrastructures.  Here is one example:

Ridgeland, MS - September 17, 2012 -Spread Networks, LLC, a privately owned telecommunications provider, today announced the deployment of 100G technology on Spread's industry leading Chicago to New York fiber backbone. Spread's new service offers customers access to 100 gigabits per second of optical bandwidth, unregenerated, on Spread's 14.6 millisecond round-trip best-latency-in-class Ultra Low Latency Chicago-New York Wavelength service.  Spread's flagship Ultra Low Latency Chicago-New York Dark Fiber service is now operational at a roundtrip latency of 12.98 milliseconds roundtrip, a 100 microsecond improvement from Spread's previous 13.1 millisecond offering.  The latency improvement over Spread's dark fiber, which is already implemented, is the result of continuous route improvements that Spread has undertaken since going live in August, 2010.  Spread's 12.98 millisecond dark fiber offering provides customers with unlimited bandwidth on a 99.999% available service at the lowest latencies achievable by fiber optic networks between these two financial centers.  For financial customers who value low-latency and reliability for their mission critical trading applications, there is no other comparable solution.

Most people at the SEC, Federal Reserve and the DOJ fully understand the need for business to do whatever it takes to create a competitive advantage.  What however still remains our "Single-Point-of-Failure" is the math.  The mathematics that make up the algorithms.  The zeros and ones of software code that tell the computers what to do and when to do it.  How many people really can understand it and explain it?

So how do you mitigate the potential risk of a rogue algorithm?  Some have devised a mechanism called a circuit-breaker.  In other words, an alarm that something is not normal.  Let's slow down until we can understand what is going on here.  What are some other ways that we could potentially address the threat or the vulnerability?  Was the "Flash Crash" a weak signal of a pending melt down of the complete system?

We are increasingly dependent on computers for all that we do, and the government won’t always be able to prevent their malfunctioning from causing serious problems. But the many glitches that have plagued financial markets in the past couple of years should serve as a sobering reminder that financial markets have evolved much more quickly in the past decade than regulators have.As Scott Patterson, author of Dark Pools, a book about high-frequency trading, said to Yahoo Finance Monday, “We have seen a massive revolution in how exchanges work. It’s been put in place extremely fast . . . the problem is that the race for profits at the exchanges and at the high-frequency firms has outpaced their ability to manage risk.”  Read more: http://business.time.com/2012/08/08/high-frequency-trading-wall-streets-doomsday-machine/#ixzz2AWeXPorn

operational risk

Starfish: A Community of Resilience...

When is the last time you were in an environment where trust was implicit?  A place where the people you were working along side, shared a unity of purpose and a single mission.  Once you experience this, it is forever engraved in your mind and felt deep in your soul.  A "Starfish Community," walking together with such a high degree of mutual trust, it will endure and remain resilient against all Operational Risks that may be encountered.

Enabled by the wisdom and thinking from Rod Beckstrom and Ori Brafman's book "Starfish and the Spider:  The Unstoppable Power of Leaderless Organizations, the "Starfish Community" is growing rapidly across the globe.  A group of decentralized networks that are able to work without hesitancy and with moral courage.  It does not matter if the model is used on the battlefield or in business, the desired outcomes are the same.  Joby Warrick at the WP describes the latest work of al-Qaeda:

Authorities in Jordan have disrupted a major terrorist plot by al-Qaeda-linked operatives to launch near-simultaneous attacks on multiple civilian and government targets, reportedly including the U.S. Embassy in the capital, Amman, said Western and Middle Eastern officials Sunday.  The Jordanian government issued a statement confirming the plot and saying that 11 people with connections to al-Qaeda’s affiliate in Iraq have been arrested. 

The foiled attack, described as the most serious plot uncovered in Jordan since 2005, was viewed with particular alarm by intelligence agencies because of its sophisticated design and the planned use of munitions intended for the Syria conflict — a new sign that Syria’s troubles could be spilling over into neighboring countries, the officials said.

The alleged plotters are Jordanian nationals. The officials said the group had amassed a stockpile of explosives and weapons from Syrian battlefields and devised a plan to use military-style tactics in a wave of attacks across Amman.  

The scheme called for multiple strikes on shopping centers and cafes as a diversionary tactic to draw the attention of police and security officials, allowing other operatives to launch attacks against the main targets, which included government buildings and embassies.  A Western official briefed on details of the plot confirmed that the U.S. Embassy in Amman was among the targets. Like others interviewed for this report, the official spoke on the condition of anonymity because the investigation is still unfolding.

The ability for the Starfish Community to evolve, adapt and to consistently execute against its agreed upon mission manifests itself in terrorist acts and simultaneously in humanitarian and disaster response.  The ability for the human race to at one moment be so evil and at the same moment so forgiving and good, will continue to amaze us all:

Syrian Arab Republic, 2012
HISG has provided food, blankets, medicine, and other assistance to families that have been affected the by political turmoil in Syria. Many of these people have lost their only source of income because businesses have shut down. Others have simply fled the larger cities to escape the violence. 

The assistance has gone to families like these: In one household, the mother had died from illness, leaving the father to care for five small children. He was not able to keep his job, and now sells small items door to door or on the streets, but it was not enough to provide for his children. When his family received food packs and heating oil in the winter, he was overwhelmed with gratitude. 

Late 2011 and early 2012 brought on an unusually cold winter in Syria, and the harsh temperatures coupled with the protests and demonstrations drove the price of heating oil to 4 times its usual price. The blankets were delivered to insulate people from the cold and help them survive the bitter cold.

The business world evolves around us with mergers and acquisitions, incidents of fraud and corruption while a silent and clandestine army of cyber warriors wage conflict on our critical infrastructure and copy or steal our intellectual assets.  The ability for the "Starfish Community" to survive in the virtual environment of the Internet is no different than the cities of Aleppo or Amman.  This is why Wikipedia and other open source projects are able to continuously adapt, grow and survive the threats or vulnerabilities to this resilient and self-healing network.

How have organizations like Google and others designed their business to withstand the tests of both physical and virtual threats to it's global well-being?  

8.  The need for information crosses all borders.
Our company was founded in California, but our mission is to facilitate access to information for the entire world, and in every language. To that end, we have offices in more than 60 countries, maintain more than 180 Internet domains, and serve more than half of our results to people living outside the United States. We offer Google’s search interface in more than 130 languages, offer people the ability to restrict results to content written in their own language, and aim to provide the rest of our applications and products in as many languages and accessible formats as possible. Using our translation tools, people can discover content written on the other side of the world in languages they don’t speak. With these tools and the help of volunteer translators, we have been able to greatly improve both the variety and quality of services we can offer in even the most far–flung corners of the globe. 

A crisis appears in your business only when you are unable to adapt and withstand the impact of the virtual or physical forces thrust upon you.  Whether it is the economic well being of the U.S. or the privacy laws in Europe.  The shock wave of a VBIED or insider threat.  Your organization could reach an Operational Risk crisis state, if you have not embraced the architecture of the "Starfish Community".  Learn from the best on how to withstand the test of time and and all that humanity has in store for us.  And to all of those who are on the front lines of crisis everyday.  God Speed.  You know who you are.

operational risk