Complexity and Resilience in an Information Centric World

Complexity and Resilience

How do organisations develop resilience in the complex environment that is the 21st century information centric world?

The lifeblood of the modern organisation is information. Every organisation, from small business to government department depends on information being passed to the right place at the right time.

Organisations and society are becoming more complex, but that doesn’t mean that they are more resilient. Complexity and resilience are more often enemies than friends!

Complex Organisations in the 21st Century

The opportunities posed by increased information flows are enormous,

Information is being gathered, stored and manipulated in larger quantities at higher speeds and analysed in more detail by organisations and society. They aim to to drive greater efficiencies and provide new and improved services. The information revolution allows organisations to become larger and more complex and to develop more complex systems and processes to support their organisational models.

1 billion Carbanak hackThe threats are also enormous

But the opportunity to become larger and therefore more complex often comes with a downside for organisational resilience and longevity. Complex systems are prone to catastrophic failure as small problems cascade and become enormous.

Information is damaging organisations when it is leaked or lost. Organisations are struggling to cope and governments are struggling to keep their own data secure. In other cases, too little information being passed to the places that need them. The organisational strategy is a delicate balancing act!

Survival and resilience

Why do organisations fail. Organisations are by definition self organising systems. However, when a self organising system loses the capacity to self organise – it is dead. Broadly, the story is similar for each one. The organisation was unable to adapt to the business environment before it ran out of resources. The end is often brought about by an acute event, but in many ways such an event is really just the ‘final straw that breaks the camel’s back’ .

The Australian Government’s resilience strategy shows Australia’s leadership in resilience thinking. It identifies four options for an organisation

  • Decline;
  • Survive;
  • Bounce Back;
  • Bounce Forward. 

However, in practice I think this may be too gentle. Taken over the longer term, organisations either live or die. There is no middle ground. Organisations that survive crises are able to do so for two reasons

  1. They have the resources, capital personnel,  leadership etc to manage themselves out of a crisis once it hits emerging weaker but alive; or
  2. They are prepared to adapt if a crisis arises and have developed a broad set of principles which will work with minimal change in most eventualities.

It is this second group which are truly resilient and survive long term. They still suffer from crises, but emerge stronger over the long term as they adapt to their new environment.

ICT is a two edged sword in the quest for resilience

As organisations become more complex, they are relying more and more on information technology and systems to help them understand themselves and their environment. Organisations can become more efficient. However, most organisations do not have control of their ICT infrastructure and it is increasingly difficult to understand how information flows within an organisation. It is also important to realise that efficiency and resilience are not the same. In fact, some efficiency practices may increase organisational fragility

Are the tools that organisations are using to try to understand their own organisations becoming in themselves part of the problem?

Possibly, though it is more the issue of complexity. There are a number of other factors

Speed of change

The speed that societies are changing is accelerating as technology advances. This means that organisations need to be able to adapt faster in order to keep up.

Interdependence

Organisations are more interdependent than ever. It is a trend that will continue to increase. In fact, countries are also more interdependent than ever. During the Cold war, sanctions didn’t affect Russia nearly as much as they do now. This is positive from a global political perspective, no country can survive without others, not even the USA or China. It is even forcing Iran to make compromises. In some ways this trade interdependency may be an alternate for the Mutually Assured Destruction (MAD) that nuclear weapons threatened to the USA and Russia during the cold war.

However, interdependency inherently leads to complexity and that is not a characteristic of resilience. Most organisations are increasingly dependent on long supply chains for materials and services, meaning that failure at one end of the supply chain can be expensive or time-consuming. On the other hand, international supply chains are extremely reliable … until they aren’t.

Everyone’s your neighbour

Because everyone is connected. Organisations can get closer to their customers and suppliers via the Internet. At the same time criminals and competitors are able to get closer to their target organisations as well.

Some organisations have been struggling. Sony corporation is one of the most prominent, but it is by no means the only one.

sony hacked again
From http://blogs.umb.edu/itnews/2015/01/06/the-sony-hack/

 

 

 

 

 

Affecting organisational longevity?

The evidence seems to be showing that organisational longevity is being reduced by a number of factors. Not least the ones I’ve written about above.

This graph produced by Innosight plots the average company lifespan on the USA Standard and Poor’s company index from 1958 to 2012 and extrapolates this out to 2030.

average company lifespan on SP500

US corporations in the S&P500 in 1958 remained in the index for an average of 61 years. By 1980, the average tenure of a similar organisation was 25 years. By 2011, that average had been cut to 18 years. In other words, the churn rate of companies has been accelerating over the last Century. On average, one S&P500 company is dropping off the index every two weeks! In total, 23 companies were removed from the S&P in 2011, either due to

  • declines in market value – eg Radio Shack’s stock no longer qualified in June 2011.
  • acquisition – eg National Semiconductor was bought by Texas Instruments in September 2011.

At the current churn rate, 75% of the S&P organisations that were there in 2011, will no longer be on the index in 2027.

The flaws in simple risk

Risk assessment loses specificity with complexity. That is, the larger, more complex the organisation, the less accurate the risk assessment can be. This is also true when we think about societal risks.

The sum of overall risk that an organisation has, is greater than its parts.

It is hubris to think that an organisation or society can know all its risks. There will be risks faced by an organisation that are either unknown, unquantifiable or both. Moreover:

  • The organisational environment continues to change rapidly. This means that risk owners ie company boards have less time for consideration and risk assessments need to adapt to the changing circumstances.
  • Perception bias is a significant problem. Gardner talks about bounded rationality in risk – suffice to say we downplay risk of things that we think we understand. Taleb talked in the Black Swan that people focus on the simple things they could understand.

In a complex organisation, people tend to focus on problems in parts of the organisation, rather than the organisation as a whole.

Different risk events

We see these issues playing out in different events that affect organisations, whether it is a

acute failure

such as the
– Deepwater Horizon Oil Spill that may yet cause BP’s demise, but seems to have been caused by a failure in the relationship with its drilling contractor, Haliburton

Target(USA) hack which saw tens of millions of credit cards stolen due to weaknesses in service provider security.

Or chronic failure

such as Kodak’s failure over decades to manage the transition to digital imaging, despite the fact that it’s own researchers had discovered the technologies in the 1970s.

A resilient approach

Resilience is the capacity for complex systems to survive, adapt, evolve and grow in the face of turbulent change. Resilient enterprises are risk intelligent, flexible and agile
(Adapted from www.compete.org)

A ‘Resilience approach’ does ignore risk assessment and management, it builds upon it to address weaknesses in terms of dealing with unknowns (known and unknown) and perception bias. Particularly those ‘high consequence low likelihood events’ – the black swans, that sit untreated at the bottom of any risk assessment, or fall off the bottom because nobody wants to think about them, or are not acute but in the chronic creeping ‘must deal with it sometime’ category. Worse still, they may be completely unknown.

Resilience approach allows enterprises to put in place mechanisms ‘deal with the gaps’ in the risk approach – those things that have been missed or underestimated.

As the world becomes more complex and organisations become more complex themselves. A resilience approach is the only option.

The resilient organisation

Develops organisational adaptability. A culture of making things work in spite of adversity. This creates a capacity to deal with adverse events – adaptability to deal with rapid onset of shocks. They also analyse to see whether improvements can be made out of any adversity.

Organisations look for mitigations that are able to treat a range of threats, because these techniques are likely to be more adaptable than highly specialised methodologies.

Testing – Organisations test systems to breaking point and beyond in the most realistic scenarios possible.

Resilience from Chaos (Monkey)

An example of testing to breaking point in a real environment is the ‘chaos monkey’ tool developed by Netflix. This application/agent randomly turns off parts of the Netflix production environment simulating the failure of different parts of their infrastructure. It is set to only do this during working hours when engineers are about to respond. In this way, the system is tested in the best manner possible short of the real thing.

Chaos Monkey Released Into the Wild

 

 

 

 

 

This post is based on a presentation I gave in Singapore. Here are my slides

This slideshow requires JavaScript.

 

Resilience Outcomes would like to acknowledge the assistance of Emirates Airlines for getting Alex to and from Singapore in great comfort.

The state of ICT Security

State of ICT Security – Attackers take over SCADA controlled steelworks furnace and caused massive damage

The threat to online assets from attackers remains critical according to a report just released on the State of ICT security by the German Government.

Cloud Computing, mobile systems and big data are providing enormous economic prosperity, but have on the other hand opened up large attack surface for organisations.

The German Federal Department for Safety in Information Technology  has just released its annual “State of ICT Security” report for 2014. The German Government’s version of the bit of NSA that helps government and businesses protect themselves online is called the BSI. They are highly skilled and well respected.

As is usual for a government report it is turgid. However there is some really interesting stuff hidden in the morass.  I’ve picked out some of the gems and translated them here.

Complexity is killing information security

The report emphasises that complexity is exposing organisations to attack. Of particular concern is that Internet of Things (Systeme und Dinge) is now moving from the stage where it is mostly about observation of the environment to changing the environment.

Importantly, particularly in light of the Snowden expose, this report is not coming from either the US or UK and so gives a secondary source to some of what those governments are saying.

There are over 250 million individual varieties of Windows malware around now

Other observations which confirm what you may have seen in other places

  1. Spam continues to grow exponentially
  2. Malware is still growing and at least a million devices are being infected annually in Germany. The BSI estimates that the number of different types of Windows malware is at a staggering 250 million. This is up from around 180 million in 2013!
  3. The number of infected sites delivering ‘driveby exploits’ is growing substantially.
  4. Botnets are being used to steal identity information. There are more than one million devices under the control of botnets in Germany.
  5. Phishing continues to yield results for cyber criminals

Advanced Persistent Threats – an increasing threat for government and industry

Germany is constantly being cyber-attacked by foreign intelligence services. The BSI has installed improved sensor technology in the government’s networks following the revelations that came from Edward Snowden in 2013/14. There are a number of methodologies which the BSI has identified. This tallies quite well with some of the things Bruce Schneier has written recently about these issues

  • Strategic enlightenment – whereby the intelligence service identifies connections between various users to gain an intelligence picture
  • Attacks on key individuals – attacking system administrators for key systems to gain access.
  • Influencing Standards – By weakening standards, , the allegation has been that NSA individuals have influenced the NIST standards development process.
  • Manipulation of IT hardware and software – Well they would do that wouldn’t they.

The BSI notes that trusted insiders are being used to enable some attacks by intelligence services, criminals and activists.

This table is reasonably easy to read, even if you don’t understand German. It shows the prognosis (prognose) for threats over the coming year.

Schwachstellen = vulnerabilities
Schadprogramme = malware
Identitaetsdiebstahl = ID theft

Cyber threat prognosis

Casestudies

The report goes through a number of cases where the BSI was called to assist businesses. Here are two that are of particular concern.

Steelworks compromise causes massive damage to furnace.

One of the most concerning was a targeted APT attack on a German steelworks which ended in the attackers gaining access to the business systems and through them to the production network (including SCADA). The effect was that the attackers gained control of a steel furnace and this caused massive damages to the plant.

Dragonfly attacks a dozen companies

The Dragonfly hacker group attacked a number of companies’ SCADA systems and installed the malware ‘Havex’. This was used to gather information about the systems. No damage was done, because the compromise was detected and removed before the hackers had completed the observation and intelligence gathering phase.

Conclusion

It’s worth remembering that there are many other countries dealing with the cyber threat around the world. Germany has always been one of the leading non-UK CAN, US, AUS, NZ countries and it is interesting to see how they view the landscape.

You can download the original Document from the BSI – Bundesamt fuer Sicherheit in der Informationstechnik – in German “Die Lage der IT-Sicherheit in Deutschland 2014”  https://www.bsi.bund.de/SharedDocs/Downloads/DE/BSI/Publikationen/Lageberichte/Lagebericht2014.pdf?__blob=publicationFile

Privacy changes in Australia

Privacy strengthened in Australia

The Australian Privacy Principles come into force on 12 March. The APPs extend coverage of privacy laws to most business with turnover of $3 million or more.

Fines of $1.7 million are possible for breaches.

Privacy - Sony executives bow in apology post Playstation breach in 2011
Execs bow post Playstation breach in 2011

Australian Privacy Principles

The Privacy Act now includes a set of 13 new harmonised privacy principles. The APPs regulate personal information handling by the federal government. In addition, the law significantly expands the number of private sector organisations covered.

The new Australian Privacy Principles (APPs) replace both the Information Privacy Principles (IPPs) that applied to Australian Government agencies and the National Privacy Principles (NPPs) that applied to some private sector organisations. The changes do not generally replace existing state of territory privacy legislation (eg Victoria & ACT) which will probably cause some confusion at the edges

A number of the APPs are quite different from the existing principles, including

  • APP 7  -on the use and disclosure of personal information for the purpose of direct marketing, and
  • APP 8 – on cross-border disclosure of personal information.

The OAIC gets teeth

The Privacy Act now includes greater powers for the OAIC which include:

  • conducting assessments of privacy compliance for both Australian Government agencies and some private sector organisations.
  • accepting enforceable undertakings
  • seeking civil penalties in the case of serious or repeated breaches of privacy

In some ways Australia is just catching up with Europe, Canada and USA, but its worth noting that breaches can mean organisations get fines of up to $1.7 million. It is probably an understatement to say that this could  have a serious impact on company finances as well as reputations.

One thing that is very good about these changes is that there is better alignment with good information security practice. We hope that these changes may help some organisations improve the state of their information security as they become privacy compliant.

For more information on the APPs and the OAIC’s APP guidelines, visit this link –  Australian Privacy Principles.

Credit Reporting is changing too

The Privacy Act now includes new credit reporting provisions including:

  • introduction of more comprehensive credit reporting, a simplified and enhanced correction and complaints process
  • introduction of civil penalties for breaches of certain credit reporting provisions
  • requiring credit providers to have an external dispute resolution scheme if they want to participate in the credit reporting scheme. The scheme must be recognised under the Privacy Act.

For a more detailed explanation of the credit changes see: Privacy business resource 3: Credit reporting — what has changed

A new mandatory credit reporting privacy code (CR code), created by the Australian Retail Credit Association ( OAIC’s Codes Register ) also starts on 12 March 2014.

We can help

We are helping government agencies and businesses assess the privacy impact of their activities in light of these legal changes. In particular, we have recently worked with the health and finance sectors in Queensland, the ACT and Victoria.
Please  contact us at Resilience Outcomes for assistance.

Cyber resilience update

Cyber resilience

One of the most important aspects of resilience in the information age is understanding the environment in which we exist. Resilience is adaptability in a changing environment, the more we understand that change, the less painful it is. Here are a few  current issues that might help your cyber resilience.

Alert, but not alarmed
Alert, but not alarmed! – Photo AWebling

Cyber Security Summit – Stanford November 2013

In the shadow of the Snowden revelations about the US and UK, security experts and leaders from more than 40 countries have been at Stanford University in California, USA for a gathering on cyber security.

If you have a sense of irony, you may have listened to the debate on Syria and comparing that to the NSA / Snowden / Internet debate.
– US Secretary of State John Kerry has recently made broad and I think reasonable statements saying that

President Assad had lost the moral authority to rule Syria.

– However that same test can be made against the USA.

 The USA has lost its moral authority to control the Internet

through the activities of the NSA and other government agencies. The full text of Secretary Kerry’s Syria speech can be found here via usembassy.gov. Of course although the USA is the biggest culprit here, the UK, Canada, Australia and NZ have all been shown up.

China was prominently represented at the conference. The Minister of State Council Information spoke about China’s problems. In his speech Cal Mingzhao said that in the first six months of 2013, 20,000  websites were hacked and 8 million servers compromised. According to Minister Mingzhao this indicated a rise of 14% year on year.

China has used the conference to repeat its call for global efforts in building a robust legal system, and strengthening international cooperation. Although I am somewhat cautious about their motives. I believe that the Chinese are on the right track with this view. I have previously made my views clear here in this post about why the world needs the cyber equivalent of an international law of the sea.

It is good to read  that Scott Charney ex US Department of Justice and current Microsoft VP on privacy and security is publicly calling for the US to show more information about what it collects and what happens to that data. Few sensible people disagree that the US and its allies should use maximum efforts against terrorists.

The US has lost support because it has strayed away from its stated goal of combatting terrorists and towards industrial espionage and employed tactics which compromise the majority in the pursuit of this goal such as the backdooring of encryption algorithms.

 

In other news

The Canadian Office of the Superintendent of Financial Institutions has released a ‘Cyber-Security Self Assessment Guidance for Canadian financial institutions, but which provides some good advice to any organisation looking for a template to help them.

Unlike the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) Preliminary Cybersecurity Framework, which was released for public comment on October 22, 2013, the Guidance does not prescribe a common language or mechanism for financial institutions to control and manage cyber security risk nor does it expressly build on existing standards, guidance and best practices for managing cyber security risk. In fact, in the Guidance, OSFI indicates that it “does not currently plan to establish specific guidance for the control and management of cyber risk.”

Rather, the Guidance sets forth an 11-page self-assessment template that sets out “desirable properties and characteristics of cyber security practices that could be considered by a FRFI when assessing the adequacy of its cyber security framework and when planning enhancements to its framework.” Of course if you’re a Canadian bank trying to do business in the US..

www.offi-bsif.gc.ca

Lastly, in the ‘this might be a little insane’ category

A US (Missouri) based cyber crime prevention network is advising parents to teach their children about cyber-security from the time they are toddlers.

www.kshb.com

I can just imagine it – “Our little Johnny fixes our firewall whilst we sit him on the potty…..” But seriously, of course keeping kids safe online is important in the same way as keeping them safe in the real world, but maybe they should learn to read first.

 

 

 

cyber identity security

Cyber Identity theft service sold personal information on US citizens by compromising multinational consumer and business data aggregators

An identity theft service that sells Social Security numbers, birth records, credit and background reports on millions of US residents has allegedly infiltrated computers at some of America’s largest consumer and business data aggregators, including Dun & Bradstreet according to Krebs on Security. 

If you’re Australian or a resident of other countries where these guys operate, you had better hope that these companies didn’t leak information between their subsidiaries and the main office – because you know that would never ever (cross fingers) happen !!

This looks like a solid investigation by the guys/gals at Krebs. The hackers at the back of this identity theft service didn’t exfiltrate data from their targets wholesale, they just compromised the targets and allowed their customers to directly query information and charged them between 50c and $2.50 US for personal records and up to $15 for credit checks – via Bitcoin or Webmoney of course!

Compromised systems accessed through the criminal service seem to include

Importantly, the compromise was probably targeted as much on gaining information about companies to take out fraudulent loans  on them according to a Gartner analyst. If a criminal can masquerade as a large company, they can take out a much larger loan on their behalf than they could on all but the richest people.

This may take a little while to play out, but it is likely to have an impact on legislative requirements for information security by data aggregator firms. By their very nature, they hold aggregated data from millions of customers. Each piece of data requires protections, together the data becomes far more valuable and therefore a greater target for cyber criminals and foreign espionage. How we deal with aggregation remains one of the keys to the risk based handling of big data.