One of the most difficult things for a community bank to do is to balance the efficiency we need from IT - with the security IT requires. Efficiency and security have an inverse relationship to one another. You can have high efficiency or high security, but not both. It's like an old scale or a children's seesaw. As security controls of a system are increased, the efficiency gained from the system decreases - and vice versa. For example, I can be really secure by unplugging my Internet connection from the wall, but it's not very practical and certainly wouldn't be very efficient.
Community banks tend to favor efficiency over security. Why is that?
Cost limitations. This is the first and obvious reason. Community banks are fighting a constant battle to remain competitive. Implementing security in systems adds costs - there is no way around it. The information systems deployed must yield efficiencies to justify their expense. More security equals more cost which equals less efficiency. Sacrificing on security to get to market faster or improve operational efficiency are common trade-offs seen in community banking.
Risk. It's not always a conscious decision for a bank to improve efficiency by sacrificing security. Sometimes there's a lack of understanding of the risks associated with the systems we deploy. By not understanding the risks we tend to underestimate the required security needs. This is a very common situation in community banking and has its roots in the fact that many community banks are highly reliant on outsourced systems. That is not a bad thing by itself. The problem arises because many banks lack the in house expertise to properly evaluate the vendor and they don't fully understand their own obligations as specified in the SAS 70. There is a general misunderstanding that the act of contracting with a vendor somehow alleviates a Bank of the responsibility of monitoring and controlling the data associated with the outsourced systems.
Personnel limitations. The many-hats syndrome runs rampant in smaller community banks. Consider a small de novo bank - the BSA officer is the IT officer - she's also the office manager, she deals with HR related issues, she waters the plants, she shovels the snow in the winter...I'm exaggerating (am I?), but the point is that some Banks, even those that possess the in house expertise to assess security needs, lack the man power to do it effectively.
Regulatory emphasis. The current regulatory environment stresses controls as they relate to policy and procedures. The sad reality is that satisfactory regulatory or internal control audits have a very low correlation to the overall security profile of the Bank. Don't get me wrong; a satisfactory control environment says very positive things about an organization's dedication to protecting non-public data and its own business continuity planning. However, we must be careful to consider the highly technical risks associated with modern information systems. Those dual controls and segregation of duties work marvelously in preventing internal fraud, but they potentially do very little to prevent a compromised laptop from opening a tunnel that can be used by an attacker to siphon data out of the bank. The results of audits - no matter how good the results are - cannot be used on their own when assessing the security environment before deploying an information system.
It's common for banks to consciously or unconsciously underestimate security needs. What we really need to do is to find the balance between security and efficiency. How do we do it? Given the biases described above, how to we maximize efficiency while also adequately considering the security needs of the information systems we deploy?
One way to find the balance is in the organizational structure. Let's take a look at a typical organizational structure as it relates to IT:
I'm using these "C" level titles to illustrate my point. You may call these people by different titles in your bank. However, I think "C" titles are easy to understand so I'll start here to make my point and then relate it back to community banking.
The thing to understand here is that in general, the CIO is the person who cares about efficiency and the CISO is the person who cares about security. They have competing goals. Remember the seesaw analogy from above; you can have one or the other but you can't have both. In a typical vertical organizational structure, efficiency tends to win out over security. The decision maker, the CEO in my example, will make her decision based on the input from her direct report, the efficiency biased CIO.
Lets see how a more modern organizational structure better incorporates security into the CEO's decision-making process:
Here, the competing forces of efficiency and security are on the same horizontal plane of the organizational chart. They will be considered equally as the CIO and the CISO are both direct reports to the decision maker.
What about small banks that don't have the depth or breadth in the organization to support the structure described above? As I described when I discussed personnel limitations, there are banks where one person does everything. Unfortunately, that's just a growing pain that many small banks must overcome. If you work for such a bank, just remember that as the bank grows, you can think about creating positions and pushing responsibility down. Remember this structure when you are considering new positions.
It's important to understand that the "C" level titles I used are strictly for illustrative purposes. What matters is the organization structure should allow for decision makers to receive equal counsel from security conscious and efficiency conscious personnel. It does not matter how far up or how far down on the organization chart the decision will occur. A balanced structure will allow the decision maker to draw a conclusion that best considers all points from both the efficiency and security point of view. From a governance perspective, those in positions of oversight can gain comfort that the decision, no matter what it is, has been carefully contemplated and appropriately balances these competing forces.
Technology is not going away. On the contrary, expect it to be ever more prevalent in the things you do. Security, while sometimes relegated to an afterthought, will continue to grow in importance as more and more of our processes become reliant on technology. Considering security as an organizational responsibility will help to ensure that it is adequately considered in the decision-making processes.
Peter Viglucci, CISA, CRISC
Director of Information Technology
Peter Viglucci, Director of Information Technology, has over 17 years of experience in all aspects of Financial Industry IT