Entries Tagged "risks"

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On Cyber Warranties

Interesting article discussing cyber-warranties, and whether they are an effective way to transfer risk (as envisioned by Akerlof’s “market for lemons”) or a marketing trick.

The conclusion:

Warranties must transfer non-negligible amounts of liability to vendors in order to meaningfully overcome the market for lemons. Our preliminary analysis suggests the majority of cyber warranties cover the cost of repairing the device alone. Only cyber-incident warranties cover first-party costs from cyber-attacks — why all such warranties were offered by firms selling intangible products is an open question. Consumers should question whether warranties can function as a costly signal when narrow coverage means vendors accept little risk.

Worse still, buyers cannot compare across cyber-incident warranty contracts due to the diversity of obligations and exclusions. Ambiguous definitions of the buyer’s obligations and excluded events create uncertainty over what is covered. Moving toward standardized terms and conditions may help consumers, as has been pursued in cyber insurance, but this is in tension with innovation and product diversity.

[..]

Theoretical work suggests both the breadth of the warranty and the price of a product determine whether the warranty functions as a quality signal. Our analysis has not touched upon the price of these products. It could be that firms with ineffective products pass the cost of the warranty on to buyers via higher prices. Future studies could analyze warranties and price together to probe this issue.

In conclusion, cyber warranties — particularly cyber-product warranties — do not transfer enough risk to be a market fix as imagined in Woods. But this does not mean they are pure marketing tricks either. The most valuable feature of warranties is in preventing vendors from exaggerating what their products can do. Consumers who read the fine print can place greater trust in marketing claims so long as the functionality is covered by a cyber-incident warranty.

Posted on March 26, 2020 at 6:27 AMView Comments

Andy Ellis on Risk Assessment

Andy Ellis, the CSO of Akamai, gave a great talk about the psychology of risk at the Business of Software conference this year.

I’ve written about this before.

One quote of mine: “The problem is our brains are intuitively suited to the sorts of risk management decisions endemic to living in small family groups in the East African highlands in 100,000 BC, and not to living in the New York City of 2008.”

EDITED TO ADD (12/13): Epigenetics and the human brain.

Posted on December 6, 2019 at 6:55 AMView Comments

NSA on the Future of National Cybersecurity

Glenn Gerstell, the General Counsel of the NSA, wrote a long and interesting op-ed for the New York Times where he outlined a long list of cyber risks facing the US.

There are four key implications of this revolution that policymakers in the national security sector will need to address:

The first is that the unprecedented scale and pace of technological change will outstrip our ability to effectively adapt to it. Second, we will be in a world of ceaseless and pervasive cyberinsecurity and cyberconflict against nation-states, businesses and individuals. Third, the flood of data about human and machine activity will put such extraordinary economic and political power in the hands of the private sector that it will transform the fundamental relationship, at least in the Western world, between government and the private sector. Finally, and perhaps most ominously, the digital revolution has the potential for a pernicious effect on the very legitimacy and thus stability of our governmental and societal structures.

He then goes on to explain these four implications. It’s all interesting, and it’s the sort of stuff you don’t generally hear from the NSA. He talks about technological changes causing social changes, and the need for people who understand that. (Hooray for public-interest technologists.) He talks about national security infrastructure in private hands, at least in the US. He talks about a massive geopolitical restructuring — a fundamental change in the relationship between private tech corporations and government. He talks about recalibrating the Fourth Amendment (of course).

The essay is more about the problems than the solutions, but there is a bit at the end:

The first imperative is that our national security agencies must quickly accept this forthcoming reality and embrace the need for significant changes to address these challenges. This will have to be done in short order, since the digital revolution’s pace will soon outstrip our ability to deal with it, and it will have to be done at a time when our national security agencies are confronted with complex new geopolitical threats.

Much of what needs to be done is easy to see — developing the requisite new technologies and attracting and retaining the expertise needed for that forthcoming reality. What is difficult is executing the solution to those challenges, most notably including whether our nation has the resources and political will to effect that solution. The roughly $60 billion our nation spends annually on the intelligence community might have to be significantly increased during a time of intense competition over the federal budget. Even if the amount is indeed so increased, spending additional vast sums to meet the challenges in an effective way will be a daunting undertaking. Fortunately, the same digital revolution that presents these novel challenges also sometimes provides the new tools (A.I., for example) to deal with them.

The second imperative is we must adapt to the unavoidable conclusion that the fundamental relationship between government and the private sector will be greatly altered. The national security agencies must have a vital role in reshaping that balance if they are to succeed in their mission to protect our democracy and keep our citizens safe. While there will be good reasons to increase the resources devoted to the intelligence community, other factors will suggest that an increasing portion of the mission should be handled by the private sector. In short, addressing the challenges will not necessarily mean that the national security sector will become massively large, with the associated risks of inefficiency, insufficient coordination and excessively intrusive surveillance and data retention.

A smarter approach would be to recognize that as the capabilities of the private sector increase, the scope of activities of the national security agencies could become significantly more focused, undertaking only those activities in which government either has a recognized advantage or must be the only actor. A greater burden would then be borne by the private sector.

It’s an extraordinary essay, less for its contents and more for the speaker. This is not the sort of thing the NSA publishes. The NSA doesn’t opine on broad technological trends and their social implications. It doesn’t publicly try to predict the future. It doesn’t philosophize for 6000 unclassified words. And, given how hard it would be to get something like this approved for public release, I am left to wonder what the purpose of the essay is. Is the NSA trying to lay the groundwork for some policy initiative ? Some legislation? A budget request? What?

Charlie Warzel has a snarky response. His conclusion about the purpose:

He argues that the piece “is not in the spirit of forecasting doom, but rather to sound an alarm.” Translated: Congress, wake up. Pay attention. We’ve seen the future and it is a sweaty, pulsing cyber night terror. So please give us money (the word “money” doesn’t appear in the text, but the word “resources” appears eight times and “investment” shows up 11 times).

Susan Landau has a more considered response, which is well worth reading. She calls the essay a proposal for a moonshot (which is another way of saying “they want money”). And she has some important pushbacks on the specifics.

I don’t expect the general counsel and I will agree on what the answers to these questions should be. But I strongly concur on the importance of the questions and that the United States does not have time to waste in responding to them. And I thank him for raising these issues in so public a way.

I agree with Landau.

Slashdot thread.

Posted on October 1, 2019 at 6:54 AMView Comments

On Cybersecurity Insurance

Good paper on cybersecurity insurance: both the history and the promise for the future. From the conclusion:

Policy makers have long held high hopes for cyber insurance as a tool for improving security. Unfortunately, the available evidence so far should give policymakers pause. Cyber insurance appears to be a weak form of governance at present. Insurers writing cyber insurance focus more on organisational procedures than technical controls, rarely include basic security procedures in contracts, and offer discounts that only offer a marginal incentive to invest in security. However, the cost of external response services is covered, which suggests insurers believe ex-post responses to be more effective than ex-ante mitigation. (Alternatively, they can more easily translate the costs associated with ex-post responses into manageable claims.)

The private governance role of cyber insurance is limited by market dynamics. Competitive pressures drive a race-to-the-bottom in risk assessment standards and prevent insurers including security procedures in contracts. Policy interventions, such as minimum risk assessment standards, could solve this collective action problem. Policy-holders and brokers could also drive this change by looking to insurers who conduct rigorous assessments. Doing otherwise ensures adverse selection and moral hazard will increase costs for firms with responsible security postures. Moving toward standardised risk assessment via proposal forms or external scans supports the actuarial base in the long-term. But there is a danger policyholders will succumb to Goodhart’s law by internalising these metrics and optimising the metric rather than minimising risk. This is particularly likely given these assessments are constructed by private actors with their own incentives. Search-light effects may drive the scores towards being based on what can be measured, not what is important.

EDITED TO ADD (9/11): Boing Boing post.

Posted on September 10, 2019 at 6:23 AMView Comments

Risks of Password Managers

Stuart Schechter writes about the security risks of using a password manager. It’s a good piece, and nicely discusses the trade-offs around password managers: which one to choose, which passwords to store in it, and so on.

My own Password Safe is mentioned. My particular choices about security and risk is to only store passwords on my computer — not on my phone — and not to put anything in the cloud. In my way of thinking, that reduces the risks of a password manager considerably. Yes, there are losses in convenience.

Posted on June 19, 2019 at 1:26 PMView Comments

Excellent Analysis of the Boeing 737 Max Software Problems

This is the best analysis of the software causes of the Boeing 737 MAX disasters that I have read.

Technically this is safety and not security; there was no attacker. But the fields are closely related and there are a lot of lessons for IoT security — and the security of complex socio-technical systems in general — in here.

EDITED TO ADD (4/30): A rebuttal of sorts.

EDITED TO ADD (5/13): The comments to this blog post are of particularly high quality, and I recommend them to anyone interested in the topic.

Posted on April 22, 2019 at 8:45 AMView Comments

Nicholas Weaver on Cryptocurrencies

This is well-worth reading (non-paywalled version). Here’s the opening:

Cryptocurrencies, although a seemingly interesting idea, are simply not fit for purpose. They do not work as currencies, they are grossly inefficient, and they are not meaningfully distributed in terms of trust. Risks involving cryptocurrencies occur in four major areas: technical risks to participants, economic risks to participants, systemic risks to the cryptocurrency ecosystem, and societal risks.

I haven’t written much about cryptocurrencies, but I share Weaver’s skepticism.

EDITED TO ADD (8/2): Paul Krugman on cryptocurrencies.

Posted on July 24, 2018 at 6:29 AMView Comments

Sidebar photo of Bruce Schneier by Joe MacInnis.