Author Archives: Emily Holbrook

About Emily Holbrook

Emily Holbrook is a former editor of the Risk Management Monitor and Risk Management magazine. You can read more of her writing at EmilyHolbrook.com.
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The Financial Industry: Cyber Security Laggards

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We have seen it all around us lately — the financial industry’s inability to guard against major data breaches.

Just last month, Citibank, the third largest bank holding company in the U.
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S., experienced a data breach when hackers obtained information on more than 360,000 credit card accounts of North American customers. And just last week, Morgan Stanley announced that data of 34,000 clients was lost or stolen.

According to two letters sent to clients, and obtained by Credit.com, the information [of Morgan Stanley customers] includes clients’ names, addresses, account and tax identification numbers, the income earned on the investments in 2010, and—for some clients—Social Security numbers. The data was saved on two CD-ROMs that were protected by passwords, according to the letters, but the CDs were not encrypted. The company mailed the CDs containing information about investors in tax-exempt funds and bonds to the New York State Department of Taxation and Finance. It appears the package was intact when it reached the department, but by the time it arrived on the desk of its intended recipient the CDs were missing, Wiggins said.

The Citibank breach has been referred to as the largest direct attack on a major U.S. financial institution. Since the attack, the Federal Deposit Insurance Corporation has been preparing new measures on data security, which proves to be much needed.

The financial industry has become somewhat of a laggard when it comes to data security initiatives and the risks of data theft are rising.

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According to a June report by IDC Financial Insights, “As financial institutions expose more capabilities to their clients through their digital channels, they must introduce more sophisticated mitigation and control techniques at a similar pace.” The report points to mobile applications as the next new target of cyberattacks.

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(Check out the next issue of Risk Management for more on this topic — online August 1st).

To approach these inevitable risks, there needs to be a change in the role and focus of enterprise risk functions, according to the IDC Financial Insights report. “Cyber risk is an enterprise risk issue, not an IT issue, and as such needs to be addressed from a strategic, cross line-of-business, and economic perspective. The CFO, not the CIO or CTO, is the most logical person to set strategies and lead the efforts required to address the cyber risk challenge.”

The following is a chart that shows that cyber risk is an operational risk component, according to IDC Financial Insights.


Do you agree with these findings? If not, how do you think the management of cyber risks fits within the realm of business’s risk management plan?

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Tips for Good Corporate Governance

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Maureen DeCicco of WithumSmith+Brown.

The following is a guest post for The Monitor written by Maureen DeCicco, CPA, partner in the New Brunswick office of the consulting and accounting firm WithumSmith+Brown. She has 18 years of public accounting experience and five years in private industry accounting and internal audit.

Whether your company is large or small, good corporate governance can be critical in establishing a positive organizational culture. Good corporate governance is evident by responsibility, accountability, consistency, fairness and transparency. It can financially benefit an organization, leading to higher profit margins, greater dividend yields and larger stock repurchases. Setting corporate governance procedures in place also enhances the organization’s reputation and builds integrity, making it more attractive to customers and investors.

The following are some simple tips for developing good corporate governance:

  • Document governance principles. When documenting a set of corporate governance principles, the roles and functions of the Board and its committees should be established.
  • Document committee charters. All committee charters should outline a committee’s authority as to decision making and their roles and responsibilities. This creates accountability.
  • Within charters, a well defined plan for dealing with governance issues and resolution of issues should be communicated.
  • An audit committee should monitor public accounting firm audit work, their independence, fees and level of services and scope of both audit and non audit services.
  • A compensation committee should address remuneration levels for executive officers, fringe benefit and incentive plans.
  • The corporate governance committee should make recommendations to the board for new members, and monitor the board performance.
  • The corporate governance committee should monitor committee and executive management performance.
  • Have independent members on the audit committee, including a financial expert.
  • Minutes should be taken at all meetings and committees should report formally to the board on a regular basis.
  • Employee code of conduct policy should be documented and provided to employees.
  • Board code of conduct policy for non-employee directors should be documented and provided to board members.
  • Formalize employee performance evaluations.
  • Employee complaint procedures should be made available to all employees. Employees should be made aware of non-retaliation policy and that they can be anonymous.

Following some of the basics of corporate governance demonstrates a good tone from the top, while creating transparency across all levels and in the firm’s operations. In light of the recent challenging economic times and the financial meltdown, exposing fraudulent activity is more important than ever. Good corporate governance will help to expose and correct any issues before becoming major problems.

Colonel Jack Jacobs: Leadership Learned Through War

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Colonel Jack Jacobs has one of the most impressive resumes ever seen.

Col. Jack Jacobs believes that "at certain levels you have to be somewhat of a Maoist."

He is a Medal of Honor recipient, he holds the McDermott Chair of Humanities and Public Affairs at the U.S. Military Academy, he was founder and COO of AutoFinance Group and managing director of Bankers Trust, he is currently a principal of The Fitzroy Group (a London-based real-estate development firm), he serves on several charitable boards, he is the vice chairman of the Congressional Medal of Honor Foundation, he is the author of the award-winning memoir If Not Now, When? and he is an on-camera analyst for NBC.

Just reading that can make anyone feel a bit inadequate.

But Jacobs did not accept the invitation to speak at the 15th Annual Wharton Leadership Conference so he could brag about his accomplishments. Far from it. In fact, most of his bio I learned from the conference material, not from his speech.

Jacobs was there to speak about how he learned leadership from his experience in Vietnam. Simply put, he believes in four “principles of war.” Those being:

  1. The objective: “You must tell a soldier what the mission is before he’ll do what you say.”
  2. Unity of command: “Don’t have one person reporting to two people — respect the chain of command.”
  3. The truth: “Honesty is very important when running any organization.”
  4. You’ll make mistakes, but do nothing that is immoral or illegal: “Anyone who says they don’t know what’s immoral or illegal is a liar!”

Jacobs is Brooklyn-born straight-shooter whose accomplishments in life have more than proved he knows how to be a leader in any given situation, whether on the field in combat or in the office with the board. His speech made those in the audience laugh, cry and feel uplifted and motivated — all at once. Proving, once again, that Col. Jack Jacobs has an overwhelming command over people. He is a natural leader.

Check back over the next couple of days for more posts relating to the amazing speakers I was fortunate enough to hear at the Wharton Leadership Conference, including Jane Golden, executive director of the City of Philadelphia Mural Arts Program and James Quigley, author of As One.

Ken Feinberg on the “Two Types of Risk”

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Ken Feinberg, the "claims czar," says there are two types of risk that challenge leadership.

Ken Feinberg just might have the most difficult job out there. He has worked as mediator/administrator in the wake of tragedies and natural disasters such as 9/11, the shootings at Virginia Tech, Hurricane Katrina and the Holocaust slave labor litigation. He is currently serving as the administrator for the $20 billion BP oil spill claims fund.

It is Feinberg’s job to sit with victim’s families and to sift through claims from each disaster in order to figure out how much their personal and financial loss is worth. It is a job few envy.

But through his years of experience with mediation and dispute resolution, he has learned that there are two types of risk that challenge leadership:

  1. Risk as defined by the assignment that you’ve undertaken
  2. External risk — or in other words, the external pressures on you or the stress level factored into how you perform

“You have to define risk with each situation [you’re presented],” he said. “When I pay a fisherman, I find a payment that ends their concern, but what is the likely risk that the Gulf is safe? Have I factored into that reward a good understanding of future risk to fishing in the Gulf? Inherent is the notion of a substantive definition of risk.”

In relating that knowledge to his recent tasks as administrator of the 9/11 victim’s compensation fund and the BP oil spill claims fund, he noted:

“When administering the 9/11 fund, it turned out that my evaluation of risk was poorly done — I underestimated the support of the victim’s families and the public in general. I evaluated correctly with the BP case — I’m a human pinata.”

More so than knowing and incorporating the two types of risk that challenge leadership, those in charge should also incorporate certain characteristics. The following are those Feinberg truly believes in and which he has incorporated during his challenging assignments:

  • Convey a sense of certainty
  • Be transparent — “The more sunlight I let into the room, the easier it is,” he said.
  • Consistency — no bias or favoritism
  • Flexibility — keep an open mind
  • Use sound judgement — “Give the people impacted by your decisions a say.”
  • Delegate to good people — “Staff is the key.”

Feinberg’s job is not easy, but it has taught him a lifetime worth of lessons regarding leadership, risk and fairness.

Check back over the next several days for more posts relating to the amazing speakers I was fortunate enough to hear at the Wharton Leadership Conference, including Jane Golden, executive director of the City of Philadelphia Mural Arts Program; James Quigley, author of As One; and senior partner at Deloitte; and Colonel Jack Jacobs, NBC analyst and recipient of the Medal of Honor.