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Cyber’s Human Side

People are often tired, distracted and overworked. They are bound to make mistakes, inadvertently overlook policies and procedures and have quick lapses in judgement—forgetting hours and hours of training.

Human error is a significant problem when it comes to managing cyber exposures. Most cyber surveys point to people as the root cause of a breach.

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The Information Commissioner’s Office (ICO) compiles statistics about the main causes of reported data security incidents. In its first 2018 quarterly report, four of the five top causes reported to them involved human errors:

  1. Loss or theft of paperwork – 91 incidents
  2. Data posted or faxed to incorrect recipient – 90 incidents
  3. Data sent by email to incorrect recipient – 33 incidents
  4. Insecure web page (including hacking) – 21 incidents
  5. Loss or theft of unencrypted device – 28 incidents

James Bone, author of the “Cognitive Hack: The New Battleground in Cybersecurity…the Human Mind,” will lead a RIMS webinar Aug. 23 that explores the cognitive risk framework. Bone asks: are risk professionals considering the “human element” in their cyber risk management plan?

According to Bone, “The purpose of creating the cognitive risk framework is to begin to educate risk professionals about the need to incorporate the human element into their risk programs, to identify areas where human error or lapses can cause significant damage, and then design effective solutions.”

Bone points to the airline and automotive industries as examples where the value of human element risk management planning has already been realized. “Automation in cockpits, navigation systems, lane assistance technology and, even something as simple as the seatbelt demonstrate organizations’ and industries’ attention to human error risk mitigation.”

“All of us have a limit in our ability to work and focus at a very detailed level for long periods of time,” Bone said. “The ability to design a work environment that simplifies the work that people do will help reduce risk.

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And, while human error is a piece of the cyber risk management puzzle, it isn’t the only human element cyber concern. Human routine, tendencies and employee processes are constantly monitored by cyber predators. “A sophisticated hacker can spend up to 18 months to two years setting their strategy to attack your organization,” he said. “They are studying the rhythm of the workflow and the movement of data across the firm. They gain a tremendous advantage by just sitting silently and watching.

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Implementing a cognitive risk framework is no easy task. The key is data. “A lot of data is mislabeled, making it difficult for risk professionals to see the connection between an end result and the human behavior that caused it. In order to use data to its fullest, it needs to be properly categorized with descriptors that allow risk professionals to be able to leverage it,” Bone said.

Organizations with risk frameworks that fail to incorporate the human element are, in his opinion, acting on assumptions. “They are assuming people will be able to follow thousands of policies and procedures with perfect accuracy every time,” he explained. “We shouldn’t assume that people won’t be distracted at work and click on phishing emails. We shouldn’t assume that people will change their passwords as frequently as we want them to. We shouldn’t and can’t be afraid to incorporate new ideas and solutions to improve routines or, at least, make them more difficult to track.”

People are the common denominator. They are not perfect by any means, but incorporating a cognitive risk framework can be a valuable advantage that allows organizations to stay ahead of human element risks while identifying opportunities to improve processes and increase productivity.

The Most Dangerous Month For Drivers Has Begun

Now that August has arrived, warnings are being posted—the United States has entered its deadliest month for drivers, according to the Insurance Institute for Highway Safety (IIHS). IIHS information revealed that 505 fatalities have been reported on Aug. 2 every year between 2012 and 2016—the most recent studied—making it the most fatal day for drivers in that time frame.

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During the same five-year span, July 4 had the second-highest number of traffic fatalities with 495.

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IIHS Senior Vice President for Communications Russ Rader attributed the statistic to the fact that there are more vehicles and road trips in unfamiliar territory, creating higher crash risks, on Aug.

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2 and during the summer in general.

“Traffic deaths are not inevitable. If everyone buckled up and every driver obeyed the laws against speeding and alcohol-impaired driving, the summer death toll would be much lower,” Rader said. “Even though Aug. 2 is a bad day, it’s staggering to recognize that, on average, about 100 people lose their lives on U.S. roads every single day of the year.”

A total of 37,461 people died in motor vehicle crashes in 2016 and the U.S. Department of Transportation’s most recent estimate of the annual economic cost of crashes is $242 billion. Contributing to the death toll are alcohol, speeding, lack of safety belt use and other problematic driver behaviors.

“Each of those deaths could have been prevented,” Rader said. “We could make a lot more progress in reducing crashes and the deaths and injuries that result if we doubled down on the countermeasures that we know work.”

The National Safety Council (NSC) reported that of all the work-related deaths in 2016, nearly 1,600 took place on roadways and about 20% of those involved pedestrian automobiles.

Organizations with fleets should take note, as motor vehicle crashes are the number-one cause of work-related deaths, accounting for 24% of all fatal occupational injuries, according to the NSC. On-the-job crashes cause employers to sustain costs of more than $24,500 per property damage crash and $150,000 per injury crash.

Nationwide’s SmartRide program identified hard braking, fast acceleration and idling in traffic as the top causes of auto accidents. Those incidents, coupled with the fact that August marks the midpoint of summer in America, make this such a dangerous time to be on the road.

Nationwide’s data identifies Fridays in general, between 9 a.m. and 4 p.m., as the most aggressive time of the week for drivers. During this timeframe, drivers’ habits behind the wheel show more instances of hard braking and faster accelerations than any other time of the week. Additionally, Nationwide members reported more accidents in August 2016 (60,976) than any other month over the past four years.

“These critical pieces of data about driving habits have been identified as some of the leading contributors to auto accidents,” said Teresa Scharn, an associate vice president at Nationwide who helped build and manage the insurer’s telematics program. “When drivers are armed with this information, they can make necessary adjustments to their driving behaviors that will help them be safer drivers.”

Total Cost of Risk Drops for Fourth Straight Year, RIMS Finds

The risk management profession is proving its resiliency. Even in the face of major hurricanes, technological influence and the seemingly common threat of international trade wars, 2017 saw the total cost of risk (TCOR) decline for the fourth consecutive year, according to the 2018 RIMS Benchmark Survey, which was jointly published by RIMS and Advisen.

Despite these uncertainties, the TCOR per $1,000 of revenue continued to drop, the survey revealed, ending at $9.75 in 2017. The main drivers were declines in liability costs (8%), by decreases in property, liability, workers compensation, management liability, and professional liability costs, as well as overall risk management administration costs. TCOR is defined in the survey as the cost of insurance, plus the costs of the losses retained and the administrative costs of the risk management department.

The survey encompassed industry data from 590 organizations and contains policy-level information from 10 coverage groups, subdivided into 90 lines of business.

Advisen Co-Founder and Chief Strategy Officer David Bradford said market conditions are favorable for insurance buyers. “A competitive insurance market resulting from a chronic overabundance of risk capital strongly contributed to TCOR decreasing steadily since 2013,” he said. “Not even record catastrophe losses in 2017 could derail the downward trend.”

Key findings from this year’s RIMS Benchmark Survey include:

  • TCOR fell despite record-high natural catastrophe losses such as hurricanes Maria, Irma and Harvey, as well as wildfires and mudslides in California.
  • While TCOR per $1,000 of revenue fell for most industries, four—healthcare, government & nonprofit, information technology and consumer staples—saw rising TCOR in 2017.
  • As predicted in the 2017 survey, the percentage of companies buying cyber insurance continued its increase since 2011, ending at 65% in 2017.
  • In 2017, the percentage of companies buying cyber insurance increased to 65%. This trend has continued upward since 2011. Additionally, the cost of cyber insurance per $1,000 of revenue increased 33% from 2016.
  • The adoption of new technologies such as machine learning and blockchain, political instability in several parts of the world, globalization, terrorism and cyber threats are expected to further shape the risk landscape in 2018 and beyond.

Bradford noted that the traditional insurance pricing cycle may seem broken, but that term is more likely a new normal resulting from a more efficient insurance market. “The factors contributing to this more efficient market are varied and complex, but the upshot is that a hard market like that last seen in 2001-2002, when commercial insurance rates shot up 50 percent, may simply never occur again,” he said. “Prices may rise, but most likely they will be quickly beaten down by fresh capital flowing into the market. That is good news for risk managers.”

“As the tools, resources and technologies that facilitate the exchange of ideas and experiences continue to improve, risk management professionals have become better equipped to strengthen their risk financing programs and apply cutting-edge, cost-cutting strategies,” said RIMS CEO Mary Roth. “The year-over-year data available in the RIMS Benchmark Survey allows professionals to accurately set expectations, and achieve goals while designing competitive but fair insurance programs for their organizations.”

To order a copy of the 2018 RIMS Benchmark Survey, visit www.advisenltd.com/media/reports/rims-benchmark-survey/ or www.RIMS.org/book.

Calif. Carr Fire Claims 6 Lives

Just when it seemed like things couldn’t get any worse in California, the Carr wildfire ignited, claiming six lives so far. The fire in Northern California near the city of Redding has been burning since July 23 and is now one of the largest in the state.

Almost 90,000 acres have burned, destroying more than 500 homes and commercial buildings and damaging 135 structures. Firefighters, who are working 24- to 36-hour shifts with little rest in between, said they are making progress and are now on the offense rather than in a defensive mode.

“Although it’s too early for credible insured loss estimates, the current California wildfires could noticeably impact exposed insurers’ 3Q 2018 earnings,” KBW said in a statement today.

Wildfires are also burning in Mariposa County California. The Ferguson Wildfire has closed large parts of Yosemite National Park, the Risk Management Monitor reported. That fire began July 13 at about 8:30 p.

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m. and by July 15 had nearly doubled to 9,300 acres. By July 27 it had burned 45,000 acres and was contained 5%, according to NOAA.

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While authorities have not declared an official cause for that fire, Colin Gannon, senior data analyst at Four Twenty Seven, which studies the economic risk of climate change, said weather and environmental conditions are certainly contributing factors.

The Associated Press reported that hotter weather attributed to climate change dries out vegetation, allowing for more intense, faster-spreading wildfires. Another issue is expansion of subdivisions into previously undeveloped areas.

“There are just places were there should not be subdivisions,” Kurt Henke, a former fire chief in Sacramento who now serves as a consultant to fire organizations told the AP. “We’re not talking about a single family who wants to build a house in the woods.

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I’m talking about subdivisions encroaching into the wild land urban interface that put them in the path of these destructive fires.”

Henke said that more funding needs to come from the state legislature to position firefighters in areas where conditions are ripe for fast-moving fires—so they can be respond quickly if a blaze breaks out.

Gov. Jerry Brown said last year that drought and climate change mean California faces a “new reality” where lives and property are continually threatened by fire.

The state is experiencing longer periods of warm temperatures and dry conditions that are making major fires nearly a year-round possibility, said Daniel Swain, a climate scientist at the University of California, Los Angeles.

On July 28 President Trump signed an emergency declaration for California and authorized federal aid for disaster relief.