Monday, February 10, 2014

Is data security worth it? Depends who's counting.

An article published by Reuters a couple weeks back caught my eye: Davos executives see data theft as too costly, too hard to beat. From the article, dated 24 January 2014:
Fighting online data fraudsters is almost impossible as their ability to hack into new technology often outpaces companies efforts to protect it, senior businessmen and bankers gathering for the World Economic Forum (WEF) said.

The mammoth data breach at U.S. No. 3 retailer Target (TGT.N) has made executives even more aware of the need to improve safety standards, but the cost is often prohibitive.


While losses on complex derivatives transactions could punch a big hole in a banks' balance sheet or even compromise its stability, the potential losses resulting from the theft of retail customers' data are often minimal.
Really? Minimal on whose balance sheet?

A study sponsored by security behemoth Symantec, and conducted by the Ponemon Institute measured costs of data breaches to business. From 2013 Cost of Data Breach Study: Global Analysis (PDF), published in May 2013 and reporting on cost per data breach victim in calendar year 2012:
As the findings reveal, the average per capita cost of data breach (compiled for nine countries and converted to US dollars) differs widely among the countries. Many of these cost differences can be attributed to the types of attacks and threats organizations face  as well as the data protection regulations and laws in their respective countries. In this year’s global study, the average consolidated data breach increased from $130 to $136. However, German and US organizations on average experienced much higher costs at $199 and $188, respectively.
Contrast that with an NBC article (on published the following month, Data breaches cost consumers billions of dollars:
A new report from Javelin Strategy and Research released on Wednesday concludes that a single massive data breach can result in “billions of dollars” in consumer fraud losses. [...]

Hackers were after Social Security numbers when they attacked the South Carolina Department of Revenue last year. They got 3.6 million of them. Javelin puts the total loss from this fraud at $5.2 billion dollars, making the breach one of the most costly ever.

The average fraud victim in this case will spend $776 out of pocket and take 20 hours to resolve their problems, the report estimated.
$188 is the cost to businesses per victim per data breach incident in the United States, from the Symantec sponsored study. NBC reports, from an incident in South Carolina, a cash cost to consumers of $776 plus whatever 20 of your hours are worth, applied to following up some company's compromise of your data by contacting banks, writing to credit agencies, trying to get the attention of law enforcement, and other such entertainments.

What are those 20 hours worth? The Social Security Administration calculated average U.S. wage data at $42,498.21 for 2012, or a little over $20/hr for a full 52-week year of 40-hour work weeks.

So let's peg the worth of those 20 hours at $400, for a total cost to data breach victims of $1,176 per incident.

Admittedly, this is arithmetic, not methodologically sound statistics I'm batting around here. But by my rough and sketchy comparisons, a data breach costs U.S. individuals over six times what such an incident costs a U.S. business for each affected person.

And yet: Davos executives see data theft as too costly, too hard to beat.

Uh huh.

In case it's not obvious yet that what "Davos executives see" is different from what you, an individual, are at risk of experiencing, let's go back to that Symantec sponsored study for a moment.

From the study's Executive Summary, bold emphasis added:
Factors that increase the cost. US companies realized the greatest increase in data breach costs if caused by a third party error or quick notification of data breach victims, regulators and other stakeholders. [...]
And from the Key Findings section of the report, bold emphasis added again:
In many countries, regulations dictate the notification of data breach victims. However, if organizations are too fast in contacting individuals it can actually result in higher costs. In this year’s study, in the US quick notification added as much as $37 per record , as shown in Figure 11c. It is understandable that this factor would have little impact on Brazil and India, because data breach notification regulations are non-existent.
No regulations, no need to notify data breach victims. No need to notify, lower cost to business. Hmmmm.... I believe what we're seeing here is what a certain category of spin-doctor might call, with respect to the United States, unfriendly business environments resulting from over-regulation, no?

The World Economic Forum's February 2013 report, Unlocking the Value of Personal Data: From Collection to Usage (PDF) contains an airbrushed sound-byte framing the old and insidious concept that what's good for the CEOs attending WEF meetings is good for the countries from which they extract wealth. From a chapter cozily titled "The World is Changing," here's the last point in a figure summarizing "New perspectives on the use of data":
Traditional approach: Policy framework focuses on minimizing risks to the individual

New perspective: Policy focuses on balancing protection with innovation and economic growth
Balance. We like balance, right?

Full disclosure: I am over-simplifying some long and complex analyses.

For example, just a couple of pages past the bit quoted just above from the WEF report, a series of figures asserts that health care outcomes for individuals is significantly improved by "personalised individual interventions based on health data" and "public disclosure of aggregated, anonymized patient outcome data."

Yes, there are not only costs, but benefits as well that accrue to individuals when vast data stores are aggregated and mined. It's complicated, and I acknowledge that.

The WEF report contains, for example, this reasonable and nuanced passage in Chapter 2:
This new approach also needs to carefully distinguish between using data for discovery to generate insight and the subsequent application of those insights to impact an individual. Often in the process of discovery, when combining data and looking for patterns and insights, possible applications are not always clear. Allowing data to be used for discovery more freely, but ensuring appropriate controls over the applications of that discovery to protect the individual, is one way of striking the balance between social and economic value creation and protection.

However, just as the discovery of new opportunities for growth is unknown, so are the possibilities for unleashing unintended consequences. Principled and flexible governance is required to assess the risk profile of actions taken in the use of data analytics.
But I would argue that this nuance is used as a self-interested prop to justify current and contemplated data collection and retention practices, on the grounds that, paraphrasing, we'll figure out how to protect people eventually.

I'm skeptical, okay? YMMV.

But here, setting aside reasonable nuance, figures and appendices, footnotes, and kumbaya use cases, let's consider this unsettling video, circa 2009, courtesy of the ACLU. What happens when you, an individual, call up a retailer to place the simplest order -- for takeout pizza -- and they know pretty much everything about your home, habits, relationships, work, and health. To wit:

It's a perspective worth balancing against the carefully groomed reports coming out of Davos.

I'll close with a report from just yesterday, 9 Feb 2014, Reuters again, titled Barclays launches investigation after customer data leak:
Barclays said it had launched an investigation after a newspaper reported that the personal details of 27,000 customers had been stolen and sold, raising the prospect of new fines for the bank. [...]

Barclays thanked the Mail on Sunday for bringing the data leak to its attention.

"Protecting our customers' data is a top priority and we take this issue extremely seriously," Barclays said in its statement.

"We would like to reassure all of our customers that we have taken every practical measure to ensure that personal and financial details remain as safe and secure as possible."

Yessiree, Bob. Every practical measure.

Related posts on One Finger Typing:
Six ways your electronica owns you
Pimped by our own devices: electronica, the cloud, and privacy piracy
Monoculture v complexity; agribusiness and deceit

Thanks to Wikimedia Commons for the image of the Davos Congress Centre, site of the World Economic Forum meetings since 1971; and also for the pile of cash image, contributed to WC by Moritz Wickendorf. And thanks to the ACLU, for all that organization's fine work and principled tenacity.

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