Getting to Compliance (IT Governance, Part 2)

Last issue we introduced IT Governance in general, some of its history and some of the regulations that compel us to embrace it.  We’ve acknowledged that it is, for many of us, an unpopular necessity. But we’ve also seen the golden promise of good that can

The Law

Are any of the new regulations going to affect you and your company?  In a word: yes. It is very likely that these – or other regulations that impact IT governance – will affect you.One of the most far-reaching ones is the Payment Card Industry Data Security Standard or PCI DSS. This one applies to anyone that accepts payment cards (credit or debit). The requirements impact fees and rates – the better the compliance, the lower the fees and rates. Money is a great motivator!  Prison can be a great motivator, too – the Sarbanes-Oxley act in the US has opened avenues for criminal prosecution along with whistle-blower protections. From securities and banking to health privacy and credit cards,  regulations are being created or tightened that have to do with protecting data and controlling IT access and change. If your industry doesn’t have requirements – yet – you won’t have to feel left out for long. If you are not a publicly traded company in the US your country is bringing similar requirements to you. Not publicly traded at all? Not to worry, the definitions are broadening to include most companies that even do business with any publicly traded companies. One way or another, sooner or later,  regulations that impact IT Governance are going to touch your organization.

Most of the financial reforms have to do with protecting data from manipulation and verifying its integrity. From an IT perspective this means you will have to put controls in place that prevent unauthorized access to data and which can illustrate a transparent path to financial reports. No murky downloading to spreadsheets, for example. Data must take a clear, clean path from transaction to financial statement. Not unlike a chain of custody for evidence in a crime investigation.

On another front, some of the newest laws coming in the US have to do with privacy. This is an area where the rest of the world is already ahead. It is important to understand the difference between security and privacy – it is a simple but important distinction. Security is about protecting the data and Privacy is about how you can use it. Most Privacy initiatives are going to look a lot like the Safe Harbour laws of the European Union. From security oriented things like the requirement to notify anyone whose data may have been a victim of unauthorized access to more privacy oriented requirements like not passing or selling contact information to third parties.

Although there are these many different regulations, things get a bit simpler for those of us on the IT side of things when we realize that there are certain fundamental requirements in common amongst them. A general understanding and implementation of good IT Governance will meet or exceed all of them. IT Governance refers to the rules, the procedures, the controls around how things are done in the IT organization. Invest the time to understand and implement Best Practices – in general and you are ready to face any specific challenges along the way. Even before they come your way.

There are two frameworks that can help a company distill the requirements of any and all regulation down to the actual steps that must be taken with the IT organization. These are Cobit and ITIL. Cobit is better known in the US. ITIL started in the UK and is more recognized outside of the US. The interesting thing about the two of them when you dig into them is that complement each other rather well. Cobit breaks down all do the controls very specifically and ITIL talks more about how and why you should implement them.

One of the best benefits of getting to know these two frameworks is that it prepares you for an audit by allowing you to familiarize yourself with the language. Chances are very good that the IT auditors are going to approach your organization with one or both of those frameworks tucked under their arm. So understanding them can save a lot of money during the actual audit – and with any penalties that might come from a failure. So … the cost  of getting to know Cobit or ITIL? It depends on how much of an independent studier you are. Knowing the test questions before they are asked?  Priceless!

Whatever framework or guidebook the auditors are using, there are some elements to an IT audit that are immutable.  Larger companies have their own internal audit team. This team stays on top of the ongoing compliance and puts IT through what you might think of as practice tests. The key difference between and internal and an external audit is that an internal auditor can tell you what they want to see. The external auditors arrive with white gloves and tight lips.

In either case you will be asked to demonstrate the controls that you have in place.  So let’s break those controls down into some broad categories. First breakdown: preventive controls and detective controls.  A preventive control may be something like a password which prevents unauthorized access, where a detective control may be an audit log of user access.  These both address the same question, “Who has access?”

Of particular interest will be who can access and modify the software and data on a production server. You will be expected to have written policies, IT general controls (things like passwords) and, where possible, application controls. Whether handled procedurally or through an application, the key questions are: How is software change handled? Who can ask for a change? Who can authorize it, who can make the change? Then how is it accepted/signed off and who actually delivers it? How is it delivered? A common ‘detective control’ is the auditors invariable request is for a report of what has been delivered within a timeframe and user access logs.

Another way to break-down controls is into automated or manual.   Manual controls are policies – rules – that you follow. Because they rely on humans to follow rules, manual controls are audited more frequently and each audit will require a wider sample of evidence. You will likely be asked to show evidence of the last twenty-five times something was done according to the rules. And when the auditors come back in six months or a year, they will have you show them that again. Every time. Once you automate the control you will be asked to demonstrate a failed attempt (when you shouldn’t be allowed to do a thing and it stops you) and a successful attempt (you followed the rules and were able to do what you needed to do). And then you won’t be asked to demonstrate that control again until it changes!  You can see how audits will get drastically less expensive the more you automate.

Now we’ve talked about some of the specific legislation, their common underlying IT Governance requirements, the two widely accepted frameworks for guidance and how that guidance specifically deals in controls.  In the next installment we will talk more specifically about trouble areas and realizing the benefits from your effort.

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