Week 6 - Code Galore

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Code Galore Caselet: Using COBIT® 5 for Information Security

Company Profile – Code Galore

Background Information

The Problems

Your Role

Your Tasks

Figures

Notes

Questions

Agenda

Profile

Start-up company founded in 2005

One office in Sunnyvale, California, USA

10 remote salespeople and a few with space at resellers’ offices

Approximately 100 total staff; about one-third work in engineering

Company Profile – Code Galore

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

Background Information

Building a comprehensive business function automation software that performs many functions (decision making in approaching new initiatives, goal setting and tracking, financial accounting, a payment system, and much more).

The software is largely the joint brainchild of the Chief Technology Officer (CTO) and a highly visionary Marketing Manager who left the company a year ago

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

Background Information – What We Do

Financed 100% by investors who are extremely anxious to make a profit.

Investors have invested more than US $35 million since inception and have not received any returns.

The organization expected a small profit in the last two quarters. However, the weak economy led to the cancellation of several large orders. As a result, the organization was in the red each quarter by approximately US $250,000.

Background Information – Financials

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

Code Galore is a privately held company with a budget of US $15 million per year. Sales last year totaled US $13.5 million (as mentioned earlier, the company came within US $250,000 of being profitable each of the last two quarters).

The investors hold the preponderance of the company’s stock; share options are given to employees in the form of stock options that can be purchased for US $1 per share if the company ever goes public.

Code Galore spends about five percent of its annual budget on marketing. Its marketing efforts focus on portraying other financial function automation applications as ‘point solutions’ in contrast to Code Galore’s product.

Background Information – Financials

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

Background Information – Org. Structure

Figure 1—Code Galore Organisational Chart

CEO

CSO

VP, Finance

VP, Business

CTO

VP, Human Resources

Security

Administrator

Sales Mgr

Accounting

Dir.

Sr. Financial

Analyst

Infrastructure

Mgr.

Sys. Dev. Mgr.

HR Manager

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

The board of directors:

Consists of seasoned professionals with many years of experience in the software industry

Is scattered all over the world and seldom meets, except by teleconference

Is uneasy with Code Galore being stretched so thin financially, and a few members have tendered their resignations within the last few months

Background Information – Org. Structure

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

The CEO:

Is the former chief financial officer (CFO) of Code Galore that replaced the original CEO who resigned to pursue another opportunity two years ago

Has a good deal of business knowledge, a moderate amount of experience as a C-level officer, but no prior experience as a CEO

As a former CFO, tends to focus more on cost cutting than on creating a vision for developing more business and getting better at what Code Galore does best

Background Information – Org. Structure

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

Engineers perform code installations. The time to get the product completely installed and customized to the customer’s environment can exceed one month with costs higher than US $60,000 to the customer.

Labour and purchase costs are too high for small and medium-sized businesses. So far, only large companies in the US and Canada have bought the product.

C-level officers and board members know that they have developed a highly functional, unique product for which there is really no competition. They believe that, in time, more companies will become interested in this product, but the proverbial time bomb is ticking. Investors have stretched themselves to invest US $35 million in the company, and are unwilling to invest much more.

Background Information – Operational

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

Business function automation software is a profitable area for many software vendors because it automates tasks that previously had to be performed manually or that software did not adequately support.

The business function automation software arena has many products developed by many vendors. However, Code Galore is a unique niche player that does not really compete (at least on an individual basis) with other business automation software companies.

Background Information – Industry

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

The product is comprehensive—at least four other software products would have to be purchased and implemented to cover the range of functions that Code Galore’s product covers.

Additionally, the product integrates information and statistics throughout all functions—each function is aware of what is occurring in the other functions and can adjust what it does accordingly, leading to better decision aiding.

Background Information – Products

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

Sales have been slower than expected, mainly due to a combination of the economic recession and the high price and complexity of the product.

The price is not just due to the cost of software development; it also is due to the configuration labour required to get the product running suitably for its customers.

Background Information – Sales

What we do

Org. Structure

Operational

Industry

Products

Sales

Financials

Acquisition

Code Galore is in many ways fighting for its life, and the fact that, four months ago, the board of directors made the decision to acquire a small software start-up company, Skyhaven Software, has not helped the cash situation.

Skyhaven consists of approximately 15 people, mostly programmers who work at the company’s small office in Phoenix, Arizona, USA. Originally, the only connection between your network and Skyhaven’s was an archaic public switched telephone network (PSTN).

Setting up a WAN

Two months ago, your company’s IT director was tasked with setting up a dedicated wide area network (WAN) connection to allow the former Skyhaven staff to remotely access Code Galore’s internal network and vice versa.

You requested that this implementation be delayed until the security implications of having this new access route into your network were better understood, but the CEO denied your request on the grounds that it would delay a critical business initiative, namely getting Skyhaven’s code integrated into Code Galore’s.

The Problems

Information Security

More recently, you have discovered that the connection does not require a password for access and that, once a connection to the internal network is established from outside the network, it is possible to connect to every server within the network, including the server that holds Code Galore’s source code and software library and the server that houses employee payroll, benefits and medical insurance information.

Fortunately, access control lists (ACLs) limit the ability of anyone to access these sensitive files, but a recent vulnerability scan showed that both servers have vulnerabilities that could allow an attacker to gain unauthorised remote privileged access.

You have told the IT director that these vulnerabilities need to be patched, but because of the concern that patching them may cause them to crash or behave unreliably and because Code Galore must soon become profitable or else, you have granted the IT director a delay of one month in patching the servers.

The Problems – Overview

Bots

What now really worries you is that, earlier today, monitoring by one of the security engineers who does some work for you has shown that several hosts in Skyhaven’s network were found to have bots installed in them.

Source Code

Furthermore, one of the Skyhaven programmers has told you that Skyhaven source code (which is to be integrated into Code Galore’s source code as soon as the Skyhaven programmers are through with the release on which they are currently working) is on just about every Skyhaven machine, regardless of whether it is a workstation or server.

The Problems – Overview

Code Galore vs. Skyhaven Employee knowledge

Code Galore employees are, in general, above average in their knowledge and awareness of information security, due in large part to an effective security awareness programme that you set up two months after you started working at Code Galore and have managed ever since.

You offer monthly brown bag lunch events in a large conference room, display posters reminding employees not to engage in actions such as opening attachments that they are not expecting, and send a short monthly newsletter informing employees of the direction in which the company is going in terms of security and how they can help.

Very few incidents due to bad user security practices occurred until Skyhaven Software was acquired. Skyhaven’s employees appear to have almost no knowledge of information security.

You also have discovered that the Skyhaven employee who informally provides technical assistance does not make backups and has done little in terms of security configuration and patch management.

The Problems – Overview

Your Role

Hired two years ago as the only Chief Security Officer (CSO) this company has ever had.

Report directly to the Chief Executive Officer (CEO).

Attend the weekly senior management meeting in which goals are set, progress reports are given and issues to be resolved are discussed.

The Information Security Department consists of just you; two members of the security engineering team from software are available eight hours each week.

10 years of experience as an information security manager, five of which as a CSO, but you have no previous experience in the software arena.

Four years of experience as a junior IT auditor.

Undergraduate degree in managing information systems and have earned many continuing professional education credits in information security, management and audit areas.

Five years ago, you earned your CISM certification.

The focus here is not on a business unit, but rather on Code Galore as a whole, particularly on security risk that could cripple the business.

Due primarily to cost-cutting measures the CEO has put in place, your annual budget has been substantially less than you requested each year.

Frankly, you have been lucky that no serious incident has occurred so far. You know that in many ways your company has been tempting fate.

You do the best you can with what you have, but levels of unmitigated risk in some critical areas are fairly high.

Your Role and the Business Units

Mr. Wingate’s focus on cost cutting is a major reason that you have not been able to obtain more resources for security risk mitigation measures.

He is calm and fairly personable, but only a fair communicator, something that results in your having to devote extra effort in trying to learn his expectations of your company’s information security risk mitigation effort and keeping him advised of risk vectors and major developments and successes of this effort.

Your Role and the CEO, Ernest Wingate

Code Galore’s IT director is Carmela Duarte. She has put a system of change control into effect for all IT activities involving hardware and software.

This system is almost perfect for Code Galore—it is neither draconian nor too lax and very few employees have any complaints against it.

You have an excellent working relationship with her, and although she is under considerable pressure from her boss, the CTO, and the rest of C-level management to take shortcuts, she usually tries to do what is right from a security control perspective.

She is working hard to integrate the Skyhaven Software network into Code Galore’s, but currently, there are few resources available to do a very thorough job. She would also do more for the sake of security risk mitigation if she had the resources.

Carmela has worked with Code Galore since 2006, and she is very much liked and respected by senior management and the employees who work for her.

Your Role and the IT Director, Carmela Duarte

You believe that Code Galore’s (but not Skyhaven Software’s) security risk is well within the risk appetite of the CEO and the board of directors.

You have a good security policy (including acceptable use provisions) and standards in place, and you keep both of them up to date.

You have established a yearly risk management cycle that includes asset valuation, threat and vulnerability assessment, risk analysis, controls evaluation and selection, and controls effectiveness assessment, and you are just about ready to start a controls evaluation when you suddenly realise that something more important needs to be done right away (outlined in The Problem section).

Your Tasks

Using the figure 4 template, you need to modify the qualitative risk analysis that you performed six months ago to take into account the risk related to Skyhaven Software. The major risk events identified during this risk analysis are shown in figure 2.

You must not only head this effort, but for all practical purposes, you will be the only person from Code Galore who works on this effort.

Your Tasks – Qualitative Risk Analysis

Your revision of the last risk analysis will not only bring Code Galore up to date concerning its current risk landscape, but will also provide the basis for your requesting additional resources to mitigate new, serious risk and previously unmitigated or unsuitably mitigated risk.

You may find that some risk events are lower in severity than before, possibly to the point that allocating further resources to mitigate them would not be appropriate. This may help optimise your risk mitigation investments.

To the degree that you realistically and accurately identify new and changed risk, you will modify the direction of your information security practice in a manner that, ideally, lowers the level of exposure of business processes to major risk and facilitates growth of the business.

Failure to realistically and accurately identify new and changed risk will result in blindness to relevant risk that will lead to unacceptable levels of unmitigated risk.

Your Tasks – Qualitative Risk Analysis

You must revise the most recent risk analysis, not only by reassessing all the currently identified major risk, but also by adding at least three risk events that were not previously identified.

COBIT 5 provides tools that might be helpful in determining the best approach reassessing and prioritising the major risk events, in EDM03, Ensure risk optimisation.

You must also provide a clear and complete rationale for the risk events, their likelihood, and impacts (outlined in the section Alternatives With Pros and Cons of Each section).

Your Tasks – Qualitative Risk Analysis

The rationale for each security-related risk that you select must include a discussion of the pros and cons associated with identifying and classifying each as a medium-low risk or higher.

For example, suppose that you decide that a prolonged IT outage is no longer a medium- to low-level risk, but instead is now a low risk.

The pros (purely hypothetical in this case) may be that outage-related risk events are now much lower than before due to, for example, the implementation of a new backup and recovery system that feeds data into an alternative data center (not true in this caselet).

In this case allocating additional resources would therefore be a waste of time and money.

Your Tasks – Pros and Cons

On the con side, lowering the severity of a prolonged IT outage risk may result in underestimation of this source of risk, which could result in failing to allocate resources and in a much higher amount of outage-related loss and disruption than Code Galore could take, given its somewhat precarious state.

Your Tasks – Pros and Cons

Exhibits – Major Risk

Figure 2—Major Risk

Figure 3—Network Diagram

Figure 4—Risk Analysis Template

Since Code Galore is in the business function automation software arena it should be consider using business process automation (BPA), a strategy an business uses to automate processes in order to contain costs. It consists of integrating applications, restructuring labor resources and using software applications throughout the organization.

Code Galore is in a very difficult situation. Its existence is uncertain, and money is critical right now.

Yet, this company has opened itself up to significant levels of security risk because of acquiring Skyhaven Software and the need for former Skyhaven programmers to access resources within the corporate network.

Worse yet, even if the chief security officer (CSO) in this scenario correctly identifies and assesses the magnitude of security risk from acquiring Skyhaven and opening the Code Galore network to connections from the Skyhaven network and prescribes appropriate controls, given Code Galore’s cash crunch, not many resources (money and labour) are likely to be available for these controls.

Notes

All the CSO may be able to do is document the risk and make prioritised recommendations for controls, waiting for the right point in time when the company’s financial situation gets better.

If an information security steering committee exists, the CSO must keep this committee fully apprised of changes in risk and solicit input concerning how to handle this difficult situation.

At the same time, the CSO should initiate an ongoing effort (if no such effort has been initiated so far) to educate senior management and key stockholders concerning the potential business impact of the new risk profile. (Note: The kind of situation described in this caselet is not uncommon in real-world settings.)

Notes

What are the most important business issues and goals for Code Galore?

What are the factors affecting the problem related to this case?

What are the managerial, organizational, and technological issues and resources related to this case?

What role do different decision makers play in the overall planning, implementing and managing of the information technology/security applications?

What are some of the emerging IT security technologies that should be considered in solving the problem related to the case?

Discussion Questions 1-5

In what major ways and areas can information security help the business in reaching its goals?

Which of the confidentiality, integrity and availability (CIA) triad is most critical to Code Galore’s business goals, and why?

Change leads to risk, and some significant changes have occurred. Which of these changes lead to the greatest risk?

Imagine that three of the greatest risk events presented themselves in worst-case scenarios. What would be some of these worst-case scenarios?

How can the CSO in this scenario most effectively communicate newly and previously identified risk events that have grown because of the changes to senior management?

Discussion Questions 6-10