Moodys Outlook Downgrade of Equifax: A Wake-up Call to Boards

The move provides another spark to light a fire under CISOs to improve how they measure and communicate security risks to the board, security experts say.

Wall Street has been abuzz this week over drastic measures by credit ratings agency Moodys to downgrade its rating outlook of Equifax, with expensive data breach fallout named as a major factor for the poor marks. While the action was not unexpected, the landmark nature of the outlook should provide some needed emphasis to both boards of directors and CISOs of the modern business imperative for cyber resilience, security and risk experts say.
Todays news puts a punctuation mark on the business reality of cybersecurity risks, says Kevin Bocek, vice president of security strategy and threat intelligence at Venafi, who believes this is going to push more boards to take in increasingly active role in understanding and managing cybersecurity risks. They definitely need to do more than ask the CISO some high-level questions. Equifax is in the hot seat now, but most of the Fortune 500 CEOs and CISOs would do no better in the same situation.
CNBC broke
the news
last night of the note from Moodys changing its rating outlook that cited the $690 million in breach expenses — including costs for settling mounting class action lawsuits — and increased need for infrastructure investments to be made by the company through 2020 to address systemic cybersecurity weaknesses found in post-breach scrutiny.
Joe Mielenhausen, a Moodys spokesperson, told CNBC that this is the first time the fallout from a breach has moved the needle enough to contribute to the change in ratings outlook.
Equifaxs record-breaking data breach, first disclosed in September 2017, was eventually found to have exposed the information of
147.9 million people
. Technically the exposure was triggered through the
exploitation of an unpatched Apache Struts vulnerability
, but security industry experts and government officials say that more serious organizational problems and lack of executive oversight were the true culprit of what
Congress called
an entirely preventable breach.
The fallout from the breach included the ouster of Equifaxs CISO and eventually its CEO, and the company is still feeling the effects of class action suits from consumers and
shareholder derivative lawsuits
.
This is Moodys delivering on their intent last November to take cyber risk into account when grading companies, says Steve Durbin, managing director of the Information Security Forum. This will certainly send a clear message to boards in a language that they understand that cyber risk is integral to business risk and that the implications of a breach or loss of data can have very real impact.
Durbin says hes been advocating for some time to both the insurance industry and credit rating agencies to take cyber risk into account as they set policy pricing and assess company value. He believes this action by Moodys will set the tone for assessment of business health in the future.
Moving forward, this should become the norm since cyber risk is so integral to business risk that an assessment of business health without taking cyber risk and a company’s resilience into account will become meaningless, he says.
Indeed, CNBC reported that Moodys hinted as such in its Equifax note, stating that it will increasingly scrutinize cybersecurity for all data oriented companies in the future.
Security insiders say that this Moodys action should not only be a wake-up call to CEOs and boards, but its also a crucial inflection point for CISOs.
According to Laurence Pitt, security strategy director at Juniper Networks, its another chance in conversation for security leaders — one that they shouldnt blow by lacking the right data or insights about organization-wide cyberrisk.
This incident changes how business will look at cybersecurity, so cybersecurity needs to change how it talks to business, he says.
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Moodys Outlook Downgrade of Equifax: A Wake-up Call to Boards