Information Systems Risk Management: An Audit and Control Approach

Information Systems Risk Management: An Audit and Control Approach

Aditya Ponnam (Louisiana State University, USA)
Copyright: © 2009 |Pages: 17
DOI: 10.4018/978-1-59904-855-0.ch007
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Abstract

Organizations worldwide recognize the importance of a comprehensive, continuously evolving risk assessment process, built around a solid risk strategy that properly manages internal and external threats. A comprehensive enterprise risk management strategy must ideally contribute to the protection of the organizations’ assets, operations, shareholder’s value, and customer satisfaction while meeting imposed regulatory requirements and standards. As IT represents an integral part of the process required to achieve the aforementioned objectives, managing the risks associated with the information technology infrastructure of an organization is critical. The goal of this chapter is to review the most common risks and threat agents for a typical organizations’ information technology infrastructure and to discuss how systematic risk management procedures and controls can manage and minimize these risks.
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Introduction

Defining and Understanding Risk and Control

Today’s business environment requires highly competent risk management functions with the capabilities to address a continuously changing risk profile.

In order to put risk in the proper context, two terms are defined (Stoneburner, Goguen, & Feringa, 2002): vulnerability, and threat. Vulnerability is a flaw or weakness in system security procedures, internal controls, or implementation that can be exercised (either accidentally or intentionally) and that can result in loss or harm. For example, a weak disaster recovery plan of an organization located in a disaster-prone area represents a vulnerability to the organization. A threat, such as a natural disaster, is the potential for a threat-source to exercise a specific vulnerability, such as a weak disaster recovery plan.

A risk is a circumstance or event that has the potential to hinder achievement of specific objective(s) or to cause harm. With respect to the previous example, the sudden disruption of a business or the loss of critical data in the event of a natural disaster is a risk that must be addressed. Therefore, organizations located in areas prone to environmental disasters should pursue a strong off-site data backup and recovery strategy by selecting a location less vulnerable to environmental disasters. A risk always has a cost associated with it. Once the vulnerabilities, threats, and respective costs are rated, risk can be interpreted by the following equation (Akin, 2002).

Risk = Threat * Vulnerability * Cost

Cost is the total cost of the impact of a particular threat incurred by a vulnerable target. Costs are of three types: hard-dollar, semihard, and soft. Hard-dollar costs are measured in terms of “real “ damages to hardware, software, or other assets, as well as quantifiable IT staff time and resources spent repairing these damages. Semihard costs might include such things as lost business or transaction time during a period of downtime. Soft costs include such things as diminished end-user productivity, damage to reputation, decreased stockholder confidence, or lost business opportunities (International Charter, 2006).

Business risks can be broadly classified into the following types (Business Link, 2006):

  • Strategic (e.g., market competition, customer preferences, industry changes)

  • Compliance (e.g., regulations, standards)

  • Financial (e.g., foreign exchange, interest rates, credit)

  • Operational (e.g., organizational culture, process risk, technology risk)

  • Hazard (e.g., natural events, environment, physical employees)

These categories are not rigid, as some parts of your business may fall into more than one category. An environmental disaster threatening an organization’s ability to successfully back-up and recover data could, for example, potentially reach across and impact hazard, operational, financial, and compliance business risk categories.

Risks have the potential to deter an organization from achieving its goals and objectives. Management, therefore, must implement a risk control framework in order to prevent or mitigate risks to a level deemed acceptable to the organization.

It is important to understand the nature of controls. Controls are formal activities taken by business process owners to achieve an objective set by the organization to mitigate a respective risk. A control can be defined as a process, policy, or procedure designed to provide reasonable assurance that business objectives will be achieved. Controls, when exercised effectively, reduce or eliminate the exposure of a process to certain risks and, therefore, make the process less likely to incur losses associated with the risk. Controls can be preventive, detective, or corrective, as described below.

  • Preventive: Implemented to prevent the risk from causing any loss or harm.

  • Detective: Implemented in situations where it is important to understand that something adverse has happened. They warn of violations or attempted violations of organizational policy.

  • Corrective: Implemented when the objective is to fix errant situations or events as they are identified.

Controls can be further classified as automated or manual (Rajamani, 2006).

  • Automated or programmed controls: Automated controls are embedded within an organization’s application systems and work in the background by virtue of the programming logic or application configuration, without any need for manual intervention. A financial application that calculates interest rates automatically based on a hard coded logic is an example of an automated control.

  • Manual controls: These controls require a person to manually enforce the control. For example, a review and sign off that the quality of material obtained from a supplier has been inspected is a manual control.

Key Terms in this Chapter

Risk: A risk is a circumstance or event that has the potential to hinder achievement of objectives or cause harm.

Auditable Domain: An auditable domain is a manageable auditable activity, which may be defined in a number of ways, such as by function or activity, by organizational unit or division, or by project or program.

Vulnerability: Vulnerability is a flaw or weakness in system security procedures, internal controls, or implementation that could be exercised (accidentally triggered or intentionally exploited) and result in loss or harm.

Application Controls: Application controls are automated controls that relate to the processing of transactions within the business process. Application controls are typically preventative in nature and are embedded within the application or could be configured. Examples of Application controls are edit checks, data input validations, calculations, interfaces, and authorizations.

Residual Risk: Risk that remains after a control is implemented is called residual risk.

IT General Controls: IT General controls are controls that apply to the entire infrastructure of the organization. The most common IT General controls are logical access controls over applications, infrastructure and data, change management controls, system and data backup and recovery controls.

Internal Control: An internal control is processes, policies, procedures, and practices, designed to provide reasonable assurance that business objectives will be achieved, and that undesired events will be prevented or detected, and corrected or mitigated.

Threat: Threat is the potential for a threat-source to exercise (accidentally trigger or intentionally exploit) a specific vulnerability.

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Table of Contents
Preface
Jatinder N. D. Gupta, Sushil Sharma
Acknowledgment
Jatinder N. D. Gupta, Sushil Sharma
Chapter 1
Xin Luo, Qinyu Liao
In computer virology, advanced encryption algorithms, on the bright side, can be utilized to effectively protect valuable information assets of... Sample PDF
Ransomware: A New Cyber Hijacking Threat to Enterprises
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Chapter 2
Joon S. Park
E-commerce has grown immensely with the increase in activity on the Internet, and this increase in activity, while immeasurable, has also presented... Sample PDF
E-Commerce: The Benefits, Security Risks, and Countermeasures
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Chapter 3
Pamela Ajoku
Even though weapons and money are considered important factors for running a modern world, at the end of the day, it is all about controlling and... Sample PDF
Information Warfare: Survival of the Fittest
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Chapter 4
Gaeil An, Joon S. Park
In this chapter, we discuss the evolution of the enterprise security federation, including why the framework should be evolved and how it has been... Sample PDF
Evolution of Enterprise Security Federation
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Chapter 5
Roy Ng
The hypergrowth of computing and communications technologies increases security vulnerabilities to organizations. The lack of resources training... Sample PDF
A Holistic Approach to Information Security Assurance and Risk Management in an Enterprise
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Chapter 6
John D’Arcy, Anat Hovav
A number of academic studies that focus on various aspects of information security management (ISM) have emerged in recent years. This body of work... Sample PDF
An Integrative Framework for the Study of Information Security Management Research
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Chapter 7
Aditya Ponnam
Organizations worldwide recognize the importance of a comprehensive, continuously evolving risk assessment process, built around a solid risk... Sample PDF
Information Systems Risk Management: An Audit and Control Approach
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Chapter 8
Udaya Kiran Tupakula
In this chapter we discuss Distributed Denial of Service (DDoS) attacks in networks such as the Internet, which have become significantly prevalent... Sample PDF
Distributed Denial of Service Attacks in Networks
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Chapter 9
Andy Luse
This chapter describes various firewall conventions, and how these technologies operate when deployed on a corporate network. Terms associated with... Sample PDF
Firewalls as Continuing Solutions for Network Security
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Chapter 10
Jamie Twycross
The immune system provides a rich metaphor for computer security: anomaly detection that works in nature should work for machines. However, early... Sample PDF
An Immune-Inspired Approach to Anomaly Detection
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Chapter 11
Wasim A. Al-Hamdani
This chapter introduces cryptography from information security phase rather than from deep mathematical and theoretical aspects, along with... Sample PDF
Cryptography for Information Security
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Chapter 12
Carlo Belletini
The chapter introduces and describes representative defense mechanisms to protect from both basic and advanced exploitation of low-level coding... Sample PDF
Memory Corruption Attacks, Defenses, and Evasions
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Chapter 13
Dalila Boughaci, Brahim Oubeka, Abdelkader Aissioui, Habiba Drias, Belaïd Benhamou
This chapter presents the design and the implementation of a decentralized firewall. The latter uses autonomous agents to coordinately control the... Sample PDF
Design and Implementation of a Distributed Firewall
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Chapter 14
Tom Coffey
This chapter concerns the correct and reliable design of modern security protocols. It discusses the importance of formal verification of security... Sample PDF
A Formal Verification Centred Development Process for Security Protocols
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Chapter 15
Ahsan Habib
This chapter develops a distributed monitoring scheme that uses edge-to-edge measurements to identify congested links and capture the misbehaving... Sample PDF
Edge-to-Edge Network Monitoring to Detect Service Violations and DoS Attacks
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Chapter 16
Doug White, Alan Rea
Hard disk wipes are a crucial component of computing security. However, more often than not, hard drives are not adequately processed before either... Sample PDF
A "One-Pass" Methodology for Sensitive Data Disk Wipes
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Chapter 17
Lijun Liao
This chapter deals with the issues concerning e-mail communication security. We analyze the most popular security mechanisms and standards related... Sample PDF
Securing E-Mail Communication with XML Technology
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Chapter 18
Li Yang, Raimund K. Ege, Lin Luo
This chapter describes our approach to handle security in a complex Distributed Virtual Environment (DVE). The modules of such an environment all... Sample PDF
Aspect-Oriented Analysis of Security in Distributed Virtual Environment
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Chapter 19
Information Availability  (pages 230-239)
Deepak Khazanchi
This chapter describes the concept of information availability (IAV) which is considered an important element of information security. IAV is... Sample PDF
Information Availability
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Chapter 20
Siraj Ahmed Shaikh
The purpose of this chapter is to introduce the reader to the research area of formal analysis of authentication protocols. It briefly introduces... Sample PDF
Formal Analysis and Design of Authentication Protocols
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Chapter 21
Rajeev R. Raje, Alex Crespi, Omkar J. Tilak, Andrew M. Olson
Component-based software development offers a promising technique for creating distributed systems. It does require a framework for specifying... Sample PDF
Access Control Frameworks for a Distributed System
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Chapter 22
Manish Gupta, JinKyu Lee, H. R. Rao
The Internet has emerged as the dominant medium in enabling banking transactions. Adoption of e-banking has witnessed an unprecedented increase over... Sample PDF
Implications of FFIEC Guidance on Authentication in Electronic Banking
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Chapter 23
Sue Conger
Historically, companies have automated a security model that analogizes the concept of a “guardian” who monitors incoming and outgoing activities... Sample PDF
Disruptive Technology Impacts on Security
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Chapter 24
Sushma Mishra
Internal auditing has become increasingly important in current business environments. In this era of the Sarbanes- Oxley Act and other similar... Sample PDF
Internal Auditing for Information Assurance
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Chapter 25
William H. Friedman
This chapter is management oriented. It first proposes a general theoretical context for IT disasters within the wider class of all types of... Sample PDF
IT Continuity in the Face of Mishaps
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Chapter 26
Yvette Ghormley
This chapter describes the tools that businesses can use to create a Business Continuity and Disaster Recovery Plan. Utilizing business modeling... Sample PDF
Business Continuity and Disaster Recovery Plans
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Chapter 27
Yvette Ghormley
The number and severity of attacks on computer and information systems in the last two decades has steadily risen and mandates the use of security... Sample PDF
Security Policies and Procedures
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Chapter 28
Arjmand Samuel
This chapter outlines the overall access control policy engineering framework in general and discusses the subject of validation of access control... Sample PDF
Enterprise Access Control Policy Engineering Framework
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Chapter 29
Sushil K. Sharma, Jatinder N.D. Gupta
The purpose of the information security policy is to establish an organization-wide approach to prescribe mechanisms that help identify and prevent... Sample PDF
Information Security Policies: Precepts and Practices
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Chapter 30
Paul D. Witman
This chapter provides a set of guidelines to assist information assurance and security researchers in creating, negotiating, and reviewing... Sample PDF
A Guide to Non-Disclosure Agreements for Researchers
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Chapter 31
Omkar J. Tilak
Software realization of a large-scale Distributed Computing System (DCS) is achieved through the Componentbased Software Development (CBSD)... Sample PDF
Assurance for Temporal Compatibility Using Contracts
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Chapter 32
Arjan Durresi
The latest estimates suggest that there are over two billion cell phone users worldwide. The massive worldwide usage has prompted technological... Sample PDF
Spatial Authentication Using Cell Phones
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Chapter 33
Sushil K. Sharma, Jatinder N.D. Gupta, Ajay K. Gupta
The ability to perform E-Commerce over the Internet has become the driver of the new digital economy. As it has opened up opportunities for... Sample PDF
Plugging Security Holes in Online Environment
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Chapter 34
Erik Graham, Paul John Steinbart
This chapter presents a step-by-step approach to improving the security of wireless networks. It describes the basic threats to achieving the... Sample PDF
Six Keys to Improving Wireless Security
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Chapter 35
Robert W. Proctor, E. Eugene Schultz, Kim-Phuong L. Vu
Many measures that enhance information security and privacy exist. Because these measures involve humans in various ways, their effectiveness... Sample PDF
Human Factors in Information Security and Privacy
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Chapter 36
Wm. Arthur Conklin
Software defects lead to security vulnerabilities, which cost businesses millions of dollars each year and threaten the security of both individuals... Sample PDF
Threat Modeling and Secure Software Engineering Process
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Chapter 37
Christopher M. Botelho, Joseph A. Cazier
The threat of social engineering attacks is prevalent in today’s society. Even with the pervasiveness of mass media’s coverage of hackers and... Sample PDF
Guarding Corporate Data from Social Engineering Attacks
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Chapter 38
Tom Clark
Data storage is playing an increasingly visible role in securing application data in the data center. Today virtually all large enterprises and... Sample PDF
Data Security for Storage Area Networks
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Chapter 39
Edgar Weippl
This chapter outlines advanced options for security training. It builds on previous publications (Weippl 2005, 2006) and expands them by including... Sample PDF
Security Awareness: Virtual Environments and E-Learning
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Chapter 40
Manish Gupta
Enterprises are increasingly interested in new and cost effective technologies to leverage existing investments in IT and extend capabilities to... Sample PDF
Security-Efficient Identity Management Using Service Provisioning (Markup Language)
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Chapter 41
Dwayne Stevens, David T. Green
Voice over Internet Protocol (VoIP) networks signal an evolution in telecommunications that is accelerating the convergence of the Internet and the... Sample PDF
A Strategy for Enterprise VoIP Security
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Chapter 42
Jose M. Torres
This chapter presents an Information Systems Security Management Framework (ISSMF) which encapsulates eleven Critical Success Factors (CSFs) along... Sample PDF
Critical Success Factors and Indicators to Improve Information Systems Security Management Actions
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Chapter 43
Rebecca H. Rutherfoord
This chapter will deal with issues of privacy, societal, and ethical concerns in enterprise security. Security for a company is defined as... Sample PDF
Privacy, Societal, and Ethical Concerns in Security
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Chapter 44
Rodolfo Villarroel, Eduardo Fernández-Medina, Juan Trujillo, Mario Piattini
This chapter presents an approach for designing secure Data Warehouses (DWs) that accomplish the conceptual modeling of secure DWs independently... Sample PDF
An MDA Compliant Approach for Designing Secure Data Warehouses
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Chapter 45
Hai Wang
This chapter introduces the survivability evaluation, especially on the corresponding evaluation criteria and modeling techniques. The content of... Sample PDF
Survivability Evaluation Modeling Techniques and Measures
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Chapter 46
Art Taylor
With the rise of the Internet, computer systems appear to be more vulnerable than ever from security attacks. Much attention has been focused on the... Sample PDF
The Last Line of Defense: A Comparison of Windows and Linux Authentication and Authorization Features
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Chapter 47
M. Pradhan
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Bioterrorism and Biosecurity
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About the Contributors