Do you have any additional blogs about FDIC changing the annual IT report to the board? I saw the article from 2012 and was wondering if there are any updates to that. Has the FFIEC updated its Information Security IT Handbook after 2016 in regard to this subject?
Hi Lynn, and thanks for the question! We haven’t seen any official board reporting updates from regulators since the 2016 revision to the FFIEC InfoSec Handbook, most of what we’ve heard on this topic lately is anecdotal (e.g., feedback from recent IT audits and examinations). The popular consensus is that the volume of information expected to be communicated to the board has greatly increased. We believe it’s because of the relatively recent requirement for the board to provide a “credible challenge” to management, which requires more information on all aspects of information security. Combine that with the hyper-focus on cybersecurity, and “the buck stops with the board” mentality, and it’s almost impossible to imagine over-informing the board.
A bit of background on board reporting… the Examination Procedures section (Appendix A) of the 2016 FFIEC Information Security IT Handbook instructs examiners to:
Determine whether the board approves a written information security program and receives a report on the effectiveness of the information security program at least annually. Determine whether the report to the board describes the overall status of the information security program and discusses material matters related to the program such as the following:
- Risk assessment process, including threat identification and assessment.
- Risk management and control decisions.
- Service provider arrangements.
- Results of security operations activities and summaries of assurance reports.
- Security breaches or violations and management’s responses.
- Recommendations for changes or updates to the information security program
We feel that this is a decent framework assuming sufficient detail is added to each item, and the reporting is presented to the board in a manner in which they are most likely to understand it. Because each one is unique, that often means dialing the level of detail up or down depending on the specific comprehension level of your board.
We also recommend folks add a “Strategic IT Planning” section to the report, with updates on all significant IT initiatives, including how each of those initiatives aligns with enterprise-wide strategic goals and objectives.
You may also want to check out Appendix A, Objective 2 of the Management Handbook. Again, nothing new, but it does help define the broad scope of Board oversight from the examiner’s perspective. Remember, for every item listed in #2 of Objective 2, there must be one or more associated reports supporting the activity, and both the activity and the supporting documentation should be part of the board minutes:
Review the minutes of the board of directors and relevant committee meetings for evidence of board support and supervision of IT activities.
Wherever there is a lack of prescriptive guidance or there is room for interpretation in the guidance, risk managers must choose the path of least risk. For us, although the official guidance hasn’t changed recently, it’s much less risky to over-report information security activities to the Board than it is to under report. To date, we’ve never had an examiner criticize one of our customers for over-reporting!