The recent SEC rule change on 5 September 2023 concerning cybersecurity disclosures by public companies has ushered in a new era of compliance, risk management and IT security practices.
After many insightful discussions with various organisations on their Governance, Risk and Compliance (GRC) processes, we thought it would be helpful to explore the significance of these changes and how they affect organisations.
We’ll aim to cover the essentials of the SEC’s cybersecurity rules, the challenges, opportunities and how automation can support organisations in going beyond compliance, turning GRC into a trust-building exercise.
Understanding the SEC rule change
The SEC’s latest cybersecurity rules represent a significant shift in regulatory focus, placing cybersecurity risk management and governance squarely on the corporate agenda. Public companies are now mandated to provide more comprehensive and standardised disclosures about their cybersecurity practices. This includes the disclosure of material cybersecurity incidents and annual reports detailing their cybersecurity risk management, strategy and governance. The overarching goal is to ensure that investors receive consistent, comparable and decision-useful information about cybersecurity, aligning with the ever-increasing dependence on electronic systems for economic activity.
These new requirements are a response to several critical trends. The modern business landscape relies heavily on digital infrastructure, making disruptions to these systems highly impactful. Cybersecurity incidents have surged, exacerbated by factors like the COVID-19-induced rise in remote work, increased reliance on third-party IT services, and the monetisation of cyberattacks through ransomware and stolen data markets. The costs and consequences of these incidents have skyrocketed, encompassing business interruptions, lost revenue, ransom payments, litigation risks and reputational damage. In light of these developments, organisations are being held accountable for safeguarding their digital assets and disclosing material cybersecurity information.
Challenges and opportunities
Navigating the SEC’s new cybersecurity rules presents organisations with both challenges and opportunities. One of the primary challenges lies in fostering cross-functional collaboration between compliance, risk management and IT security teams. Achieving alignment and synergy among these traditionally separate departments can be complex, requiring a fundamental shift in organisational culture and processes. In addition, accurately determining the materiality of cybersecurity incidents and their potential impact on the business poses an ongoing challenge, as organisations must strike a balance between transparency and safeguarding sensitive information.
However, within these challenges, there are significant opportunities for organisations to demonstrate their commitment to cybersecurity and build trust with regulators and investors. Effective compliance with the SEC rules can enhance an organisation’s overall cybersecurity posture and strengthen its resilience against cyber threats. Transparent reporting not only satisfies regulatory requirements but also sends a powerful message to investors and stakeholders about an organisation’s commitment to cybersecurity risk management. Organisations that proactively address these challenges can establish themselves as leaders in cybersecurity governance, potentially gaining a competitive advantage in the marketplace.
Lastly, the SEC’s emphasis on cybersecurity disclosure aligns with broader industry trends and legislative developments, such as the Cyber Incident Reporting for Critical Infrastructure Act of 2022 (CIRCIA). Organisations that invest in robust cybersecurity practices, compliance and disclosure are better positioned to adapt to evolving regulatory landscapes and demonstrate their commitment to protecting critical assets and market trust.
Automation: The key to efficiency
In the ever-evolving landscape of GRC, automation has emerged as a transformative force, providing organisations with a competitive edge and risk mitigation capabilities. While the adoption of cloud infrastructures and advanced technologies continues to soar, there is a growing realisation among GRC professionals that costly manual processes are no longer sustainable.
To effectively address the challenges posed by the SEC’s new cybersecurity rules, we believe that automation is not only desirable, it is essential in today’s modern world.
1. Standardised templates and error reduction:
One of the paramount reasons to embrace automation in GRC is the wide usage of standardised templates. In the GRC sector, recurrent reports are often recreated following a standard schedule, gathering data from multiple systems and consolidating it into predefined templates. The manual execution of these seemingly straightforward tasks harbours inherent risks, including the use of outdated templates, accidental copying and pasting errors, and the potential misdelivery of reports due to multitasking. These errors can lead to wasted time and, in some instances, legal and financial ramifications.
Automating these report generation processes provides a safeguard against these pitfalls. It begins with creating templates, a relatively straightforward task that, when executed correctly, lays a robust foundation for automation. By automating the assembly of these reports, organisations can eliminate errors, save valuable time, and ensure that critical information is consistently and accurately presented. This not only bolsters compliance efforts but also enhances trust among investors and regulators by demonstrating a commitment to data accuracy and integrity.
2. Timesaving for frequent reports:
Automation is not merely about reducing errors, it’s also a strategic time-saving tool. Repetitive tasks like manually assembling frequent reports consume valuable hours that could be more profitably directed towards projects and initiatives aligned with an organisation’s business goals. By automating these tasks, GRC professionals free themselves from the monotony of copy-paste operations and report compilation, allowing them to focus on more impactful GRC work.
Efficiency gains achieved through automation translate into significant advantages. GRC professionals can allocate their time and expertise to activities that genuinely protect and benefit their organisations. Rather than being tethered to manual report generation, they can leverage automation to have reports work for them, aligning their efforts with the broader business strategy and demonstrating a proactive approach to GRC.
3. Ensuring up-to-date reports with sensitive information:
The reliance on copy and paste functions in manual processes introduces an additional layer of vulnerability when dealing with reports that must always be kept up to date, particularly when strict guidelines dictate freshness. Manually updating these reports introduces the potential for human error, jeopardising the accuracy and timeliness of critical information.
Automation addresses this challenge head-on by centralising templates and automating document generation. By doing so, organisations ensure that every report is fresh, updated and error-free. This not only eliminates the risk of delivering stale information but also reinforces the reliability and trustworthiness of reports presented to regulators and investors.
4. Enhancing data security and privacy:
As cybersecurity concerns continue to intensify, the secure handling of sensitive data becomes paramount. Manual processes inherently expose organisations to data breaches and privacy violations. Automating data collection and reporting minimises the human touchpoints in these processes, reducing the risk of data leaks and unauthorised access. This not only safeguards sensitive information but also instils confidence among stakeholders, demonstrating a commitment to robust data security practices.
5. Enabling scalability and adaptability:
The scalability and adaptability offered by automation are invaluable in an environment characterised by evolving regulations and complex compliance requirements. As organisations grow, manual processes become increasingly unwieldy and prone to errors. Automation allows for flexible scaling, ensuring that GRC operations remain efficient and accurate even as the volume and complexity of compliance tasks expand. This adaptability is particularly pertinent when addressing the SEC’s new cybersecurity rules, as it enables organisations to stay ahead of regulatory changes and confidently navigate the shifting compliance landscape.
Incorporating automation into your GRC practices is a strategic decision that can revolutionise your approach to compliance and risk management. It empowers organisations to eliminate errors, save time, ensure data security and privacy and stay agile in the face of evolving regulatory requirements. By automating critical GRC processes, you not only navigate the challenges posed by the SEC’s new cybersecurity rules more effectively but also harness the opportunities that automation brings.
Next steps
Navigating the evolving landscape of cybersecurity regulations and ensuring compliance with the SEC’s new rules demands a collaborative effort across various functions within your organisation – representing both a challenge and an opportunity.
From our perspective, the way forward for GRC revolves around automation, moving away from cumbersome manual compliance workflows and the burden of redundant evidence requests. Through automation, GRC teams can channel their energies into what truly matters: increasing agility, fostering trust and translating data into actionable risk insights.
While we acknowledge the necessity of compliance, we also understand its limitations in safeguarding critical assets and establishing market trust. Automation, as we see it, is the bridge between compliance and comprehensive risk management. By leveraging automation, organisations can gain more than just efficient evidence collection; they can regain time for strategic analysis, adopt a security-first approach, and achieve clarity to make strategic, risk-based decisions confidently.
At Nephos, we combine technical expertise and the strategic business value of traditional professional service providers to deliver innovative data solutions. We understand the nuances of this evolving landscape. Our approach is not just about compliance; it’s about building a resilient GRC framework that adapts to change and fosters confidence with regulators and investors. Whether you’re taking your first steps towards automation or seeking to refine your existing processes, we stand ready to assist. Utilising our experts and partners, we can assist your organisation to automate control evidence collection across various frameworks, controls, standards and regulations through:
- Risk workflow: Seamlessly retrieving evidence files from your chosen GRC programs or automating requests to control owners.
- Evidence endpoint: Connecting effortlessly to diverse source systems simply by requesting an evidence file from an application endpoint.
- Tool integration: Effortlessly integrating platforms to consolidate evidence files from internal systems into a single, unified platform.
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