May 27, 2020
Software & Technology

Cybersecurity is an area rife with regulation and energetic regulators. Having strong cybersecurity measures in place is an essential part of any business using computers and the internet to store information i.e. most businesses.

What do we mean by cybersecurity?

The term “cybersecurity” refers to the need to protect the following from unlawful use, access or interference:

  • Information and data that is stored electronically (rather than only in physical form).
  • The communications networks which underpin societal, business and government functions.

Reasons for ensuring cybersecurity

Businesses are faced with numerous and varied cybersecurity threats. One leading antivirus software provider reported that it identified over 60,000,000 new forms of malware in the third quarter of 2018 alone. The persons responsible for threats are varied and include computer vandals, organised cybercriminals, “hacktivist” groups and nation states.

Potential consequences

The results of a cyberattack can be devastating for a business. It can result in:

  • Contractual and tortious liability towards individuals seeking compensation for damage and/or distress caused by the unlawful acquisition, disclosure and/or use of their personal information.
  • Prosecution or regulatory sanctions being imposed for failing to comply with legal obligations to keep the information and networks secure or, in some cases, to respond appropriately in the event of a cyberattack. Sanctions may include fines as well as the “naming and shaming” resulting from publication of the authority’s investigations into businesses that failed to comply with their statutory obligations.
  • Reputational damage flowing from adverse media coverage, the publication of investigatory reports by regulatory authorities, and where the business is required by law to notify its customers and users of the cyberattack.

Managing cybersecurity risk and compliance

Businesses should be alert to the cybersecurity risks posed by commercial transactions that will involve a third party introducing goods or services into (or being provided with access to) the business’s secure IT environment. A business’s own cybersecurity obligations will include managing risk within its supply chain and outsourcing to service providers.

These risks can be managed by, for example, implementing various technical and organisational precautions and procedures, inserting appropriate provisions into commercial contracts, obtaining adequate insurance, identifying applicable laws and regulations and ensuring compliance.

Practical steps towards compliance

The steps a business should take to comply with its cybersecurity obligations depend on the nature of the business, its circumstances and the industry in which it operates. There is potential overlap between the different regulatory regimes.

Full compliance with legal obligations and best practice guidance may require a business to implement sophisticated security measures and risk management procedures. However, most security breaches (including some of the most high-profile and significant breaches) are the result of businesses failing to implement relatively basic security precautions and procedures, for example:

  • Not encrypting data or storing encryption keys on vulnerable systems.
  • Using outdated software and systems (containing flaws or vulnerabilities), failing to install fixes, patches and upgrades, retaining redundant systems and servers and not implementing software updating policies.
  • Retaining data for longer than necessary. Data that a business no longer requires may still be valuable to cybercriminals, creating a potential liability for a business rather than an asset.
  • Failing to carry out background checks and vetting on employees with access to data and systems.
  • Not providing sufficient staff training and failing to implement policies relating to employee-data interaction (such as authorised data access or bring your own devices (BYOD) policies).
  • Failing to securely destroy or dispose of data or equipment containing data (or verify destruction by subcontractors).
  • Using removable media (such as USB drives and CDs) or portable computers (such as laptops and tablets) in an insecure manner (for example, not scanning media for viruses before introducing new hardware into a secure environment or failing to encrypt data).

Ascertaining which regulations apply

Every business should assume it has a legal duty to implement effective information risk management procedures, of which cybersecurity measures are an essential part. In particular, there are few businesses that do not handle any personal data (whether in relation to employees, customers or other individuals). At a minimum, businesses should seek to comply with the obligations set out in the General Data Protection Regulation ((EU) 2016/679) (GDPR) and Data Protection Act 2018 (DPA 2018), in particular:

  • Sixth data protection principle(Article 5(1)(f) GDPR): personal data shall be processed in a manner that ensures appropriate security of the personal data, including protection against unauthorised or unlawful processing and against accidental loss, destruction or damage, using appropriate technical or organisational measures.
  • Articles 32 to 34, GDPR:both the controller and the processor are required to ensure a level of security appropriate to the risk, taking into account factors such as the costs of implementation and the context of the processing, and there are obligations to report personal data breaches.
  • Controller and processor contracts(Article 28, GDPR): Specific requirements as to what should be included in a contract between a controller and a processor.

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OESs and RDSPs

In addition, certain operators of essential services in the UK, and certain relevant digital service providers who have their head office, or have nominated a representative, in the UK (OESs and RDSPs, respectively) are subject to additional cybersecurity and incident notification requirements under the Network and Information Systems Regulations 2018 (SI 2018/506) (NIS Regulations).

OES are organisations that operate services deemed critical to the economy and wider society. They include critical infrastructure (water, transport, energy) and other important services, such as healthcare and digital infrastructure.

RDSPs are organisations that provide specific types of digital services: online search engines, online marketplaces and cloud computing services. To be an RDSP, you must provide one or more of these services, have your head office in the UK (or have nominated a UK representative) and be a medium-sized enterprise.

There is a general small business exemption for digital services; if you have fewer than 50 staff and a turnover and/or balance sheet of less than €10 million then you are not an RDSP, and NIS does not apply. However, if you are part of a larger group, then you need to assess the group’s staffing and turnover numbers to see if the exemption applies.

Generally speaking, OESs and RDSPs have the following main obligations under the NIS Regulations:

  • Under regulation 10, an OES must take appropriate and proportionate:
    • technical organisational measures to manage risks posed to the security of the network on which their essential service relies; and
    • measures to prevent and minimise the impact of incidents affecting the security of the network and information systems used for the provision of an essential service, with a view to ensuring the continuity of those services,
    • having regard to any relevant guidance issued by their competent authority.
  • Under regulation 11, an OES must notify their competent authority without undue delay and no later than 72 hours after becoming aware of any incident which has a significant impact on the continuity of the essential service which that OES provides, having regard to:
    • the number of users affected by the disruption of the essential service;
    • the duration of the incident; and
    • the geographical area affected by the incident.
  • Under regulation 12, RDSPs must identify and take appropriate and proportionate measures to manage the risks posed to the security of network and information systems on which it relies to provide, within the European Union, either an online marketplace, online search engine or cloud computing service.
  • Under regulation 12,RDSPs must notify the ICO without undue delay and in any event no later than 72 hours after becoming aware of any incident having a substantial impact on the provision of any of the digital services mentioned above, providing sufficient information to enable the ICO to determine the significance of any cross-border impact.

It will be important for any organisation that identifies as an OES to follow published guidance from its designated competent authority as it is released.

Other regulatory frameworks

The Information Commissioner’s Office (ICO), which is responsible for enforcing the GDPR and Data Protection Act 2018 in the UK, as well as the NIS Regulations against relevant digital service providers, has also published much cybersecurity guidance for those organisations falling under its remit.

In addition to the above, special consideration must be given to businesses that:

  • Handle particularly sensitive information.
  • Carry out certain activities (such as merchants that process payments).
  • Provide certain services (such as financial services or publicly available electronic communications services)
  • Operate as part of a regulated profession or industry (for example, legal or accounting services).

They are likely to be subject to additional regulation and be required to comply with certain industry standards. These businesses should be able to obtain advice and details of their obligations (for example, guidance on mandatory obligations and best practice) from their relevant regulatory authority, professional body or industry group.

Implementing cybersecurity measures, policies and procedures

There are several different ways in which the risk of cybercrime can be reduced:

  • Technical measures: installing firewalls and antivirus software, limiting employee access rights and controlling document retention.
  • Practical measures, for example:
    • a business should have policies in place that enable it to react properly in the event of an incident. These policies should address issues such as information disaster recovery and backup, response to a security breach (including notification) and remedial steps; and
    • a business’s policies and measures will both need to be kept under review. Audits and risk assessments should be carried out from time to time and the robustness of policies and measures should be tested regularly. Where appropriate, this may involve engaging independent third parties (such as penetration testers).

For small and medium sized enterprises (SMEs) unsure as to how to proceed, the UK government’s ten steps to cybersecurity provide a useful starting point. For any consultancy assistance with achieving the recommended security baselines you could discuss your needs with our friends at Tantivy or other specialist security firms.

EM Law are experts in technology law and data protection law. Please get in touch if you need any help with cybersecurity compliance or if you have any other legal issues.