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UK Warns Critical Industries to Boost Cyber Defense or Face Hefty Fines

The UK government has warned that Britain's most critical industries must boost their cybersecurity or face potentially hefty fines under the EU's Networks and Information Systems Directive (NISD).

The warning comes less than four months before the deadline for the NISD, adopted by the EU on July 6, 2016, to be transposed into EU member states' national laws (May 9, 2018, which aligns with the date for GDPR enforcement).

NISD is designed to ensure the security of network systems not already covered by the GDPR -- but its primary purpose is to ensure the security of the industries that comprise the critical infrastructure (such as power and water, healthcare and transport). These companies, or covered entities, are defined within the directive as 'operators of essential services' (OES), and 'digital service providers' (DSPs).

Since it is a Directive rather than a Regulation, the NIS Directive has some national flexibility in its implementation. For example, the UK government had earlier proposed that maximum fines under the directive should be between €10 million and €20 million or 2% to 4% of annual global turnover. It has now settled on a maximum fine of €17 million.

The government announcement on Sunday stems from its published response (PDF) to a public consultation it initiated in August 2017.

Related: Learn More at SecurityWeek's ICS Cyber Security Confernece

The UK has made it clear that a breach of an OES will not automatically trigger a fine. This will depend on the judgment of separate industry sector regulators, or competent authorities. The primary factor will be whether the breached OES/DSP has made adequate cyber security provisions -- in practice, this will probably depend upon how well the firm has implemented the 'NIS Directive: Top-level objectives' guidelines published by the National Cyber Security Centre (NCSC, part of GCHQ) Sunday. However, the government also states, "New regulators will be able to assess critical industries to make sure plans are as robust as possible."

The key part of the EU's NIS Directive is Article 14: Security requirements and incident notification. This specifies, "Member States shall ensure that operators of essential services take appropriate and proportionate technical and organizational measures to manage the risks posed to the security of network and information systems."

The NCSC guidelines say this can be implemented through conforming to four top-level objectives comprising 14 security principles. The top-level objectives are: managing security risk; protecting against cyber-attack; detecting cyber security events; and minimizing the impact of cyber security incidents. Each of the objectives is then broken into the series of sector-agnostic security principles. "Each principle," states the NCSC, "describes mandatory security outcomes to be achieved."

Only one of the four objectives takes the traditional view of cyber security: protecting against cyber-attack -- recognizing the difference between commercial and critical organizations. For the former, personal information and profitability are the primary motivations; for the latter, it is continuity (or recovery) of operation that is important. "This legislation clearly signals the move away from pure protection-based cybersecurity thinking," comments Steve Malone, director of security product management at Mimecast. "Robust business continuity strategies have never been more important to ensure organizations can continue to operate during an attack and get back up on their feet quickly afterwards."

The objective that concentrates on protection against a cyber-attack recognizes that technology is not a complete solution. For example, Principle B1 deals with policies and procedures. Principle B6 handles staff awareness and training. This latter is particularly welcomed by Stephen Burke, Founder and CEO at Cyber Risk Aware.

Noting that the critical infrastructure is actively targeted by nation state actors more than cyber criminals, he asks, "But how do nation states get in? The simple answer is through people. For example, the Saudi Aramco breach affected 35,000 machines and the attackers got in because a Saudi Aramco employee clicked on a link in a spear-phishing email and meant 10 percent of the world's supply was at risk.

"This emphasizes the fact that any institutions no matter how big they are and no matter how sophisticated their technical defenses are, they need to help staff and make them become aware of the cyber dangers they face as that’s how actors are going to breach defenses.”

But it isn't just about cyber-attacks and data loss. NISD "will also cover other threats affecting IT such as power outages, hardware failures and environmental hazards," says the government announcement. "Under the new measures recent cyber breaches such as WannaCry and high-profile systems failures would be covered by the Network and Information Systems (NIS) Directive.

"These incidents would have to be reported to the regulator who would assess whether appropriate security measures were in place. The regulator will have the power to issue legally-binding instructions to improve security, and – if appropriate – impose financial penalties."

This raises another issue. Most of the critical industries will have customer databases, and that could make them liable to GDPR  as well as NISD, plus any existing sector-specific regulations. "Under this new legislation," warns Andy Miles, CEO of ThinkMarble, "companies could potentially be fined under the GDPR, the Government and by a regulator, so there is a risk of double or even triple jeopardy here."

The government's response document specifies the regulator (or 'competent authority') for the different critical sectors. This is often the government itself; that is, the relevant Secretary of State for that sector -- although it is the Information Commissioner (ICO) who is the competent authority for digital service providers just as with the GDPR. This could lead to confusion and lack of consistency since Secretaries of State change, and different enforcement levels could change rapidly in line with a changing political situation. "I believe that the NCSC, working alongside the ICO, should take the lead in putting these sanctions in place -- and the regulators should feed into them, not the other way around," suggests Miles.

There is a danger that NISD has simply been overshadowed by GDPR. There is concern that many of the covered entities will not be ready for its implementation in May 2018. Miles warns that "27% of respondents [to the governments consultation period] had no plans to implement further security measures, and 31% did not know if they would make any changes. This suggests that there is much still to be done in educating companies about the importance of protecting themselves from cyber-attacks."

Lorena Marciano, EMEAR data protection & privacy officer at Cisco, told SecurityWeek that organizations seen as privacy-immature experience far greater losses than those considered as privacy-mature. The implication, she said, is that NISD provisions, "shouldn’t be adopted for the single purpose of avoiding fines, but that organizations which are willing to go beyond the set compliances will reap the long-term financial benefits as well as protecting customer data.”

This means that the NCSC's guidelines should be considered as the base-line for critical industries, and that they should then go beyond them. The first step would clearly be a gap analysis between existing security controls and the NCSC's guidelines.

"Importantly, meeting those four objectives and 14 principles will demand a degree of cyber maturity that is far removed from prescriptive, compliance-based tick-box exercises," comments Robert Orr, cyber security principal consultant CNI, Context Information Security. "This means that [covered entities] will need to put as much emphasis on NIS as they should be putting on that other EU regulation, GDPR; not least because the level of fine for non-compliance is similarly punitive."  That will require OES and DSPs to assess their existing cyber security and resilience, to identify any gaps in meeting the NIS outcomes, and to develop improvement plans to close those gaps -- and then go beyond them.

Related: EU Invests €450 Million in Cybersecurity Partnership 

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Kevin Townsend is a Senior Contributor at SecurityWeek. He has been writing about high tech issues since before the birth of Microsoft. For the last 15 years he has specialized in information security; and has had many thousands of articles published in dozens of different magazines – from The Times and the Financial Times to current and long-gone computer magazines.