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LAN and E-mail exposure: the bottom line.

Local area networks (LANs) and e-mail create notorious security exposures. The lack of privacy, the risk of losing essential business information, and other threats can have a significant impact on the bottom line. According to Robert W. Edwards, PhD, president of Risks, Limited, of Keedysville, Maryland, "Losses can easily exceed insurance coverage."

Edwards, who spoke at the American Bankers Association 12th Annual National Security and Risk Management Conference in Phoenix, explained the types of exposures LANs and e-mail present. Both are vulnerable to fraudulent activities, but LANs also create new opportunities for software copyright violations and the possibility of losses from system outages. E-mail is threatened by the disclosure of information.

Edwards explained that system outages present the potential for massive uninsured losses, disruptions of the customer base, and, in the case of banks, regulatory non-compliance. Since due diligence issues for system implementation and recovery lead directly to a bank's board of directors, such risks affect a bank's director's and officer's liability, usually its most costly insurance.

The difficulty of controlling licensed software in distributed systems is another concern for LAN users. If caught, both the company and the individual face severe civil and criminal penalties for copyright infringement. "This is no longer a trivial offense," Edwards said. As a result, this copyright risk affects a company's general liability coverage.

Companies may also become the target of a lawsuit because of the unauthorized disclosure of information through e-mail. Wrongful dismissal, libel, and slander suits can result from the disclosure of sensitive personnel data and negligence suits can result from the disclosure of proprietary information. "This |risk~ affects almost every insurance coverage you have," explained Edwards.

To manage the risk, Edwards suggested that managers do the following:

* Seek to understand the magnitude of the exposure by finding out who uses these systems and for what purposes.

* Look at the nature and effectiveness of controls.

* Determine if the risks are covered by existing insurance, and if so, if the levels of coverage are adequate.

* Inform the bank's board of directors of all uninsured or uninsurable risks and the ways in which the risks exceed current company coverage.
COPYRIGHT 1994 American Society for Industrial Security
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1994 Gale, Cengage Learning. All rights reserved.

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Title Annotation:local area networks; electronic mail
Author:Arbetter, Lisa
Publication:Security Management
Date:Mar 1, 1994
Words:355
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