In our technical due diligence reviews we conduct for investment firms, we see five common mistakes by both young startups and in well-seasoned companies alike:
Lack of Security Mindset During Development: Security gets a bad rapport for being overkill, costly, and a hindrance to fast growth when security teams fall into the “No It All” philosophy of saying “No” especially when their focus on security overshadows any considerations of what revenue they halt or hinder in saying “No.” This tends to be true when organizations do not share the same risk related goals, or when the security organization feels that it is only responsible for risk alone and not the maximization of revenue with appropriate risk. Good security requires a team effort and is difficult to add into a well-oiled machine as an afterthought. It is much easier to do at the onset of writing code and including checks for security with the automation of testing and QA will ensure security is baked in. Hold developers responsible for security and security responsible for enabling revenue while protecting the company in a common sense approach.
Failing to Separate Duties: Usually as small companies grow larger, everyone continues to have access to everything, and many original employees wear multiple hats. Making sure no one individual is responsible for development to production gains points in other areas like business continuity as well. Separation of duties does not just exist between two employees - the separation can also be created by automation as is the case in many successful continuous deployment/delivery shops deploying directly into production. Automated testing will additionally help with code compliance and quality assurance. Automate access control by role wherever possible and regularly have business owners review and sign off on access control lists (at least monthly). My colleague James Fritz goes into greater detail in a separate article.
Not Segregating and Encrypting Sensitive Data At Rest: Encrypting all data at rest may not make sense, but segregating all personal identifiable information (PII), financial, medical, and any other sensitive or confidential information into a separate, encrypted database is a better attack plan. Even if you are not required to be under PCI or HIPPA or other regulations, limiting exposure to your customer and company confidential information is a best practice. You can add additional protections by tokenizing the information wherever possible. When there is a security breach (probably safe in today’s climate to say “when” not “if” there is a breach), it is really hard to try and explain to your customers why you didn’t encrypt their sensitive data at all times. Given recent headlines, this is now considered entry level security table stakes and a safeguard required by your customers - and no longer a nice to have optional item.
Checklist Only Mentality: In our experience, many auditors have been focused primarily only on checklist compliance until recently - but times are changing and the true test of compliance is moving from a checklist and certification to trying to explain your most recent data breach to your customers and stakeholders. Constantly working towards safeguarding your customers and serving them will likely mean you easily fall within current and future security requirements or can get there quickly. It is much easier to design security into your products now than to be relegated to doing it later because of a misstep and it will do a lot more for customer adoption and retention.
These are just a summary of five common findings – there are certainly many others. The common denominator we find with successful companies is that they are thinking holistically about their customers by automatically building security into their products and are able to scale and expand into new market segments more readily. Building in security as a part of a holistic approach will address areas in business continuity, disaster recovery, resiliency, being able to roll back code, etc.
Under the Hood - Our Security Questions for Technical Due Diligence
In our assessments, we cover each of the areas below - using these questions as guidelines for conversation - not a point-by-point Q&A. These are not a yes/no checklist, we rank our target based on other similarly sized clients and industry averages. Each question receives a ranking from 1-4, with 4 being the highest score and then we graph our findings against similar and competing companies within the market segment.
- Is there a set of approved and published information security policies used by the organization?
- Has an individual who has final responsibility for information security been designated?
- Are security responsibilities clearly defined across teams (i.e., distributed vs completely centralized)?
- Are the organization’s security objectives and goals shared and aligned across the organization?
- Has an ongoing security awareness and training program for all employees been implemented?
- Is a complete inventory of all data assets maintained with owners designated?
- Has a data categorization system been established and classified in terms of legal/regulatory requirements (PCI, HIPAA, SOX, etc.), value, sensitivity, etc.?
- Has an access control policy been established which allows users access only to network and network services required to perform their job duties?
- Are the access rights of all employees and external party users to information and information processing facilities removed upon termination of their employment, contract or agreement?
- Is multi-factor authentication used for access to systems where the confidentiality, integrity or availability of data stored has been deemed critical or essential?
- Is access to source code restricted to only those who require access to perform their job duties?
- Are the development and testing environments separate from the production/operational environment (i.e., they don’t share servers, are on separate network segments, etc.)?
- Are network vulnerability scans run frequently (at least quarterly) and vulnerabilities assessed and addressed based on risk to the business?
- Are application vulnerability scans (penetration tests) run frequently (at least annually or after significant code changes) and vulnerabilities assessed and addressed based on risk to the business?
- Are all data classified as sensitive, confidential or required by law/regulation (i.e., PCI, PHI, PII, etc.) encrypted in transit?
- Is testing of security functionality carried out during development?
- Are rules regarding information security included and documented in code development standards?
- Has an incident response plan been documented and tested at least annually?
- Are encryption controls being used in compliance with all relevant agreements, legislation and regulations? (i.e., data in use, in transit and at rest)
- Do you have a process for ranking and prioritizing security risks?
- Separation of Duties in an Agile Environment
- Technical Due Diligence Checklists
- Avoiding the Policy Black Hole
- Security Considerations for Your Technical Due Diligence
- Technical Due Diligence Best Practices
- Learn More About AKF Partners Technical Due Diligence