Risk management is one of those terms that is often used a bit too loosely, warns AssurX’s Sal Lucido. “People say ‘risk management’ but it can mean very different things to people working at different parts of a company.”

For example, the finance and accounting department focuses on documenting and managing risks associated with business financial transactions and reporting as governed by Sarbanes-Oxley (SOX). The information technology group (IT) focuses on cyber security risks, which involves processes such as identity and access management, threat and vulnerability management, and configuration control. The regulatory compliance group is concerned with meeting government regulations, laws and standards applicable to their industry. For example medical device companies must meet regulations imposed by the FDA regarding such activities as quality and incident management. Energy companies must abide by national and state mandated regulations established by NERC, FERC and their respective regions. Noncompliance can lead to fines that sometimes total in the millions.

Across these industries “the Federal Government is actively auditing and levying large fines for those companies found to be out of compliance. The bar is being set higher each year and the penalties are becoming more severe.”

“Having a risk management system that is managed on paper and spreadsheets is just not going to cut it anymore.”

Sal has helped dozens of regulated companies in industries ranging from utilities to medical device manufacturers to better manage their corporate risk data and processes. And he’s observed that they have a lot in common when it comes to handling risk management. Based on his years of experience with many different firms working to address risk, he has some valuable observations and advice.

Across the board, “what we’ve been finding is that information associated with risk management is rarely made available to the departments that need access to it. For example, if the audit department had access to the identified risks and their risk levels, they could use this information to plan their audit activities aiming audits at those that pose the greatest liability to the company. ”

Companies are now looking for tools that “allow for secure collaboration” so that the risk information and data is readily available for all those who need to access it.

”Because each of these departments already have their own processes” companies are looking for applications that allow each group to maintain their own forms and workflows. “It’s critical to have an application that provides processes unique to each group while harmonizing the underlying data” so that each group can access what it needs, when it needs it.

The other trend we are seeing is that companies are looking to move beyond just documenting risks and listing mitigation efforts. They are looking for enterprise applications that can manage the associated business processes. For example, risk assessment and mitigation efforts are tasks that need to be assigned to individuals or teams, with due dates and status updates. In order to ensure projects stay on track there is a need for escalation functionality that automatically emails the appropriate personnel when tasks become due and go late. These activities also have associated workflows and approval routings that need to be managed via software. Of course this type functionality goes well beyond the capabilities of simple risk tracking software and spreadsheets.

The other need we are seeing is related to reports and dashboards. Department and process managers are looking for reports that show risk levels, heat maps, late reports and so forth. The executive staff is looking for enterprise dashboards that report on the state of compliance throughout the organization using easy to read traffic light and gauge or thermometer formats.

Finally the solution should also be flexible enough to integrate with data and systems that are already being used within the company. For example, if a system is already being used to document the status of key risk indicators (KRI’s) such as violations or incidents, “that data should be reported within (and accessible from) the risk management system.”

In conclusion, managing risk across the corporation means something different to each department yet it requires the entire organization to work together. It involves documenting and sharing risk data across the enterprise, managing workflows and tasks, while handling escalation and reporting. Yes, risk management has matured beyond the spreadsheet.

Sal Lucido is VP of Enterprise Solutions at AssurX, Inc.

In comments filed last month, the North American Electric Reliability Corporation (NERC) told the National Institute of Standards and Technology (NIST) that it should focus hard on coordination of standards as it works on its Proposed Framework for Smart Grid Interoperability Standards.

NERC simultaneously stressed the differences between the three types of proposed standards: Interoperability Standards, System Security Standards and Reliability Standards – and the ultimate need for streamlined, real coordination between the different standards.

“Although the voluntary Interoperabilty Standards proposed by NIST are designed to achieve a different purpose from the NERC mandatory Reliability Standards, it is critical to the continued reliability of the bulk power system that the two bodies of standards be compatible and complementary,” the Nov. 9th comment noted.

NERC also stressed the importance of cyber security to smart grid technologies and encouraged NIST to integrate adequate cyber security protection, at all levels (device, application, network and system) in the development of its Interoperabilty Standards.

While NERC CIP Reliability Standards provide for the reliable and safe operation of the bulk power system by preventing the unauthorized cyber and physical access to critical assets and critical cyber assets, NERC commented, there is a need to develop additional cyber security protection for distribution facilities in the development of Smart Grid Interoperability Standards to address, for example, security aspects of interoperability at the distribution level.

http://www.nerc.com/files/FinalNERCCommentsNIST_Smart_Grid_Framework_Document.pdf

Click here for more information about NERC Electric Reliability Compliance Solutions

The 2009 Annual AssurX Electric Reliability Special Interest Group Meeting was a great success. This year we met in Denver on June 9-10, 2009 and kicked the event off with a networking reception that mixed business and great conversations. During the conference sessions, we discussed the latest product upgrades for CATSWeb ER, which makes it easier to import new and revised NERC Standards and RSAWs.

In our open forum we learned about how everyone is using the product to manage compliance to the NERC Standards and much more. Presentations on CIP Compliance, Compliance Framework and a customer presentation were loaded with important, useful information. I want to thank RRI Energy for a very informative presentation on their NERC compliance process: recurring evidentiary documentation/
gap analysis process.

I also want to thank our customers and partners who participated in this great event. We look forward to the next one!

The CATSWeb Measurements feature makes it easy to track performance to goals, monitor trends and automatically send performance-based alerts. Measurements can be added to executive and corporate dashboards to provide important, easy to read, quality metrics information. Not only does this give you feedback about your performance to goal and trends, it also allows you to focus your resources on the areas of the business that need attention. Detailed information can be easily accessed by clicking on the metric of interest. All this is done within CATSWeb without relying on any third party tools or add-ons.

Because most of us don’t have time to look at these dashboards every day, alerts may be configured to automatically send E-mail notifications when the metrics change. Measurements can link to any data source such as internal system data like queries and filters, and with all system reports and graphs in CATSWeb – the source data can even be ‘external’  – such as from ERP and HR systems – or other Oracle and Microsoft databases.

It’s easy to set up a measurement:

1. From the Manage page, click on Measurements and choose “Add” (or copy an existing one)
2. Enter your company goals
3. Then add the measurement to a Dashboard

The CATSWeb Measurements Feature provides an easy way to track progress to goals and alert you when thresholds are crossed. This helps your company to:

• Achieve its corporate goals
• Broaden visibility regarding those goals
• Reduce cycle times
• And ensure that tasks get completed on time

Let us know what corporate goals you are tracking (or would like to track) and how you are using the Measurements Feature in CATSWeb.

Based on the latest information from NERC, the Critical Infrastructure Protection Standards, CIP-002 thru CIP-009 reach the Auditably Compliant stage on July 1st, 2009. Up until now most of us have been focusing on the Sabotage Reporting Standard, CIP-001. Most of the violations associated with CIP-001 are a result of not having an established contact with the FBI for sabotage reporting or for deficiencies in the procedures or training related to sabotage reporting. Given that CIP-001 is only one standard and is fairly simplistic as compared to the other eight standards we all assume that a lot more effort will be required for compliance.  We also assume there will be significantly more violations and significantly higher fines associated with CIP-002 thru CIP-009.

Given companies have limited resources and time it may be helpful to look at what is ‘common’ amongst these standards as they relate to processes and workflows. One process that repeatedly shows up in the requirements are reviews or assessments.  For example, CIP-006 Requirement 1.9 says that companies need to establish a process for ensuring that the physical security plan is reviewed at least annually. CIP-009 Requirement 1 says that companies should perform a review of their recovery plans for Critical Cyber Assets annually. While each of these processes must be tailored to meet their specific requirements, there are many common elements that can be leveraged to save time. For example a typical ‘review’ process includes the following steps:

• Initiate the review
• Perform the review and document any recommendations for change
• Approve the determination and recommendations
• Implement all approved changes
• Request approval that that changes were implemented and close the review
• Schedule the next review based on the required period

Once you have agreed on a general workflow you can then customize the process to meet specific needs. For example, determine who should be approving recommend changes and closure for the specific processes being implemented. So prior to developing your workflows read through the entire set of CIP Standards and look for repeated processes. It may help you to save time and money. Let me know what processes you have found in the CIP Standards that may be repeated.

As we all know on August 8, 2005, President Bush signed into law the Energy Policy Act of 2005, which authorized the creation of an electric reliability organization (ERO) with the statutory authority to enforce compliance with reliability standards among all market participants.  The electric industry has had to adjust to the change from a voluntary system of compliance to a mandatory system of reliability standards compliance.  In order to deal with this situation most organizations decided to use their favorite weapon – the spreadsheet. It was a great choice given there was a lot of information that needed to be organized in a very short period of time, including: standards, requirements, entities, measures, subject matter experts, applicable procedures, evidence of compliance and the list goes on.

However, once these spreadsheets were filled up with reams of data on dozens of interconnected worksheets, problems began to surface:

• Complexity: Documenting the relationships of each applicable requirement to applicable procedure, compliance rationale for each of the registered entities within the organization quickly becomes a rat’s nest of intertwined data.

• Maintenance: As new and revised standards are released just managing changes to these spreadsheets becomes more then a full-time job.

• Doesn’t Manage Tasks: Analysis of compliance to requirements usually requires assigning tasks, which implies management of assignees, due dates along with documenting the task and the outcome.

• Silos of Information: Spreadsheets by their vary nature are typically owned by one person and are located on that individual’s computer. After a while most companies learn that there is more than one spreadsheet. In fact several people in various parts of the organization are maintaining this information with overlapping data and most of the time without knowledge of each other.

This is when it makes sense to use a corporate-wide compliance management system that can deal with the complexity of the data, can be easily maintained with new and revised standards and manage task assignments, due dates (with automatic email reminders) and associated procedures and evidence.

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When President Bush signed into law the Energy Policy Act of 2005, which authorized the creation of an electric reliability organization (ERO) with the statutory authority to enforce compliance with reliability standards, market participants faced sea change.  The voluntary system of compliance had morphed into a mandatory system of reliability standards compliance backstopped by audits and fines. Even though this was something brand new for energy companies – it is not the first time an industry has had to deal with such a regulatory shift.

Lessons can be learned from similar events in other industries:

• 1990’s: Manufacturers scramble to obtain ISO 9000 certification
• 2000: FDA regulated medical device and pharmaceutical companies face increased scrutiny regarding management of electronic quality records
• 2005: Publicly traded companies deal with Sarbanes Oxley laws

Here are some ‘lessons learned’ I have encountered while helping companies implement compliance management systems:

Top-Down Approach: The most successful companies implement corporate-wide compliance programs with a clearly stated purpose initiated from the top. The best illustration of this is President Kennedy’s 1961 ‘Man on the Moon’ speech. Kennedy (the top executive) described the goal (“landing a man on the moon and returning him safely”) and deadline (“before this decade is out”).

Compliance for Cost and Reliability Improvement: Given the tight deadlines and overwhelming workload most companies set up a compliance program with one goal in mind ‘pass the audit’. While this may be a necessary first focus; companies that raise their sights towards actually ‘improving reliability’ and ‘reducing costs’ gain the biggest benefit from compliance expenses.

Enterprise Management Systems: Managing everything associated with compliance (data, tasks, documents, evidence, due dates, etc.) quickly outgrows spreadsheets and homegrown databases. It is best to reap the benefits of a commercial-off-the-shelf (COTS) system designed specifically for their industry. COTS vendors like AssurX typically host user group meetings and continually improve the system to keep up with regulatory changes.

Post by Sal Lucido