Legal pressures, not to mention your moral obligation to assist unwitting victims, means that you should never delay when disclosing IT security incidents, says Martin Allen.

In November 2005 a laptop belonging to an employee of the Boeing Corporation was stolen. Among the information on the machine was personal financial data about 161,000 current and former employees of the aerospace giant.

None of the confidential information was encrypted, and therefore the thieves would have been able to read and exploit it easily. Yet this was only one of the two serious failings in Boeing's IT security procedures that this episode highlighted. The second was not to have immediately owned up to the incident. The company still refuses to reveal precise timings, but has admitted that it was 'several days' before the 161,000 'victims' were officially informed that their personal details were now in the public domain, potentially ready to be used by criminals involved in identity theft.

Companies across the world have always preferred not to reveal details of IT security breaches. The problem became so bad in the UK that the Metropolitan Police launched a special guarantee under which companies are promised anonymity if they report that their systems have been the target of hackers. Without such a scheme, police were unable to prosecute because they were unaware that the incidents had taken place.

It's easy to understand the dilemma of the targeted organisation. A run-of-the-mill incident might cost a typical bank £250,000 in terms of lost productivity, replacement hardware, or system downtime. Yet if the attack is reported to the police and the suspects subsequently end up in court, the whole episode becomes public knowledge, which results in customers losing trust in the bank concerned. At this point the £250,000 becomes totally insignificant. For, if a bank loses the trust of its customers,it will suffer a far greater loss.

The problems that can occur are many and varied, ranging from loss of key information, adverse publicity, loss of trust, legal action by customers, to official censure by regulators. All of these can be avoided with a little forethought and a professional attitude to the use of data encryption.

Where once your key information, such as customer account data and profitability figures resided on a few desktop PCs in a private office, now the information is spread far and wide. As well as the master copy on the main system, there are often copies (or at least extracts or summaries) in many other computers. Some of them will be laptops, which are incredibly easy to lose or steal.

In addition, unscrupulous staff or dishonest visitors can easily copy information from a bank's main systems to a multitude of external storage devices. These include USB flash drives, digital cameras, MP3 players, mobile phones, or even old-fashioned floppy disks. All become vulnerable if subsequently lost, stolen, or copied.

Although Windows provides some encryption with its Encrypting File System, EFS is difficult to manage and impossible to enforce. Turning it off requires just a couple of mouse clicks, and it does not protect areas of the hard disk such as the swap file or other temporary files. Most importantly, if files are copied from a Windows PC to an MP3 player, floppy disk, mobile phone, ftp site or USB drive they invariably lose their encryption, often without the user being aware that this has happened.

An effective encryption policy, therefore, needs to encompass every device onto which employees might wish to copy files. It also needs to be transparent to users, so that it can be centrally controlled without any user action being required. And it should be impossible to disable, except by authorised administrators. Ideally it should also have the selective ability to block files from being copied to external devices at all, or if the target device doesn't support the same level of encryption as that which protects the source data.

Your choice of crypto algorithm is also vital. You can choose a proprietary encryption system, but if anyone discovers the secret mathematical formula behind it, all of the files that you have every encrypted instantly become public knowledge. It is therefore wiser to use a known international standard, such as the Advanced Encryption System, or AES, with a key length of at least 256 bits.

Taking action

A management walk-through is a great way to assess the possible impact of a security breach. Simply sit a group of technical and non-technical managers around a table and discuss a series of 'what-if?' scenarios.

Such an exercise invariably highlights critical weaknesses in existing strategies, which can then be corrected before it is too late.

For example, walk through the following scenario. A director of your company attended a conference last week, during which his briefcase was snatched from the back seat of his car. The case contained a laptop computer which held a list of the top 10,000 accounts by revenue. The information was not encrypted. This happened on Friday afternoon, but it is now Monday morning and the loss has only just been reported.

Among the topics that you will need to discuss are:

- How will you ensure that those 10,000 affected companies are discreetly informed about the breach as soon as possible?

- Who will brief the regulatory authorities and your company's legal team?

- What will you tell journalists from the national press and broadcast media, once they get hold of the story and want to hear your version of events?

- Who is officially responsible for the security of your company's information, and what will he or she be doing to prevent such an event happening again?

- Who could make use of the stolen information, and how? Can you put systems in place to help detect instances of this taking place?

- What action will the marketing department take to help regain the trust of new customers who have decided to take their accounts elsewhere?

- Which laws and regulations has the organisation broken, and in which countries? For example, the UK's Data Protection Act requires companies to take care of customers' personal information.

The trust of one's customers and investors is among the greatest assets that your organisation owns. Lose it, and you are well on your way to being out of business. Failure to protect key information and data, or unnecessarily delaying making losses public, could make such a situation a reality. This is why full disk encryption should be mandatory for all organisations no matter what their size

- Martin Allen is managing director of Pointsec Mobile Technologies,