Retailers under pressure to tighten security

Privacy concerns and proposed laws governing the use of sensitive personal information are making it more important for retailers to be able to demonstrate due diligence when it comes to information security practices, according to IT managers at the Retail Data Security Forum in Chicago this week. An inability to do so could expose companies to serious damage to their reputations, financial losses and customer churn, they said.

"The brand can suffer real consequences" from a security breach, said Brian Kilcourse, chief strategist at the Retail Systems Alert Group, the Newton, Mass.-based organizer of this week's forum. "In the eyes of the customer, if their data is compromised, the retailer is legally and ethically bound to report that breach."

The issue is particularly urgent given that a survey by the Retail Systems Alert Group shows that retailers are amassing a growing amount of information on their customers, Kilcourse said. Increasingly, retailers are associating demographic information and transaction-level details to customer profiles -- even though they don't appear to be using the data to deliver specialized services for customers, he said.

While many retailers have worked to ensure the security and integrity of the data, queries to it in many cases are not well controlled, and the data itself is not encrypted, he said. Similarly, forensic data related to the creation and retrieval of customer information is not captured, Kilcourse said.

Information security executives understand what needs to be done to fix such issues, said the IT security director at a major Midwestern franchise chain, who requested anonymity.

"The problem is the executive sponsorship" for the investments needed to bolster security, he said. While high-profile data compromises such as those involving ChoicePoint and BJs Wholesale Club last year have raised awareness of the stakes involved, there still is an unwillingness to invest in security "without a clear demonstrable ROI," he said.

Even so, retailers have done a relatively good job of protecting consumer data so far, said Bob Belair, a partner with the Washington-based law firm of Oldaker, Biden & Belair.

The key now is being able to show that companies have done all they can to protect their consumer data, he said. That means having a formal information security plan that embodies protections commensurate with the sensitivity of the information at risk, he said. Such a plan has to be dynamic to a changing threat environment and should include processes for periodic reviews and audits. There also needs to be clear accountability and processes for training and educating those who handle consumer data, he said.

"You do all these things and a hacker still breaks in, chances are you are not liable because you have acted in a reasonable manner," Belair said.

There are four initial steps companies can take to mitigate the risk of a data security breach, Michele DeMaree, president of DeMaree Consulting, said during a presentation at the show. The first is to identify key data assets and determine what information needs to be protected. The second is to create cross functional teams to deal with privacy, security, legal and compliance issues. The third step is to begin assessing risk by measuring the frequency of policy violations against customer data and other information assets. And finally, companies need to educate data owners about risks.

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