[Dataloss] Perspective: Who says security breaches are small potatoes?

[security curmudgeon]

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From: InfoSec News <alerts at infosecnews.org>

http://news.com.com/Who+says+security+breaches+are+small+potatoes/2010-1029_3-6185856.html

By Eric J. Sinrod
May 23, 2007

perspective - The impact of computer security breaches is not 
hypothetical. The financial consequences are real and can be immediate.

The economic cost of unauthorized computer intrusions is illustrated in 
the first-quarter earnings report posted by TJX Companies.

By way of background, TJX refers to itself as the leading off-price 
retailer of apparel and home fashions within the United States and 
globally. TJX operates 830 T.J. Maxx, 763 Marshalls, 271 HomeGoods, 127 
A.J. Wright stores, and 35 Bob's Stores in the United States. TJX also 
states that it operates 185 Winners and 69 HomeSense stores in Canada, as 
well as 211 T.K. Maxx stores in Europe.

According to its first-quarter earnings report, TJX suffered unauthorized 
intrusions into portions of its computer systems that process and store 
information related to credit card, debit card, and check and 
"unreceipted" merchandise return transactions that were discovered during 
the fourth quarter of the prior fiscal year.

TJX has been investigating the intrusions with the assistance of computer 
security and incident response experts. Management believes customer 
information was stolen and that this information primarily relates to 
portions of transactions at its stores (not including Bob's Stores) from 
2003 through part of 2004, and from mid- to late 2006.

The financial upshot is that TJX recorded an after-tax charge of 
approximately $12 million for costs incurred during the first quarter 
relating to the intrusions. That's in addition to an after-tax charge of 
approximately $3 million for costs recorded during the prior fourth 
quarter.

The charges include costs to investigate and contain the intrusions, as 
well as to strengthen computer security and systems. It also includes 
costs relating to communications with customers and for technical, legal 
and other related charges. The company continues to experience ongoing 
costs related to the intrusions, but still cannot estimate a range or its 
potential exposure. Such costs and losses, it says, could wind up being 
material to TJX's results.

Without knowing whether TJX took adequate steps to try to prevent the 
intrusions before they occurred, there are obvious lessons here. Plainly, 
companies of all types should want to avoid the costs of investigations, 
customer communications, and technical, legal and monitoring costs--not to 
mention potential exposure for related losses--which arise from computer 
system breaches.

Thus, companies should educate themselves now, if they have not done so 
already, as to how best to strengthen their computer security. Breach 
prevention bears a cost. But that expense pales in comparison to what a 
company will spend after a breach takes place. Better to be penny-wise 
rather than pound-foolish, and companies would be smart on the front-end 
to take steps that prevent breaches from ever occurring

-=-

Biography

Eric J. Sinrod is a partner in the San Francisco office of Duane Morris. 
His focus includes information technology and intellectual-property 
disputes. To receive his weekly columns, send an e-mail to ejsinrod (at) 
duanemorris.com with "Subscribe" in the subject line. The views expressed 
in this column do not necessarily reflect those of Sinrod's law firm or 
its individual partners.