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Cybersecurity in Europe is Improving: Thank You GDPR?

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Cybersecurity in Europe is Improving Thank You GDPR

By Jake Olcott, VP of Strategic Partnerships at BitSight

After years of debate over whether to impose new cybersecurity regulations on companies, General Data Protection Regulation (GDPR) laws went into effect in May 2018. Already we’ve seen several data breach victims ordered to pay fines under the new rules and cookie disclosure notices are popping up on more websites than ever.

Everyone is waiting with bated breath for the first report from the Information Commissioner’s Office (ICO), to be issued after the implementation of GDPR, in order to gain an understanding of the magnitude of breach reporting.

The most recent report from the Information Commissioner’s Office (ICO) has revealed a 29% increase in the number of reported data security incidents, from 3146 between April and June 2018, to 4056 from July to September 2018. This demonstrates a 490% increase compared to the same quarter in 2017. This doesn’t necessarily mean that organisations are experiencing more incidents, but it does means that more are now being reported, as organisations try to tread carefully.

This has inevitably been fuelled by GDPR, as well as the significant data breach incidents that recognisable brands have suffered. However, this increase is also likely due to the new data breach notification requirements under GDPR, which require organisations to report incidents within 72 hours of becoming aware of them.

Drilling into the statistics, most data breach incidents are down to people, processes and inadequate policies. These frequently involve internal users making mistakes, including the incorrect disclosure of data; this accounted for 62% of all data incidents between July and September 2018.

In terms of monetary penalties, £875,000 of fines were issued under the UK’s Data Protection Act (DPA), between July and September 2018, down from £1,030,000 between April and June 2018. It should be noted that from GDPR’s enforcement on 25th May to the beginning of October 2018, fines reached £1,425,000, with organisations undoubtedly falling foul of the new regulations as they work towards achieving full compliance.

But let’s think about the bigger picture. Is GDPR working? How would we know?

For years, global policymakers have struggled to develop effective responses to cyber threats, in part because they just don’t have the data to understand what’s actually happening in cyberspace. Think about it — if you are a policymaker considering how to address unemployment, you can turn to the Office for National Statistics (ONS) – which measures labour market activity, working conditions and the impact of economic activity – in addition to comprehensive census data on personal and socio-demographic, and economic issues.

When it comes to cybersecurity, the UK Government’s National Cyber Security Centre (NCSC) has taken the leading role in significantly raising awareness of the evolving cybersecurity risks facing all UK businesses with a digital footprint, as well as the threat to the UK’s Critical National Infrastructure (CNI). This includes a comprehensive bank of guidance on a variety of topics, alongside extensive education and research papers, insights, alerts and advisories, and recommended certified cybersecurity products.

BitSight is taking a different approach to cybersecurity and risk management, enabling it to profile and identify specific threats. Thanks to its extensive data collection and processing techniques and capabilities, BitSightis able to collect, evaluate, and measure cybersecurity performance across global organisations, providing unique and valuable insight into global, regional, and sectoral performance trends across organisations of varying sizes.

When BitSight recently analysed the security performance of more than 140,000 organisations worldwide, the findings were surprising. While its research revealed a steady decrease in security performance across all worldwide regions, organisations within continental Europe actually improved their security performance over the last year. Some of the areas that organisations have improved on include the implementation of stronger controls to reduce Internet exposed services (open ports).

Security performance data may be useful to policymakers as they consider the impact of existing regulations like GDPR, but also future policies and regulations. Policymakers around the world will continue to consider implementing regulations based on GDPR that will protect citizens from poor data security management.

The industry has already seen many calls to adopt similar legislation elsewhere around the world, including Apple’s Tim Cook who, in October 2018 at the Conference of Data Protection and Privacy Commissioners in Belgium, proposed that the U.S enact a policy similar to GDPR. This summer, California passed the California Consumer Privacy Act that imposes stronger privacy regulations for companies doing business in the state, with this also being discussed across the United States.

How will policymakers judge the necessity or effectiveness of these efforts? In what sectors should they spend their time and focus? On what sized companies? What data will they use? How will they model the impact of introducing such policies?

Global policymakers must begin thinking about the essential elements that will be necessary to build a lasting legal and policy framework to address these significant cyber risks. The ONS was established over 20 years’ ago; as we look ahead to the next two decades, the transformational changes that will occur worldwide as a result of technological and connectivity developments will inevitably present a new wave of cybersecurity challenges, making quantitative cybersecurity more crucial than ever.

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19 1

Organizations in the Middle East have had to take immediate actions in reaction to the COVID-19 pandemic, such as shifting to remote and virtual work, implementing new ways of working and redirecting the workforce on critical activities. According to Deloitte’s 10th annual 2020 Middle East Human Capital Trends report, “The social enterprise at work: Paradox as a path forward,” organizations now need to think about how to sustain these actions by embedding them into their organizational culture.

“COVID-19 has created a clarifying moment for work and the workforce. Organizations that expand their focus on worker well-being, from programs adjacent to work to designing well-being into the work itself, will help their workers not only feel their best but perform at their best. Doing so will strengthen the tie between well-being and organizational outcomes, drive meaningful work, and foster a greater sense of belonging overall,” said Ghassan Turqieh, Consulting Partner, Human Capital, Deloitte Middle East.

According to the Deloitte report, many organizations in the Middle East made quick arrangements to engage with employees in the wake of the pandemic through frequent communications, multiple webinars where senior leaders addressed employee concerns, virtual employee events, manager check-ins, periodic calls and other targeted interactions with the workforce.

The report also discussed how UAE and KSA governments have reexamined work policies and practices, amended regulations and introduced COVID-19 initiatives to support companies and the workforce in the public and private sectors. Flexible and remote working, team-building and engagement activities, well-ness programs, recognition awards and modern workspaces are among the many things that are now adding to the employee experience.

Key findings from the Deloitte global report include:

  • Only 17% of respondents are making significant investments in reskilling to support their AI strategy with only 12% using AI primarily to replace workers;
  • 27% of respondents have clear policies and practices to manage the ethical challenges resulting from the future of work despite 85% of respondents saying the future of work raises ethical challenges;
  • Three-quarters of leaders are expecting to source new skills and capabilities through reskilling, but only 45% are rewarding workers for the development of new skills; and
  • Only 45% of respondents are prepared or very prepared to take advantage of the alternative workforce to access key capabilities despite gig workers being likely to comprise 43% of the U.S. workforce this year according to the Bureau of Labor Statistics.

“Worker well-being is a top priority today, and similarly to the rest of the world, companies in the Middle East are focusing their efforts to redesign work around well-being by understanding workforce well-being needs,” said Rania Abu Shukur, Director, Human Capital, Consulting, Deloitte Middle East.

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One in five insurance customers saw an improvement in customer service over lockdown, research shows

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One in five insurance customers saw an improvement in customer service over lockdown, research shows 2

SAS research reveals that insurers improved their customer experience during lockdown

One in five insurance customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics. This far outweighed the 11% of customers who felt it had deteriorated over the same period.

This is positive news for insurers during such challenging times, with 59% of customers also saying that they would pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of insurance customers using a digital service or app has grown by 10%. Three-fifths (60%) of new users plan to continue using these digital services moving forward.

However, while the number of digital users grew over lockdown, half of the insurance customer base has not yet chosen to move to digital insurance apps or services.

Paul Ridge, Head of Insurance at SAS UK & Ireland, said:

“It’s impressive that there was a net improvement in customer experience during lockdown, despite the challenges the industry was facing with a transition to remote working and increased claims for things like cancelled holidays. While many were forced to wait on customer help lines for long periods, part of the improvement may be explained by even a small (10%) increase in the number of digital users.

“However, it’s clear that a huge number of customers are still yet to make the move online. It’s vital that insurers provide the most accurate, timely and relevant offerings to customers, and this is best achieved by having additional insight into online customer journeys so they can understand them better. Using analytics and AI, insurers can seize this opportunity to digitalise their customer experience and offer a more personalised approach.”

Meanwhile, for insurers that fail to offer a consistently satisfactory customer experience, the price could be severe. A third (33%) of customers claimed that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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The power of superstar firms amid the pandemic: should regulators intervene?

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The power of superstar firms amid the pandemic: should regulators intervene? 3

By Professor Anton Korinek, Darden School of Business and Research Associate at the Oxford Future of Humanity Institute. Gosia Glinska, associate director of research impact, Batten Institute for Entrepreneurship and Innovation, Darden School of Business

Recent news that Apple hit a market cap of USD2 trillion highlights an extraordinary success story: A once struggling computer-maker on the verge of bankruptcy innovates its way to becoming the most valuable publicly traded company in the United States.

Apple’s 13-figure valuation is indicative of a larger trend that is not entirely benign — the rise of a handful of superstar firms that dominate the economy. Over the past three decades, advances in information technology, mainly the Internet, have supercharged the superstar phenomenon, allowing a small number of entrepreneurs and firms to serve a large market and reap outsize rewards. And COVID-19 has greatly accelerated the phenomenon by pushing us all into a more virtual world.

Apple — along with Amazon, Facebook, Google, Microsoft and Netflix — is a case in point. The combined market value of those six companies exceeds USD7 trillion, which accounts for more than a quarter of the entire S&P 500 index. Even amid the pandemic’s economic wreckage, these megacompanies continue to prosper. The combined share price for Apple and its five peers was up more than 43 percent this year, while the rest of the companies in the S&P 500 collectively lost about 4 percent.[1]

Superstar firms can be found in almost every sector of the economy, including tech, management, finance, sports and the music industry. They command increasing market power, which has consequences for technological, social and economic progress. It is, therefore, critical to understand how their advantages arose in the first place.

THE FORCES BEHIND THE SUPERSTAR PHENOMENON

The “economics of superstars” was first studied by the late University of Chicago economist Sherwin Rosen. Forty years ago, Rosen argued that certain new technologies would significantly enhance the productivity of talented workers, enabling superstars in any industry to greatly expand the scope of their market, while reducing market opportunities for everyone else.[2] Digital innovations, including advances in the collection, processing and transmission of information, is what Rosen envisioned would lead to the superstar phenomenon.

Digital technologies are information goods, which are different from the traditional, physical goods in the economy. What it means is that fundamentally different economic considerations apply. Unlike physical goods — a loaf of bread or a car — information goods have two key properties: They are non-rival and excludable. Non-rival means that something can be used without being used up. Excludability means that an owner of digital innovation can prevent others from using it, by protecting it with patents, for example. These two fundamental properties of information goods are what give rise to the superstar phenomenon.

In a working paper I co-authored with Professor Ding Xuan Ng at Johns Hopkins University[3], we described superstars as arising from digital innovations that require upfront fixed costs that allow firms to reduce the marginal costs of serving additional customers.[4] For example, once an online travel agency has programmed its website at a fixed cost, it can easily displace thousands of traditional travel agents without much additional effort, scaling at near-zero cost.

Because a firm can exclude others from using its digital innovation, it automatically gains market power. The innovator then uses that power to charge a mark-up and earn a monopoly rent — basically, a price superstars charge in excess of what it costs them to provide the good — which we call the ‘superstar profit share’.

THE POLICYMAKER’S DILEMMA

In a vibrant free market economy, businesses compete for customers by innovating and improving their offerings while keeping prices low; otherwise, they are displaced by more innovative rivals entering the market. Unfortunately, the increasing monopolization of the economy by technology superstars is weakening the competitive environment around the world.

Monopoly power is the main inefficiency from the emergence of superstar firms, because superstars can exclude others from using the innovation that they have developed.

So, what policy measures can be employed to mitigate the inefficiencies arising from the superstar phenomenon?

We do have antitrust policies designed to promote competition and hence economic efficiency. Authorities could take a drastic measure and break up monopolies. Or they could tax all those excess profits megacompanies make.

Another policy to consider involves giving consumers control rights over their data. Right now, only companies have that data, and they are selling it. If you free it up and don’t allow them to sell it anymore, it reduces their monopoly profits. And if you give consumers more freedom over their data, they could, for example, share it with the latest start-up and create a more competitive landscape.

However, such policy remedies can be a double-edged sword. On the one hand, they reduce monopoly rents. On the other hand, they can also reduce innovation.

Innovation requires investments in R&D, which represent a significant sunk cost that only large firms can afford. Government regulations can easily backfire, discouraging large firms from making long-term R&D investments.

What, then, is the best policy intervention? Professor Ding Xuan Ng and I believe that basic research should be public. Digital innovations should be financed by public investments and should be provided as free public goods to all. This would make the superstar phenomenon disappear, and the effects of digital innovation would simply show up as productivity increases.[5]

We live in a brave new world that is increasingly based on information. Because the information economy is different from the traditional economy, antitrust policy should be revamped to reflect that. Instead of worrying about the economy being eaten up by these gigantic monopolies, policymakers need to focus on the question ‘What specific actions can we pursue to make the economy more competitive and efficient?’

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