Enterprises ignorant of outsourcing security risks

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Organizations that outsource their IT systems are increasing their vulnerability to security breaches, causing possible long-term damage to their businesses, insurers have warned.

ACE European Group Limited (ACE) reported today that it has uncovered a lack of awareness among many European businesses of the increasing risks that outsourcing poses to their networks. The firm added that it is aware that there is "a degree of uncertainty" among many businesses, both as to the level of protection given to their computer systems and the cover provided by their existing insurance policies.

Shaun Cooper, ACE's senior network risk underwriter, commented: "Outsourcing presents an additional challenge to the security of IT systems. Outsourcing systems does not mean outsourcing the responsibilities for maintaining security. Businesses are not only dealing with their own employees but with those of a third party - often in another country.

"While technology, such as firewalls and anti-virus software, is part of the solution, it alone cannot guarantee network security, particularly in an outsourced environment," continued Shaun Cooper.

"Businesses must look to alternatives, including transferring the risks to insurers, in order to reduce the impact of technology failure, human error or criminal activity."

An Economist Intelligence Unit survey in September 2005, sponsored by ACE, revealed that more than half of the European companies polled had suffered significant financial damage as a result of IT system failure, including damage or misuse of systems, by staff or contractors, during the previous twelve months.

According to ACE, outsourcing computer operations further increase the risk of security breaches, as responsibility for the protection of the system cannot be outsourced in the same way.

Last year, the National Outsourcing Association (NOA) issued a report responding to allegations that staff in an Indian call center had sold data on U.K. financial services customers. While the NOA said it was unaware of any trends in security flaws in this type of outsourcing practice, it did point out that security should be of concern to any company and that they must ensure that offshore operations are managed particularly carefully.

"The success and even survival of many businesses today rests squarely on the security and reliability of their technology systems," added Cooper.

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