Q: What could put your firm at severe peril of failure that has nothing to do with clients, markets, bank debt, partner flight, infighting at the top, or any of the other usual suspects?

A: A cybersecurity breach of your systems exposing confidential client info.

Yes, you’ve heard all about this before and yes, it’s recently been in the news (US Charges Three Chinese Traders with Hacking Law Firms,—The Wall Street Journal, 29 December 2016), but it’s 2017 and cyber(in)security is no longer new, surprising, or frankly excusable.

Lest you harbor any doubt, Preet Bharara, keeping his usual low profile, pointed to the firms—though not identified publicly, by every account they were Cravath and Wachtell—in announcing the break in the case:

Manhattan U.S. Attorney Preet Bharara said the case should serve as a reminder to law firms that “you are and will be targets of cyber hacking, because you have information valuable to would-be criminals.”

Legal-industry experts say law firms often lag behind their corporate clients in data-security measures, even though they are entrusted with valuable trade secrets, market-moving deal news and other sensitive information that is attractive to hackers.

Now, how long will it be before Mr. Bharara moves from warning law firms to prosecuting them? How much money would you bet on his indefinite forebearance?

Yet, on the whole, the consensus of informed observers is that Law Land is a few years behind corporate land in taking cybersecurity seriously. This demands that one ask, “Why would that be?” and I have an unflattering and a more-unflattering hypothesis.

The unflattering one is that law firms have only found themselves in the cross-hairs recently, or perhaps it would be more accurate to say they’ve only known they were in the cross-hairs recently. Serious cybersecurity also costs real money:

“Law firms aren’t necessarily committed to things that don’t make them money per se,” said Neil Watkins, the senior vice president of security, risk, compliance and privacy at legal-services company Epiq Systems.

You might think Mr. Watkins is being harsh, or speaking out of pure self-interest (Epiq offers data-breach response services). But the fact remains, per the ABA’s annual Legal Technology Survey for 2016, that only one law firm in three has a staff member specifically charged with data security, much less a full-bore CISO.

What do I mean by a “full-bore CISO?” For the larger firms, I mean a heavily credentialed and experienced data security expert, the type who comes with a 6- or 7-figure price tag, and whose background is from the likes of the NSA or companies in comparably sophisticated leagues. (I didn’t say this would be cheap, but neither is dissolution as a going concern.)

And another thing: Whatever your CISO recommends needs to have the same force as if it came from the Managing Partner and Executive Committee. No worming around it or taking an appeal.

I have another theory—the even less flattering one—about why Law Land is vulnerable: Partners who think they know better and are too smart or can’t be bothered. I can, without meeting any of the offenders lurking within your firm, assure you with a high degree of confidence of their response were you to challenge them on their security hygiene: They would lecture you with certitude and an air of finality that they know better and that nothing could possibly go wrong.

Secretaries, paralegals, and most of your partners and associates wouldn’t do that. Only the Super Egos will. But as usual, that’s who you need to watch out for.

I have zero knowledge of what might or might not have happened at Cravath and Wachtell, and the point of this article is that we all need to belatedly start to take this stuff with dead seriousness, but I can’t help but point out that my ego-driven exceptionalism theory is fully consistent with the most elite firms being vulnerable—they house the most super-sized egos.

It’s been said that the biggest “or” in the English language is the one in this phrase: “knew or should have known…”

By that standard, you have no further excuses.

Regular readers know that I’m fond of data, so here’s some.

Courtesy of the ingenious “Information is Beautiful” site, here is a diagram of:

  • Every known data breach since 2004
  • Involving at least 30,000 records
  • In the financial services, healthcare, legal, and tech sectors
  • Resulting from hacking or an inside job/leak.

The size of the bubbles corresponds to the number of records stolen and, for present purposes, you can ignore the blue and orange colors. (Orange represents what the “Information is Beautiful” folks think is a particularly interesting story.)

Don’t say you couldn’t see it coming.

Biggest Data Breaches

Biggest Data Breaches

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