Thursday, August 18, 2005

Big Blue Gets Serious About ORM...

Big Blue is getting ever more serious about Operational Risk Management. Recently unveiled solutions for biometrics, enterprise risk management frameworks, and customer relationship management cater to their financial customers.

When IBM says listen, most finance sector CIO's stop in their tracks.

IBM demonstrated a "cancelable" biometrics system, in which a prearranged transformation algorithm intentionally distorts a person's biometric data, such as a fingerprint, rendering the original biometrics useless for identification purposes. The biometrics project was conceived out of a need "to make replacing biometrics as easy as replacing credit cards," said IBM researcher Nalini Ratha during a presentation at IBM's Industry Solutions Lab in Hawthorne, N.Y.

IBM detailed an enterprise risk-management framework intended to help financial institutions cope with a stream of regulations such as Basel II and the Sarbanes-Oxley Act. The central themes of the IBM approach are that risk and compliance need to be managed centrally, and that operational risk, such as the likelihood of losses due to unpredictable events such as natural disasters, needs to be modeled using probabilistic means. IBM tested the risk framework during its own Sarbanes-Oxley compliance process, which involved almost 10,000 financial-control points.


As a public company, they are the perfect lab for testing their own systems and solutions, especially when it comes to regulatory compliance issues. The question remains whether the SOX process at IBM will produce positive outcomes. Time will tell. Even more interesting is their approach to "cancelable biometrics". The financial industry is under new pressure to solve some of the operational loss events due to unauthorized access. Authentication using more than a User ID and password is gaining momentum as a result of new focus by the banks to stem the millions of dollars they are losing each month. This solution tries to address the privacy issue for consumers feeling their data is safe and to thwart the value to hackers gaining access and utilizing your personal biometric for fraudulent purposes.

IBM's system wouldn't entirely solve the replaceability problem of biometrics: If a hacker got hold of a user's fingerprint and made a passable model, he could still wreak havoc with it. What IBM's technology could do, however, is significantly narrow hackers' opportunities to gain access to such data. If a user's fingerprints (or facial photographs, iris scans or any other biological marker) aren't stored in any of the systems she uses them to access, cracking those systems won't give the hacker keys to the victim's biometric kingdom. If a hacker did get in - and the frequency with which companies sheepishly confess to database hacks and inadvertently exposed personal information illustrates the reality of that risk - IBM's system would let a user quickly cancel the compromised biometric profile and generate a new one, akin to replacing a lost or stolen credit card.


The cryptographers think they have found irreversible algorithms to make this commercially feasible. We wish this becomes a reality.

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