Risk Management: Cyberspace — Risks in a Networked World

Risk Management

by Edward A. Schirick, C.P.C.U., C.I.C., C.R.M.

Thomas L. Friedman in his The New York Times best selling book The
World Is Flat
, suggests that the evolution of information technology, which
created cyberspace, is among the events which flattened the world, literally
changing the balance of economic power among countries throughout the

Cyberspace, as everyone knows, is the online world of computer networks
that has facilitated communication, accelerated the transmission of data,
and revolutionized the way the world works. The long-term impacts of
information technology remain to be seen. But one issue is now quite
clear. Businesses will seek competitive advantages in the marketplace
for goods and services by developing new ways to use the Internet more
effectively. Most businesses will require employees to possess technical
computer skills in order to succeed in the networked world of the future.

Camps have been quick to recognize the value of the Internet as a marketing
and communication medium. Other businesses have been slower to respond.
The fact is there are individuals and businesses all over the world finding
new, largely beneficial, but sometimes destructive ways to use cyberspace.


Some people see cyberspace as the new frontier. Naturally, with anything
new, there are some uncertainties and risks, which may not be clear at
the beginning. This has certainly been the case with the Internet. As
this new online world has developed and expanded many new risks have
evolved (viruses, worms, etc.). Unfortunately, some of the risks and
their consequences have caught users unaware.

Consider the identity theft issue for example. How much of your personal
and business information is accessible online? Even the pioneers and
leaders in cyberspace were confronted with unanticipated risks. Do you
recall all of the patches Microsoft had to develop to address security
issues within its various versions of the Windows operating system?

Risk Management
in a Networked World

What Are Some Risks?

Risks can be categorized generally into First Party (Your Camp) and Third
Party (Others).

First-Party Risks

Do you remember how you communicated and conducted business before e-mail
and the Internet became so prominent in our daily lives? Fact is we have
become very dependent upon our computer networks for business. Most of
us can tolerate losing the use of our computer networks, or our Web site
for a brief time, but a prolonged outage might jeopardize some businesses

Equipment Malfunction or Breakdown — Repair Expense — Loss
of Income

What are the sources of the threats and risks that might cause your computer
equipment to malfunction or breakdown? Generally, these threats/risks
can be characterized as internal and external. Examples of internal threats/risks
include manufacturing defects (usually immediately after the warranty
expires); unauthorized downloading of software by employees (which can
impact system performance); vandalism (pollution or destruction of data)
by disgruntled employees; and failure to maintain appropriate security
for your system's resources among others.

Examples of external threats/risks include damage by lightning, power
surges, brown- outs, viruses, worms, vandalism by hackers outside your
organization, and other pollution of your systems by programs which spy
on your systems and slow down their performance.

Third Party Risks — Acts and Omissions

Examples of threats/risks to third parties may involve inappropriate
actions by camp staff, such as illegal downloading and use of copyrighted
material (copyright infringement), or unintentional trademark infringement
in advertising, and potential for libelous statements in electronic communications
(e-mail, in official camp-sponsored chat rooms, or on camp bulletin boards).

Other third party risks include failure to protect private/confidential
information about campers/parents, transmission (via e-mail) of threatening,
obscene, or harassing material by campers or staff, and unauthorized
creation of blogs by employees or campers. All of these actions or omissions
and more may create hidden liabilities for your camp.

Other Issues

Protecting children from physical and sexual abuse has become a high
priority for American society. Some of the knowledge we have about abusers
is being changed by the online world. This will require new risk management

There has been a flurry of television news reports recently about predators
stalking children over the Internet. Many of these would-be abusers of
children have positions of responsibility and authority in our communities,
in government, and law enforcement. Most have no criminal records. Likewise
you will not find their names listed in any registry of sexual abusers.
They may not be known by the child, except through the virtual reality
of the Internet. Under these circumstances, it is clear that businesses
who wish to prevent physical and sexual abuse of children in their care
must do more than just secure a criminal background check on prospective

But, why do these predators feel comfortable stalking children in cyberspace?
In my opinion, it is because the Internet creates a feeling of anonymity
and security. Experts who have studied the motivation for abusers indicate
that one of the reasons they act is they feel they won't get caught.
How do you guard against a camper being stalked by a stranger over the
Internet? How do we prevent a camper from being befriended by a staff
person/predator who subsequently stalks them over the Internet after
camp is over? Are there other concerns in light of the changing online

Awareness and involvement by camp management and coordination with parents
is one approach that makes sense. The good news is law enforcement is
aware of these predators and the risks they present to the safety and
security of children. In addition, law enforcement is taking innovative
action to reduce the vulnerability of children in this new online world.
Children must also be educated about these risks. Parents and those who
act in place of parents must be vigilant and knowledgeable. What is your

Don't Assume Your Camp Insurance Will Respond

Your camp's first-party (property) insurance may respond to some
of the first-party risks and losses your camp may suffer, but don't
assume it will. Check into the scope of your computer insurance coverage
to determine if mechanical breakdown is a covered peril. How does your
insurance respond to damage from lightning, power surge, and brown out?
How big is your deductible? Do you have replacement cost protection?
Does your crime insurance respond to computer fraud, including electronic
funds transfer fraud? How does it respond if your computer network is
infected by a virus?

Liability insurance protection against third party cyberspace threats/risks
is incomplete. Some versions of the commercial general liability policy
covering camps specifically exclude personal injury (including libel)
arising out of chat rooms and bulletin boards, for example. Likewise,
some potential third party liabilities, such as failure to protect private
camper and camper parent information, may involve financial losses. These
losses are most likely not covered by the commercial general liability
policy, which is designed to respond to bodily injury, property damage,
personal, and advertising injury liability claims.


If you haven't taken the time to consider the threats/risks to
your computer network resources take the time to do so in the very near
future. Impacts may involve first-party (your camp) or third-party (others)
interests. Realize that the risks/threats may be internal, and others
may be external to your camp.

Your camp insurance program may respond to some first-party and fewer
third-party threats/risks. Find out where you may be exposed. After you
have identified the risks, take appropriate action to reduce the risk
of damage or destruction of your camp computer network resources. Consider
establishing procedures for the use of the Internet, prohibiting those
actions that might create third-party liabilities. Investigate transferring
these third-party risks via insurance or other contractual risk methods.

In Conclusion

Discuss cyberspace risk management issues with your insurance brokers
and computer system consultants or advisors. Partner with parents when
appropriate. Integrate your — cyberspace risk management practices
into the rest of your camp risk management plan. Be aware of evolving
cyberspace risks and keep your camp risk management plan up to date.

Edward A. Schirick, C.P.C.U., C.I.C., C.R.M., is president of Schirick
and Associates Insurance Brokers in Rock Hill, New York, where he specializes
in providing risk management advice and in arranging insurance coverage
for camps. Schirick is a chartered property casualty underwriter and
a certified insurance counselor. He can be reached at 845-794-3113.

Originally published in the 2006 July/August
issue of Camping Magazine.