First Financial Northwest, Inc. 10-K Cybersecurity GRC - 2024-03-13

Page last updated on April 11, 2024

First Financial Northwest, Inc. reported their cybersecurity risk management and governance process in a yearly 10-K filed on 2024-03-13 17:15:21 EDT.

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10-K filed on 2024-03-13

First Financial Northwest, Inc. filed an 10-K at 2024-03-13 17:15:21 EDT
Accession Number: 0000939057-24-000074

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Item 1C. Cybersecurity.

Item 1C. Cybersecurity Risk Management and Strategy Our cybersecurity risk management and strategy are integrated into our enterprise-wide risk management (ERM) program, which leverages a “three lines of defense” model to manage risk within the organization. Such model incorporates 1) day-to-day/operational activities and controls that are managed at the business unit level 2) identification, measurement and mitigation of inherent security risks via the use of internal control and cybersecurity maturity frameworks, operating policies, independent monitoring, risk management and compliance oversight and 3) internal audit designed to provide objective and independent validation of the design and operating effectiveness of cybersecurity and information security controls. Technology risk (including cybersecurity and overall operational risk) is identified as a key risk area for the Company, and utilizes a combination of manual and automated methods as well as internal and external resources to monitor, measure and mitigate cybersecurity risks. The ability to mitigate cybersecurity risks is dependent upon an effective risk assessment process that identifies, measures, controls, and monitors material risks stemming from cybersecurity threats. These threats include any potential unauthorized activities occurring through the Company’s information systems that could adversely affect the confidentiality, integrity, or availability of the Company’s information systems or the data contained therein. The Company’s Information Security Program includes a comprehensive information security risk assessment process that incorporates the following elements: 1. Identification of reasonably foreseeable internal and external threats that could result in unauthorized disclosure, misuse, alteration, or destruction of confidential information or information systems. 2. Assessment of the likelihood and potential damage of these threats, taking into consideration the sensitivity of confidential information. 3. Assessment of the sufficiency of policies, procedures, information systems, and other arrangements in place to control risks. The risk assessment process is designed to identify assets requiring risk reduction strategies and includes an evaluation of the key factors applicable to the operation. The Company conducts a variety of information security assessments throughout the year, both internally and through third-party specialists. In designing our Information Security Program, we refer to established industry frameworks - in particular, the Federal Financial Institutions Examination Council (FFIEC) and guidance and best practices from the National Institute of Standards and Technology (NIST). The FFIEC framework offers a set of guidelines to help financial institutions effectively manage and mitigate cybersecurity risks. The framework focuses on ensuring the confidentiality, integrity, and availability of sensitive information and systems. NIST is part of the U.S. Department of Commerce and among other initiatives, develops cybersecurity standards, guidelines, and other resources to meet the needs of U.S. industry, federal agencies and the broader public. Activities range from producing specific information that organizations can put into practice immediately to longer-term research that anticipates advances in technologies and future challenges. The Company utilizes these frameworks to assist with the design of our Information Security Program, including risk mitigation controls and processes. While we believe our information security program is well-designed and appropriate for our organization, the sophistication of cyber threats continues to increase and the Company’s cybersecurity risk management and strategy may be insufficient and may not be successful in protecting against all cyber incidents. Accordingly, no matter how well designed or implemented the Company’s controls are, it may not be able to anticipate all cyber security breaches, and it may not be able to implement effective preventive measures against such security breaches in a timely manner. For more information on how cybersecurity risk may affect the Company’s business strategy, results of operations or financial condition, please refer to Item I A. Risk Factors - Risks Related to Cybersecurity, Data and Fraud. The Company uses a cross-functional approach to identify, prevent, and mitigate cybersecurity threats and incidents. We have adopted controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. We have developed a formal cybersecurity incident response plan that summarizes the steps the Company will take to respond to a 45 cybersecurity incident. The plan includes an Incident Response Team (IRT), which is responsible for addressing and coordinating all aspects of the Company’s response to cybersecurity events. The IRT is supported by operating procedures and guidelines designed to outline the expectations and processes to be followed when responding to incidents of unauthorized access to confidential information maintained by the Company or its service providers. The IRT may consult legal counsel and other external experts in connection with their respective activities. An escalation process has been established for engaging other resources and appropriate reporting protocols at both the management and Board of Directors levels. Governance Our Board of Directors has adopted, and reviews annually, a Risk Appetite Statement that articulates the Company’s attitude towards risk. The Company’s Risk Appetite Statement identifies key risk categories and establishes risk tolerances for each. Associated risk metrics are monitored quarterly by Management and reported to the Audit/Compliance/Risk (ACR) Committee of the Board and the Board of Directors. Management measures and reports inherent risk, mitigating controls, residual risk and emerging risk for various key risk categories, inclusive of cybersecurity and information security risks. The Company’s governance and oversight of cybersecurity risks are facilitated through our Information Security Program, which establishes administrative, technical, and physical safeguards designed to protect the confidential information and records of all the Bank’s clients in accordance with FDIC regulations. Our Information Security Program, along with its associated policies and guidelines, takes into account FDIC and FFIEC regulations and guidance on sensitive information protection as well as information system security. It is tailored to align with the Company’s risk assessment results, and the size, complexity, nature and scope of our activities. We maintain relevant expertise within the Bank’s management team to manage cybersecurity risks. In particular, the Bank’s Information Security Officer ( ISO ) reports directly to the Chief Risk Officer ( CRO ) and provides direction and oversight for information and cyber-security related activities across the Company including existing and emerging initiatives, service provider arrangements, incident response, business continuity management, staff training, monitoring of key controls and adjusting the information security program in response to changes in operations and internal/external threats and vulnerabilities. The ISO has more than 20 years of information security experience at financial institutions as well as information security consulting firms, and maintains various cybersecurity and IT audit professional certifications. The ISO works in partnership with the Company s Information Technology department and is supported by both internal and external information technology and information security tools, resources and staff. Both the CRO and ISO provide routine reports to various management committees and at the Board level namely the ACR Committee and the Board of Directors regarding the overall status of the Information Security Program. Such reporting encompasses various aspects, such as risk assessment, risk management and control decisions, service provider arrangements, results of independent testing, cybersecurity incidents or violations and Management’s responses, and recommendations for changes to the Information Security Program. The Board of Directors plays a crucial role, annually reviewing and approving our Information Security Program. The Board oversees efforts to develop, implement, and maintain an effective Information Security Program, including reviewing Management’s reporting on program effectiveness. Additionally, the Board of Directors’ Corporate Governance/Nominating Committee considers information technology and cybersecurity expertise when assessing potential director candidates, to help ensure the Board of Directors has the capability to appropriately oversee Management’s activities in these areas.

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