What Does NIS2 Directive Mean for Your Organization

In 2016, the first cybersecurity law spanning the European Union (EU) came into effect. Officially called the Directive on security of network and information systems, but more commonly referred to as the NIS Directive, the law marked a significant step in moving the EU’s member states to a higher and more even level of cybersecurity for network and information systems.

However, since the introduction of the NIS Directive, the cybersecurity industry has undergone many changes, such as:

• The continued evolution of the cybercrime ecosystem, characterized by the rise of as-a-service business models (i.e., ransomware-as-a-service), countless ransomware gangs, and threat actors who operate like Fortune 500 companies
• Geopolitical conflicts that have led to back-and-forth cyberattacks from an array of actors, including nation states, threat groups affiliated with nation states, cybercriminals simply hoping to cash in on the chaos, vigilantes, and hacktivists
• Pandemic-accelerated digitalization and cloud adoption, which has significantly expanded the attack surface
• The debut of new technologies, including 5G telecommunications networks and seemingly ubiquitous — but still only nascent — large language models (LLMs)
• Several highly successful third-party and supply chain attacks

Accordingly, the EU recognized that an update to the NIS Directive was needed. On January 16, 2023, the “Directive on measures for a high common level of cybersecurity across the Union” — the NIS2 Directive — entered into force, and member states have until October 17, 2024 to transpose its measures into national law.

What is NIS2 Directive?

The NIS2 Directive, also known as the Network and Information Systems Security Directive, is a crucial framework that sets cybersecurity standards and requirements for enterprises. NIS2 is European Union (EU) legislation aimed at enhancing the cybersecurity posture of vital infrastructure operators and digital service providers.

It’s important to note that under the EU’s minimum harmonisation concept, NIS2 only establishes minimum requirements — individual member states within the EU are free to go above and beyond (e.g., expand the sector list, impose stricter obligations for companies, etc.). Therefore, specific details may vary from country to country, and it’s important for your organisation to stay informed as each country writes and passes their respective national laws.

General Objectives of NIS2

Per The NIS2 Directive Briefing by the European Parliament, the three general objectives of the NIS2 Directive are to:

• Increase the level of cyber-resilience of a comprehensive set of businesses operating in the European Union across all relevant sectors, by putting in place rules that ensure that all public and private entities across the internal market, which fulfil important functions for the economy and society as a whole, are required to take adequate cybersecurity measures.
• Reduce inconsistencies in resilience across the internal market in the sectors already covered by the directive by further aligning:
  1. the de facto scope;
  2. the security and incident reporting requirements;
  3. the provisions governing national supervision and enforcement; and
  4. the capabilities of the Member States' relevant competent authorities.
• Improve the level of joint situational awareness and the collective capability to prepare and respond by:
  1. taking measures to increase the level of trust between competent authorities;
  2. by sharing more information; and
  3. setting rules and procedures in the event of a large-scale incident or crisis.

These objectives are intended both to account for the changes in threat landscape and technological context noted above, and to address some noted shortcomings of the original NIS Directive that became apparent over the years, with the main issues being:

• Insufficient level of cyber resilience of businesses operating in the EU
• Inconsistent resilience across Member States and sectors
• Insufficient common understanding of the main threats and challenges among Member States
• Lack of joint crisis response.

What Sectors and Organisations Are Within the Scope of the NIS2 Directive? Does the Size of An Organization Matter?

NIS2 distinguishes between “essential” and “important” entities, which impacts what rules apply to an organization. Whether a particular organization is considered to be essential or important depends upon both its sector and its size (based upon number of employees or annual revenue).

The NIS2 Directive divides sectors into two groups:

An organization is an “essential” entity if it operates in one or more of the sectors of high criticality AND has more than 250 employees OR annual revenue of over €50 million.

An organization is an “important” entity if it operates in one or more of the sectors of high criticality OR one or more of the other critical sectors AND has more than 50 employees OR annual revenue of over €10 million.

However, it’s important to note that NIS2 also “leaves certain discretion to member states to identify smaller entities with a high security risk profile that should also be covered by the obligations of the new Directive.” In other words, smaller organizations may still fall within the scope of NIS2 if they are deemed sufficiently important and at risk.

In particular, this applies to organizations that are the only provider of an essential service within a member state and those for whom disruption would have significant impact on public safety, security or health. This has the practical impact that public administration and some digital services fall within the scope of NIS2 regardless of the organization’s size.

What Does the NIS2 Directive Require of Organizations Operating Within the EU?

From the perspective of businesses and other organizations operating with the EU, the NIS2 Directive introduces several important changes compared to the original NIS. Some of the most significant changes are outlined below, but the subjects and the accompanying explanations are intended to be illustrative rather than exhaustive or comprehensive.

NIS2 imposes a risk management approach to cybersecurity

Compared to NIS, the new directive strengthens security requirements that organizations must meet. It does so by imposing a risk management approach to cybersecurity that includes a minimum list of basic security elements, including:

• Vulnerability handling and disclosure
• Policies and procedures to assess the effectiveness of cybersecurity risk management measures
• Basic computer hygiene practices and cybersecurity training
• The effective use of cryptography and, where appropriate, encryption
• Human resource security
• Access control policies
• Asset management

Also, while NIS2 imposes the same security requirements upon essential and important entities, the Directive attempts to accommodate different operating contexts by recognizing that effective risk management measures consider an organization’s size and risk profile, and the wider consequences of a cyberattack. The takeaway is that essential entities will have a higher bar.

NIS2 specifically addresses supply chain risks

Supply chain security is a particular point of emphasis within the new directive, which requires individual companies to address cybersecurity risks in supply chains and supplier relationships.

Fortunately, the burden of supply chain security doesn’t fall solely onto individual organizations. As mentioned in the European Parliament’s briefing, “To address key supply chain risks and to assist entities in managing cybersecurity risks related to the ICT supply chain, the NIS Cooperation Group, together with the Commission and ENISA, would be tasked to carry out a coordinated risk assessment per sector of critical ICT services, systems, or products including relevant threats and vulnerabilities. The supply chain risk assessments would consider both technical factors (hardware- or software-related) and, where relevant, non-technical factors (such as suppliers being subject to interference by a non-EU country or state-backed players).”

The NIS2 Directive introduces stronger requirements for incident handling and crisis management

In addition to the preventative measures outlined above, NIS2 introduces more precise provisions for reporting significant cybersecurity incidents to the national competent authorities, the content of the reports, and the timelines that govern them. In short:

• Affected entities have 24 hours from when they first become aware of an incident to submit an early warning to the CSIRT or competent national authority, which allows them to seek guidance or operational advice on the implementation of possible mitigation measures
• The ‘early warning’ should be followed by an incident notification within 72 hours of becoming aware of the incident
• A final report is due no later than one month later

NIS2 is serious about enforcement and consequences — for organizations and for senior managers

The NIS2 Directive introduces several minimum supervisory measures to help ensure effective compliance by organizations operating within the EU. For example, competent authorities may:

• Perform regular and targeted audits
• Engage in on-site and off-site checks
• Request information and access to documents or evidence

Essential entities will be subject to stronger supervision, and will face regular, targeted, and ad hoc audits; important entities face audits only after security incidents.

The new directive is also very clear about the role of enforcement. As explained by the European Commission in an online FAQ, “So far there has been an overall reluctance across Member States to apply penalties to entities failing to put in place security measures or report incidents. This can have negative consequences for the cyber resilience of entities. To make enforcement effective, the new Directive sets up a consistent framework for sanctions across the Union. It therefore establishes a minimum list of administrative sanctions for breach of the cybersecurity risk management and reporting obligations laid down in the NIS2 Directive”

These consequences include:

• Binding instructions
• An order to implement the recommendations of a security audit
• An order to bring security measures into line with NIS2 requirements

Additionally:

• “Essential” entities are subject to administrative fines of up to €10 million or 2% of the organization’s worldwide turnover — whichever is higher.
• “Important” entities are subject to administrative fines of up to €7 million or 1.4% of the organization’s worldwide turnover — whichever is higher.

Plus, “in order to ensure real accountability for the cybersecurity measures,” NIS2 introduces provisions on the liability of senior managers.

In other words, in addition to enforcement measures that apply to an organization, NIS2 also provides provisions that directly apply to the people who make up the senior management and executive positions within organizations that fail to meet the Directive’s requirements.

How Can eSentire Help Organizations Meet Their NIS2 Obligations?

It’s likely that your organization will have to make significant changes to your cybersecurity program by October 2024 to comply with the timeframe. It’s important to understand that compliance with the NIS2 Directive is centred on your organization’s ability to achieve cyber resilience – that is, your ability to anticipate cyber threats, withstand current cyberattacks, and recover from incidents with minimal disruption.

At eSentire, we are mission-driven to help you anticipate, withstand, and recover from the most sophisticated cyberattacks so you can build a more resilient security operation. As such, many of our services within our Exposure Management, Managed Detection & Response, and Digital Forensics & Incident Response portfolios align with the NIS2 Directive’s requirements:

• Our Virtual CISO service (vCISO) can help identify and fill your organizational security gaps through services like the Security Architecture Review, Security Program Maturity Assessment, and more.
• Our Managed Vulnerability Service is an important element of a risk-based approach to cybersecurity and will help you build continuous awareness of the threat landscape, identify vulnerable systems, and remediate them quickly based on priority. Moreover, our Technical Testing services can help to address the Directive’s need to monitor and test the effectiveness of your safeguards.
• Our 24/7 multi-signal Managed Detection and Response (MDR) service provides around-the-clock security operations support from our SOC Cyber Analysts, deep visibility across your entire attack surface, 24/7 threat detection, investigation, and complete response against any threat that bypasses your existing defences.
• Our services support the provisions around incident handling and reporting. Our services can be engaged on a retainer basis so you can respond with industry-leading speed and efficacy with an industry-leading 4-hour threat suppression SLA anywhere in the world. Our Incident Response (IR) experts can also help you develop a comprehensive Incident Response (IR) plan.

To learn more about how eSentire can help you meet your obligations under the NIS2 Directive and achieve cybersecurity regulatory compliance before October 2024, connect with an eSentire cybersecurity specialist.