Password Management Policy

## Why Password Management Matters

Passwords remain the primary authentication method for 90%+ of business applications despite decades of "passwords are dead" predictions. While passwordless authentication is emerging, the reality is that your organization depends on hundreds or thousands of passwords daily—and each one is a potential security vulnerability or compliance requirement.

Consider this: The average business user manages 191 passwords. When overwhelmed, users resort to dangerous shortcuts: reusing passwords across systems, writing them down, using simple patterns (Password1, Password2), or storing them in plaintext files. A single compromised password can cost organizations millions through data breaches, ransomware attacks, or compliance violations.

This Password Management Policy Template provides a comprehensive, NIST-compliant framework for securing your organization's authentication infrastructure. Based on NIST Special Publication 800-63B guidelines and informed by real-world breach data, this policy balances security requirements with user productivity—because a policy users can't follow won't improve security.

## The Evolution of Password Best Practices

Password guidance has changed dramatically. Old recommendations—change passwords every 90 days, require special characters, ban password reuse—have been replaced by evidence-based practices that actually improve security.

### What Changed? The NIST Revelation

In 2017, NIST fundamentally revised password guidelines based on research showing that traditional requirements actually *weakened* security:

**Old Rule**: Require password changes every 60-90 days

**Problem**: Users make minor, predictable modifications (Password1 → Password2)

**New Rule**: No periodic changes unless compromise is suspected

**Old Rule**: Require complex character combinations (!@#$%^)

**Problem**: Users create patterns (P@ssw0rd!) that are predictable to attackers but hard for users

**New Rule**: Emphasize length over complexity, screen against known breached passwords

**Old Rule**: Ban password reuse forever

**Problem**: Users write down passwords or use incremental patterns

**New Rule**: Allow password managers and focus on breach detection

**Old Rule**: Lock accounts after 3-5 failed attempts

**Problem**: Enables denial-of-service attacks against user accounts

**New Rule**: Rate-limiting instead of lockouts, plus MFA for protection

### Why This Matters for Your Policy

Following outdated password rules creates security theater—policies that appear secure but don't protect against real threats. This template implements current best practices so your policy actually reduces risk instead of frustrating users.

## Core Password Policy Components

### 1. Password Complexity Requirements

**Length Over Complexity**

Research shows password length is more important than character complexity. A 16-character passphrase like "correct-horse-battery-staple" is exponentially stronger than "P@ssw0rd1" despite having no special characters.

**Recommended Requirements:**

- Minimum length: 12-14 characters for users, 20+ for admin/privileged accounts

- No maximum length (support passphrases)

- No mandatory character type requirements (allow all-lowercase if long enough)

- Screen against known breached passwords (Have I Been Pwned database)

- Block common passwords and dictionary words

- Block username and company name

**Why This Works:** Longer passwords increase the computational difficulty of cracking exponentially. A 12-character password has 95^12 possible combinations (if using full character set) versus 95^8 for an 8-character password—the difference is millions of years of cracking time versus hours.

### 2. Multi-Factor Authentication (MFA)

Passwords alone are insufficient. MFA adds a second authentication factor, protecting accounts even when passwords are compromised.

**MFA Requirement Framework:**

**Mandatory for:**

- All administrative and privileged accounts

- Access to sensitive data (PII, financial, IP)

- Remote access (VPN, cloud applications, remote desktop)

- Email and collaboration platforms

- Financial systems and payment processing

**Recommended for:**

- All user accounts (phased rollout)

- Customer-facing applications

- Mobile device access

**MFA Method Hierarchy** (most secure to least):

1. Hardware security keys (YubiKey, Titan Key)

2. Authenticator apps (Microsoft Authenticator, Google Authenticator, Authy)

3. Push notifications (Duo, Okta Verify)

4. SMS/Text codes (only if nothing else available)

**Never Use:** Security questions, email-based codes for critical systems

**Implementation Tip:** Start with admin accounts and high-risk systems, then expand to all users over 3-6 months. Provide clear setup guides and help desk support.

### 3. Password Lifecycle Management

**Initial Password Assignment**

When creating new accounts:

- Generate random, unique temporary passwords

- Force password change on first login

- Provide clear instructions for password creation

- Verify user identity before providing initial credentials

**Never:**

- Use default passwords (admin/admin, password/password)

- Derive passwords from usernames

- Email passwords in plaintext

- Use the same initial password for multiple users

**Password Changes: When Required**

Modern best practice: Don't force periodic password changes. Instead, require changes only when:

1. **Suspected Compromise**: Breach notification, malware detection, phishing attack

2. **Confirmed Breach**: Account accessed by unauthorized party

3. **Shared Account Misuse**: Shared credential used inappropriately

4. **Departing User**: User with shared knowledge leaves the organization

5. **Privileged Account Rotation**: Quarterly rotation for break-glass accounts

**Password Reset Process**

Secure password reset prevents unauthorized access:

**Identity Verification Methods:**

- MFA to registered device

- Manager approval (for in-person verification)

- Valid government ID (in-person at help desk)

- Security token/certificate

**Never Accept:**

- Security questions (easily researched or guessed)

- Callback to phone number in directory (can be spoofed)

- Email-only verification (email may be compromised)

**Self-Service Reset:**

Enable self-service password reset with MFA verification to reduce help desk burden while maintaining security. Tools like Azure AD Self-Service Password Reset, Okta, or similar.

### 4. Password Storage and Transmission

**How Passwords MUST Be Stored:**

**Application/System Password Storage:**

- Hash with modern algorithms (bcrypt, Argon2, PBKDF2, scrypt)

- Add salt (unique random value per password)

- Never store passwords reversibly encrypted

- Never store passwords in plaintext

**User Password Storage (Password Managers):**

- Deploy approved enterprise password manager

- Encrypt password vault with strong master password + MFA

- Enable secure sharing for team passwords

- Audit password manager usage quarterly

**Approved Enterprise Password Managers:**

- 1Password Business

- LastPass Enterprise

- Dashlane Business

- Bitwarden Enterprise

- KeePass (for highly controlled environments)

**Password Transmission Requirements:**

- Only transmit over encrypted channels (TLS 1.2+)

- Never send passwords via email, chat, or SMS

- Never display passwords in URLs

- Mask password fields in user interfaces

### 5. Prohibited Password Practices

These practices MUST be prohibited and enforced through technical controls and user education:

**Never Allowed:**

- Writing passwords on sticky notes or documents

- Sharing passwords between users

- Using same password across multiple systems

- Storing passwords in browser "remember password" (unless enterprise-managed)

- Emailing or messaging passwords

- Using passwords in screen shares or recorded sessions

- Including passwords in scripts without secure credential storage

- Using personal password managers for business passwords

**Technical Enforcement:**

- Deploy password filters to block weak passwords

- Screen against breached password databases

- Disable clipboard in password fields (where appropriate)

- Implement password strength meters

- Deploy password manager browser extensions (enterprise)

## Privileged Account Password Requirements

Privileged accounts (admin, root, service accounts) require enhanced protection due to elevated risk:

### Administrative Account Passwords

**Requirements:**

- Minimum 20 characters

- Stored in privileged access management (PAM) solution

- Rotated quarterly or after use

- Checked out/in from password vault

- Session recording for audit

- Just-in-time (JIT) elevation instead of standing privileges

**PAM Solutions:**

- CyberArk Privileged Access Security

- BeyondTrust Privilege Management

- Thycotic Secret Server

- Delinea (formerly Centrify)

### Service Account Passwords

Service accounts (database connections, API keys, automation) present unique challenges:

**Best Practices:**

- Use managed service identities where possible (Azure MSI, AWS IAM roles)

- 32+ character random passwords

- Store in secure vault (HashiCorp Vault, Azure Key Vault, AWS Secrets Manager)

- Rotate automatically (30-90 days)

- Monitor for unexpected usage

- Disable interactive login

- Limit to specific hosts/services

### Break-Glass/Emergency Accounts

Emergency accounts for disaster recovery must balance accessibility and security:

**Implementation:**

- Store passwords in sealed envelopes in secure location (safe)

- Require two-person integrity for access

- Generate new passwords after each use

- Annual verification of sealed envelopes

- Alternative: Split knowledge (password requires combining two secrets)

## Password Breach Response

Despite best efforts, password breaches happen. Have a response plan:

### Detection

**Indicators of Compromised Passwords:**

- Unusual login times or locations

- Multiple failed login attempts

- Impossible travel (login from US and China within minutes)

- Suspicious password reset requests

- Account activity post-login (unusual data access, downloads, modifications)

**Monitoring Tools:**

- SIEM alerts for anomalous authentication

- Azure AD Identity Protection

- Okta Threat Insight

- Google Workspace Security Center

### Response Procedure

**Immediate Actions (within 1 hour):**

1. Disable affected account(s)

2. Notify user via secure channel (not email)

3. Review recent account activity

4. Preserve logs for investigation

5. Check for lateral movement

**Investigation (1-24 hours):**

1. Determine breach scope (one account or many?)

2. Identify compromised data

3. Trace attack vector (phishing? malware? reused password?)

4. Check for persistent access (backdoors, API keys)

**Remediation (24-72 hours):**

1. Force password reset for affected accounts

2. Revoke active sessions

3. Reset MFA tokens

4. Review and revoke recent permission grants

5. Deploy additional monitoring

**Communication (as appropriate):**

- Notify affected users

- Report to management

- Regulatory notification (GDPR, state breach laws)

- Customer notification (if their data affected)

## Password Policy for Different User Types

One size doesn't fit all. Tailor requirements to risk:

### Standard Users

**Requirements:**

- 12-character minimum

- Screen against breach databases

- MFA for remote access

- Password manager required

- Training: annual refresh

**Systems:** Email, collaboration tools, standard business applications

### Privileged Users (IT Admin, Developers)

**Requirements:**

- 14-character minimum

- MFA for all access

- PAM/vault for privileged passwords

- Quarterly password rotation for privileged accounts

- Training: quarterly, includes social engineering

**Systems:** Active Directory, databases, cloud admin consoles, infrastructure

### Executive/High-Value Targets

**Requirements:**

- 14-character minimum

- MFA with hardware keys preferred

- Enhanced monitoring

- Dedicated incident response plan

- Training: quarterly, targeted threat briefings

**Systems:** All executive access, board portals, financial systems

### Contractors/Third-Party

**Requirements:**

- 14-character minimum

- Mandatory MFA

- Time-limited accounts (auto-expire)

- No privileged access without justification

- Separate identity provider/domain

**Systems:** Limited to required applications only

## Compliance and Regulatory Requirements

Password policies must satisfy multiple regulatory frameworks:

### NIST 800-63B (Federal/Highly Regulated)

**Key Requirements:**

- Minimum 8 characters (we recommend 12+)

- Screen against known breaches

- No composition rules (allow any characters)

- No periodic changes

- MFA for privileged access

**Compliance**: Follow template with 12+ character minimum

### PCI-DSS (Payment Card Industry)

**Key Requirements:**

- 7-character minimum (we recommend 12+)

- Complexity requirements

- 90-day maximum password age

- No password reuse (last 4 passwords)

**Compliance**: Template exceeds requirements with option to enforce 90-day rotation for PCI scope systems

### HIPAA (Healthcare)

**Key Requirements:**

- No specific password requirements

- "Technical safeguards" to protect ePHI

- Unique user IDs

- Automatic logoff

**Compliance**: Template meets HIPAA by implementing strong authentication

### GDPR (EU Data Protection)

**Key Requirements:**

- "Appropriate technical measures"

- Protection against unauthorized access

- Data breach notification

**Compliance**: Template implements appropriate controls, enables breach detection

### SOX (Financial Reporting)

**Key Requirements:**

- Access controls

- Audit trails

- Segregation of duties

**Compliance**: Template supports through privileged account management and logging

### State Privacy Laws (CCPA, etc.)

**Key Requirements:**

- "Reasonable security"

- Protection of personal information

**Compliance**: Template exceeds "reasonable" standard

## Implementing Password Policy: Phased Approach

Rolling out new password requirements requires planning to avoid user disruption:

### Phase 1: Foundation (Month 1-2)

**Actions:**

- Deploy password manager

- Document current password practices

- Train help desk on new policy

- Prepare user communication

- Configure breach password screening

**Users Affected:** IT staff, pilot group (50-100 users)

### Phase 2: Privileged Accounts (Month 2-3)

**Actions:**

- Deploy PAM solution

- Migrate admin passwords to vault

- Implement MFA for privileged access

- Automated service account rotation

- Enhanced monitoring for admin accounts

**Users Affected:** IT administrators, developers (5-10% of organization)

### Phase 3: Standard User MFA (Month 3-5)

**Actions:**

- Deploy MFA platform (Duo, Okta, Azure MFA)

- Enroll users in waves

- Provide self-service enrollment

- Help desk support surge

- Monitor adoption metrics

**Users Affected:** All users (100%)

### Phase 4: Password Policy Updates (Month 5-6)

**Actions:**

- Increase minimum password length

- Remove forced password changes

- Enable breach password screening

- Deploy password strength meters

- Update account lockout thresholds

**Users Affected:** All users (applied on next password change)

### Phase 5: Continuous Improvement (Ongoing)

**Actions:**

- Monthly password manager audit

- Quarterly privilege access review

- Annual policy review and updates

- User training refreshers

- Emerging threat adaptation

## User Education and Training

Best policy fails without user buy-in. Education is critical:

### Initial Rollout Training

**Content:**

- Why password security matters (real breach examples)

- New policy requirements

- Password manager setup (hands-on)

- MFA enrollment (step-by-step)

- Help desk resources

**Format:** 30-minute live or recorded session + written guide

**Verification:** Quiz with 80% passing score

### Annual Refresher Training

**Content:**

- Policy reminders

- Recent threat landscape updates

- Social engineering/phishing awareness

- Password hygiene tips

- New tools/features

**Format:** 15-minute online module

**Verification:** Acknowledgment signature

### Targeted Training for High-Risk Users

**Executives, Finance, HR:**

- Quarterly threat briefings

- Simulated phishing exercises

- One-on-one security coaching

- Enhanced incident response procedures

## Measuring Password Policy Effectiveness

Track these metrics to assess program maturity:

**Password Hygiene Metrics:**

- % users enrolled in password manager

- % accounts with MFA enabled

- Average password length

- % accounts using breached passwords

- % accounts with repeated passwords across systems

**Security Event Metrics:**

- Password-related help desk tickets

- Account compromises (absolute and rate)

- Phishing success rate

- Brute force attack attempts blocked

- Policy exception requests

**Compliance Metrics:**

- % systems enforcing policy

- Audit findings related to passwords

- Time to remediate password vulnerabilities

- PAM adoption rate

- Training completion rates

**Target Benchmarks:**

- 95%+ MFA adoption

- 90%+ password manager adoption

- Less than 0.1% using breached passwords

- Less than 1% password-related incidents

- Zero critical audit findings

## Common Password Policy Mistakes

Learn from these common implementation failures:

### Mistake 1: Too Complex to Follow

**The Problem:** 15-character passwords with uppercase, lowercase, numbers, symbols, no repeating characters, changed monthly.

**The Result:** Users write passwords down, use password1→password2 patterns, or quit.

**The Fix:** Emphasize length, allow passphrases, provide password manager.

### Mistake 2: No Exception Process

**The Problem:** Rigid policy with no exceptions for legitimate special cases.

**The Result:** Shadow IT workarounds, stored passwords in plaintext, disabled MFA.

**The Fix:** Documented exception process with security review and compensating controls.

### Mistake 3: Treating All Accounts the Same

**The Problem:** Same password policy for domain admin and conference room calendar.

**The Result:** Either inadequate protection for privileged accounts or unnecessary burden on low-risk accounts.

**The Fix:** Tiered requirements based on account privileges and data sensitivity.

### Mistake 4: Set-and-Forget Policy

**The Problem:** Write policy, never update as threats and technology evolve.

**The Result:** Outdated requirements, missing modern protections, compliance gaps.

**The Fix:** Annual policy review, continuous threat monitoring, technology updates.

### Mistake 5: No Technical Enforcement

**The Problem:** Policy exists but systems don't enforce it.

**The Result:** Policy violations go undetected, false sense of security.

**The Fix:** Configure systems to enforce policy, monitor compliance, automate where possible.

## Getting Started with This Template

The Password Management Policy Template provides everything needed for immediate implementation:

**What's Included:**

- Complete password policy document (ready to customize)

- Technical implementation guides

- User training materials and presentations

- Password manager deployment guide

- MFA implementation roadmap

- Help desk procedures

- Password breach response playbook

- Compliance mapping guide

**How to Use:**

1. **Review template** with security team and stakeholders

2. **Customize** requirements for your risk tolerance and compliance needs

3. **Select** password manager and MFA solutions

4. **Plan** phased rollout using included implementation guide

5. **Train** users with provided materials

6. **Deploy** technical controls following implementation guides

7. **Monitor** effectiveness with recommended metrics

8. **Update** annually based on threat landscape

**Customization Checklist:**

- ✅ Replace [Company Name] placeholders

- ✅ Set minimum password length (12, 14, or 16 characters)

- ✅ Choose MFA methods and timeline

- ✅ Select approved password manager(s)

- ✅ Define privileged account list

- ✅ Map to your compliance requirements

- ✅ Integrate with existing security policies

- ✅ Assign roles and responsibilities

- ✅ Set review and update schedule

This template represents current best practices for password security. Whether you're implementing your first formal password policy or updating an outdated one, this template provides the foundation for effective password management that balances security with usability.

Strong password policies don't prevent users from working—they protect users while they work. Implement this policy to secure your authentication infrastructure without creating friction that drives users to dangerous workarounds.