The fact that tech giant Microsoft recently confirmed that it suffered a data breach should be proof enough for any corporate board that all companies could have vulnerabilities when it comes to cybersecurity. A rise in cyber incidents over the last few years prompted the Security and Exchange Commission to propose new cybersecurity disclosure requirements in March that would protect investors by requiring public companies to disclose cybersecurity incidents quickly and detail company cybersecurity risk management practices and board oversight policies. New disclosure rules should be approved soon.
The corporate board and company management must agree on how to comply with these proposed disclosures while improving the organization’s cybersecurity. The chief information security officer (CISO) will play a major role in developing the company’s cybersecurity strategy and the board will need to rely on this person’s expertise to fortify the company’s systems against constantly evolving cyber threats.
A recent report on board views about cybersecurity found that 65% of board members believe their company is at risk of experiencing a material cyber incident within the next 12 months, but almost half (47%) feel their organization is unprepared to deal with a targeted cyber attack. Boards that believe their company is unprepared for a cyber attack (or could be better prepared) have time to improve cybersecurity measures before new disclosure rules expose cyber risks to investors.
The report stated that boards viewed internal data becoming public, reputational damage and revenue losses as the most significant consequences of a cyber incident. However, CISOs were more worried about significant downtime, disruption of operations and the impact on the business’ valuation. All of those consequences can negatively affect stock prices, which ultimately hurts investors, so all boards should want to prevent any of these outcomes from happening.
While there are no one-size-fits-all solutions to cybersecurity, there are some things companies can do to get them closer to the best solution for their firm.
• Conduct an information governance audit. Since data breaches can involve the loss of certain information, it’s critical to have a firm understanding of all the different types of data the company handles, where it is stored, as well as, which employees have access to the data. Companies will also need to confirm if there are legal or compliance issues that come with handling certain data – and if the company is in compliance.
The audit should reveal if the company has the right systems to handle all of its data. It should also determine if the current technology systems have the proper protections against cyber attacks. Any vulnerabilities should be flagged and dealt with. Such an audit is quite complex and will likely require the help of outside consultants.
• Update and reemphasize policies and procedures for handling all data. With new cybersecurity disclosures on the way, it will be important for companies to show that they are staying current with best practices for handling and securing sensitive information. Companies should review their policies for handling data and make sure all relevant employees understand the policies and practices that will keep company data safe. Are there safeguards in place to stop data from being stolen/corrupted internally? Regulators have shown greater interest in how companies handle customer data, so having these policies clearly stated and reinforced by management will help show that the board is exercising oversight of cybersecurity risk.
• Determine what policies and procedures should be followed in the case of a data breach. Even if precautions are taken, a cyber incident may still occur, so companies should have a plan to handle these matters in place. Those plans should include how data breaches are handled as well as how technology disruptions may be handled (computer systems go down). Is critical data stored elsewhere as a backup? How will the company conduct an investigation to find out how a data breach occurred? Is there a strategy to provide service in the case of a cyber incident? Investors will want to know that a company is prepared if a data breach occurs.
• Secure cyber insurance to mitigate potential losses. While cyber incidents can’t always be avoided, the damage can be softened by cyber insurance that covers financial losses involving technology system failures, including data breaches and the loss of sensitive data. Lawsuits against companies that suffer data breaches are common, so companies will want to be prepared.