Companies Ill-Prepared to Deal With Cyber Attacks
Despite a barrage of cyber attacks on businesses in the U.S. and abroad – with American firms targeted most often – more than half are ill-prepared to deal with the threat, according to a survey by specialist insurer Hiscox.
Cyber crime costs the global economy more than $450 billion in 2016, Hiscox said. Losses included business interruption and reputational damage to brand.
The findings show 72 percent of U.S. firms with 250 or more employees, and 68 percent of smaller American companies experienced a cyber incident within the past year.
Nearly half of the U.S. firms (47 percent) reported two or more incidents during the last year.
U.S. firms suffered the most serious and costly attacks even though nearly half of those businesses were ranked as “experts” by the survey in dealing with cyber threats.
Martin J. Frappolli, senior director of knowledge resources for The Institutes/Risk and Insurance Knowledge Group, said many organizations don’t fully recognize that “first party risks are just as big as third party risks and more commonly sources of lost revenue.”
“The biggest risk of cyber breach is the continuity of the business,” he said. Depending on the length of the business disruption, the loss of revenue, he said, could be financially devastating.
Another matter to keep in mind, Frappolli said, is the increased data sharing between firms, vendors and business partners. “The chain is only as strong as its weakest link.”
In the “Hiscox Cyber Readiness Report 2017,” U.S. firms reported their top cyber security challenges were the changing nature of threats, both internal and external.
To deal with them, 63 percent plan to increase spending on cyber security over the next year with the most money invested in technology, followed by training, cyber security, security staffing, other measures and outsourcing. Many plan to buy cyber insurance.
Technology is the top investment despite being the area where most firms appear to be best prepared.
“This isn’t necessarily about throwing money at technology. It’s about having a well-rounded strategy, process and resources,” said Dan Burke, vice president and cyber product head at Hiscox USA. “This is a human problem as much as it is a technology problem.”
Training employees to recognize potential threats, such as phishing scams in emails, and having strong password management can go a long way toward cyber security, he said. Seven out of 10 respondents say training has reduced the number of business disruptions.
Emily Cummins, a member of the board of directors of RIMS, the Risk Management Society, and managing director of tax and risk management at the National Rifle Association, is a strong proponent of employee cyber risk training.
“The No. 1 recommendation is always continuous training,” she said. “And that means year-round reinforcement because employees are a source of unintentional errors and training can prevent [breaches].”
Cummins said training done in collaboration with departments, divisions or teams and including top management presents a powerful message to employees that prevention is critical to the organization. She also recommends devising a breach, or disaster response plan and practicing it regularly.
Most survey respondents listed cyber insurance as a key priority, with 57 percent saying they intend to purchase or enhance cyber insurance coverage this year.
More U.S. firms (55 percent) have cyber insurance policies than companies in the U.K. (36 percent) and Germany (30 percent). Another 25 percent of U.S. firms said they plan to take out a policy this year.
Frappolli said a firm’s risk manager, or a good insurance broker, can help determine which type of policy is best, since there is no standard product. Choices include cyber liability policies, business interruption policies, first party coverages, and endorsements or riders to existing policies.
He advised firms to purchase insurance to fill in the gaps not covered by training and technology and to have a breach plan in place in the event a hack occurs.
“Use the whole toolbox,” Frappolli said. “Don’t just think ‘I want to buy insurance’ and I’m done.”
Released in February, “The Hiscox Cyber Readiness Report 2017” details the results of a survey of 3,000 firms according to their cyber readiness in four key areas — strategy, resourcing, technology and process — and ranks them from novice to expert. It includes their plans to combat the threat going forward and offers advice on how to best prevent and manage it.
Conducted by Forrester Consulting on behalf of Hiscox, the survey, taken in late 2016, questioned executives, managers and IT specialists in charge of cyber security at 1,000 companies of all sizes each from U.S., Germany and the U.K.