If your business depends on computer systems in any way, you need to understand cyber risks and how they can impact your business. A cyber loss could leave you financially responsible for consumer losses and hurt your business operations. We’ll explain the different types of cyber risks and what you can do to reduce them.
Cyber risk is the threat of data loss, property destruction or ransom demands resulting from a hack of your IT systems. Cyber risks can result in a financial loss or disruption to your business. They can also harm your company’s reputation if consumers don’t feel their information is secure. Cyber risks can lead to system failure or the unauthorized use of information.
If an unauthorized person gains access to your computer system and databases, they can halt your operations or steal information unless you pay a ransom. This is why you need to have the right cybersecurity.
Any business that uses online systems for operations or data storage is susceptible to cybercrimes.
The impact of cyber risk to a company is huge. Even a small attack can lead to a company needing to pay for lost or stolen data records, with an average cost of $150 per stolen data record. According to research by IBM, the average cost of a data breach in the United States was $8.64 million in 2020.
Even if the loss numbers are not as high for a small business, the impact could be lost revenue from an operating system being shut down for days or weeks. Even after the business restores all systems, consumers may be wary of working with a company that recently experienced a data breach or cyberattack, afraid that their personally identifiable information (PII) is not safe.
Cybercriminals come from various backgrounds. Some cybercrimes are committed by former employees looking to get revenge on a business that fired them. You can prevent this type of crime by revoking system access as soon as an employee is terminated.
Sometimes attacks come from industry competitors trying to put your business in a negative light. There are also activist organizations that believe they are helping society by hacking and harming certain businesses.
Some security risks simply arise from careless mistakes made by employees, especially those who work for companies that haven’t implemented the right policies and training. A prime example occurred in 2016, when a massive phishing attack hit Hillary Clinton’s campaign and workers fell for the scam.
Still, the majority of cybercrimes come from those who intend to profit from hacking by such actions as selling data on the dark web, demanding a large ransom or funneling credit card transactions to a third-party account that they control.
Cyber risks are not limited to external threats from bad actors. A business must also deal with internal threats that can compromise data or systems. It’s important to plan for both.
While most employers want to believe that employees are trustworthy, there are several types of internal risks. These stem from either an employee or former employee who has access to systems and can use the access in an adversarial way.
These are some common internal cyber risks:
Conducting background checks on potential new hires can reduce your internal cyber risks.
Businesses often must be most concerned with external cyber risks where bad actors seek to illegally use data or halt business operations. It’s often hard to tell where external cyber risks come from.
These are some common external cyber risks:
In 2021, the Colonial Pipeline, which is responsible for providing oil to the Southeastern U.S., was hit with a ransomware attack. This is believed to be the work of the Russian criminal group known as DarkSide. By shutting down the pipeline, the group succeeded in triggering mass panic about a gas shortage. DarkSide was paid a ransom of approximately $2.3 million in bitcoin.
A good plan is the best defense against cyber risks. While you can’t prevent every cybercrime, you can do a lot to make sure that your business is not harmed. Here are nine ways to reduce your company’s cyber risk:
Since you can’t predict if and when a cyberattack will occur, it makes sense to have cyber liability insurance. A cyber liability policy will pay for financial losses stemming from:
On top of paying for losses and damages, many insurance cyber loss teams will help a business remediate the losses as quickly as possible. This means they use their internal teams to help halt the progress of viruses and malware, with the goal of minimizing the ultimate loss to both your business and to the insurer.
The Federal Trade Commission is tasked with protecting America’s consumers, and it’s every business owner’s responsibility to make sure that consumer data is protected. If it isn’t, you may be held liable and face the risk of fines and even, in egregious cases, jail time.
The FTC recommends that business owners assess the types of information they collect and keep, keep only what is necessary, and lock that data either electronically or physically. When the information is no longer needed, discard it by shredding it or through using a data-deletion service.
It isn’t just the FTC fines that a business has to deal with in the event of a data breach. You may face these additional penalties:
These are just a few of the penalties businesses could face from a data breach. Most small businesses can’t afford these types of fines. They could lose an estimated 20% to 30% of their consumer base from a data breach. Keeping consumer data private and having insurance to help protect against financial losses are critical in the digital age.