Cyber Risk Management, What Does It Mean for Insurance?
In recent years, we have seen an increase in cyber incidents some of which have been highly publicised in the news and media. These incidents have impacted organisations globally, across a range of different industry sectors.
Put simply, cyber risk means any risk of financial loss, disruption or damage to the reputation of an organisation from some sort of failure of its information technology systems. Risk can stem from both online and offline sources and put data at risk of theft or ransomware infiltrating systems and networks.
As technology changes, cyber risk is now becoming widely accepted as being one of the top emerging risks. Organisations rely on technology and computer networks to perform. Products and services, customer interactions and information, employee information and generating income are now all reliant on technology.
Cyber incidents can stem from a multitude of sources with a variety of motivations. Attacks could come from external agents such as cybercriminals and hackers, internal agents such as disgruntled employees, accidental data breach due to processing mistakes or human error.
The technological age we live has shifted the importance of tangible documents to intangible assets. This reliance creates a risk, a risk which is continuously evolving and businesses need to address the new threats to their network infrastructure.
Not only do companies need to look at improving their digital security, legal and financial protection. An important evolution of risk management needs to extend to insurances, this is where cyber insurance or cyber liability insurance can come into play.
To ensure the impact of a cyberattack on a company is reduced multi-dimensional cyber risk solution should be implemented. The changing face of risk management means one of the key players in managing that risk will be the insurance sector.
Cyber liability insurance is designed to mitigate both the first and third party costs that may be incurred from a cyber-attack.
First-party costs could include;
• Reimbursement for the costs to repair, restore or replace data damage on websites, digital processes and programs or electronic data.
• Crisis management costs for practical support, forensic investigations or legal advice.
• Compensation for loss of income, damage to reputation due to interruption of business services which prevented income for the business.
• Covering the costs of any ransom held against your business and any incurred costs involved in managing that situation.
A business may also incur third party claims for violations of security and failure to protect confidential data. These costs may also be compensated by a cyber insurance policy. Some fines, penalties and assessments may also be cover as well.
Cybercrime exists because of our reliance on technology and electronic communications. But technology is now an essential part of business practice and is only set to become more so. It is important to have the right risk management system in place so you can protect your business and your customers.