Effective cyber risk management involves the mapping and monitoring a company’s digital assets to quantify their attack surface. This approach can help identify and prioritize threats that impact a business’s most critical functions.
Managing these risks can be challenging for even skilled teams. This is especially true when a third party may contact sensitive information.
Information Technology (IT) and Operational Technology (OT) Platforms
Since the dawn of industry, businesses have been tasked with protecting physical property and business operations. As technology evolved, the challenge of managing risk became increasingly complex. This led to the formation of information security teams that specialize in securing IT and OT systems.
However, the convergence of IT/OT and the emergence of hyper-connected environments introduces new risks to both IT and OT networks. Many OT systems were never designed with a security infrastructure in mind, and they are susceptible to the same vulnerabilities as traditional IT devices. For example, password malpractice remains a common cause of breaches. OT systems are often vulnerable to worms and other malware infiltrating IT networks and migrating into OT devices.
In addition, OT systems are frequently prone to vendor lock-in and limited flexibility due to proprietary communication protocols. These factors can limit the ability to patch or upgrade OT systems and can expose critical assets to attack.
These factors, coupled with the increased exposure and heightened impact of cyberattacks (now ranked fifth on the World Economic Forum’s list of top five global risks), require businesses to rethink their risk management strategies. Organizations can better understand and mitigate risks, reduce costs, and improve operational performance by addressing key vulnerability categories across their IT and OT infrastructures.
Data Privacy Concerns
A large portion of the cyber risk management cycle involves protecting the privacy of sensitive data. The large number of recent data breaches has led to many consumers not trusting companies with their personal information and refusing to do business with them. This has caused a significant drop in trust levels for companies across industries. Consumers also use tools that give them more control over their online privacy. For example, more than one in ten Internet users worldwide and three in ten US users use ad-blocking software.
Cyber risk management includes identifying, measuring, and communicating risks to the organization’s digital systems and customers. Mature organizations typically have cyber threats in their enterprise risk management (ERM) programs, which generally consider strategic, operational, and financial risk.
Due to the emergence of cybercrime, there is an urgent need for better cybersecurity defenses at corporate, national, and supranational levels. This can be done by improving the availability of cyber data through improved cyber information sources, standardized databases, and mandatory reporting. This will increase awareness of cyber risks among insurers and companies and support sustainable loss-prevention strategies. Moreover, it will enable the development of more efficient models for estimating and quantifying cyber threats. It will also allow businesses to make informed decisions about how much investment they should put into a cyber-attack risk reduction strategy.
IT Infrastructure
The modern business landscape is highly dependent on digital systems. These systems range from web and mobile applications that enable customer transactions to supply chain systems that exchange data with organizations through automated program interfaces (APIs). These technologies are built using code that contains vulnerabilities. This is due to various factors, including a lack of secure software development processes, third-party vendor code, and open-source modules rife with vulnerabilities. These vulnerabilities pose a significant risk to the organization.
Organizations must conduct rigorous security assessments of third-party suppliers and partners to mitigate this risk. They must also continuously monitor their IT infrastructure for vulnerabilities. In addition, they should use existing data sources to identify and analyze trends in cyber threats and develop countermeasures.
Damage costs associated with cyberattacks are challenging to quantify. Operational costs can include lost time and resources. In contrast, fiscal charges are incurred through fines for non-compliance or the loss of business opportunities from customers who lose trust in the brand. Reputational losses are also difficult to calculate but can significantly blow a company’s credibility and brand.
Managing these threats is a full-time job for the Chief Technology Officer, who must invest in innovative solutions, educate employees, and collaborate with stakeholders to safeguard assets in today’s digital age. Because the threat landscape constantly evolves, CTOs must stay vigilant and continually assess and adapt their cybersecurity strategy.
Cyber-attacks
Cyberattacks are a constant threat to the safety of business systems and data. While some attacks are intentionally malicious—such as a disgruntled employee making copies of confidential information on an unsecured drive or third-party vendors with poor security practices putting the company’s IT infrastructure at risk—many are not. Negligent users storing sensitive data on unprotected drives or servers are not cyberattacks but breaches or security incidents. Attackers are often motivated by financial gain, such as stealing credit cards or identity information for money laundering or holding company computer systems hostage to demand a ransom.
Other attackers are simply seeking disruption and revenge. They may want to expose a company’s secrets or disrupt its operations in the name of social or political activism, or they might be nation-state attackers seeking to embarrass an adversary. Still others are “hacktivists,” a loose collection of international activists who operate under the radar and seek to promote their causes through attacks on government entities.
Cyberattacks are a growing concern for businesses and present challenges to the insurance industry. Even though insurance coverage for these risks exists, the industry’s need for more open and standardized datasets limits its ability to conduct in-depth research and develop sustainable risk-adjusted pricing models. However, mandatory reporting and more widespread awareness of cyber threats could improve these datasets’ availability.