By Nick Pearson, Senior Analyst
For better or worse, nearly everything in the modern world is interconnected. There’s no denying that these connections, and the new technologies and digital advancements that enable them, bring convenience to our personal and professional lives. In many cases, all you need is access to a few key credentials, such as a username and password, and a vast expanse of information is a mere screen tap or two away. But with this power comes great responsibility—and risk.
Countless companies have fallen victim to data breaches in recent years, from retailers like Target and Home Depot to credit bureaus like Equifax. But it’s not just the Targets of the world that are at risk for cyber crime. Small and mid-sized companies across all industries are likely prey for hackers seeking to siphon funds or hold sensitive data for ransom.
When it comes to cyber attacks, the best offense is a good defense. However, we’re not just talking about insurance—there are other perks that come with the purchase of cyber policies that can wind up being more helpful than the coverage itself.
Here’s a rundown of the risks posed by our increasingly interconnected word, as well as ways you can protect your business and prevent potential losses.
Know Your Risk: Types of Cyber Crime
Companies face a range of different exposures, including first- and third-party damage, business interruption and regulatory ramifications. When an organization is hacked, the consequences can be severe. In fact, the cost of data breaches is surging around the world, with the current average hovering around $3.8 million per company. The average ransom amount jumped to $175,000 in 2019 from $72,000 in 2018, according to a report by NetDilligence.
There are two primary types of cyber crime—ransomware attacks and wire transfer fraud—and they can impact any company that houses data or processes credit card or electronic payments. Ransomware attacks, in particular, are on the rise, and they occur when a hacker threatens to destroy or disclose data after a given deadline elapses without payment. The longer a victimized company waits to respond to a ransomware attack, the longer the hacker and their malware inhabit the company’s network.
As the name implies, wire transfer fraud originated as a type of attack that used wire transfers to gain access to funds being sent via telegraph or phone lines from one entity to another. As our tools and technologies have adapted to a more remote-based working environment, that definition has expanded to include any fraud that involves electronic communication versus face-to-face communication. For example, sometimes an attacker will pose as an executive leader at a company by sending an urgent email to an employee requesting funds for a business purchase. If the recipient provides account information to complete the transaction, the money will go to a fraudulent account, often before they realize they’ve been compromised by a hacker.
The Added Perks of Purchasing Cyber Insurance
Cyber policies provide first- and third-party coverage for businesses’ liability for data breaches involving sensitive customer information, such as social security numbers, account numbers, health records and more. Cyber extortion or ransomware policies typically cover costs paid for ransom demands, but more importantly, they provide additional coverage for services most small and mid-sized businesses wouldn’t be able to handle on their own.
These policies cover the cost of hiring experts to negotiate with hackers and computer forensic accountants and attorneys who can uncover how the hackers gained access to the system and how long they resided there. They also work with businesses to make recommendations on how to prevent these types of attacks in the future. The goal is for businesses to become more proactive instead of reactive with their risk tolerance for cyber liability.
There are plenty of reasons for businesses to purchase cyber coverage, especially as events like the pandemic push companies to work remotely and store classified information online or in cloud-based networks. Despite the risks associated with interconnectivity, these policies provide a silver lining for organizations seeking to keep their assets safe:
- Because it’s a relatively new type of coverage, cyber insurance is as cost effective as it’s ever going to be.
- Companies that don’t have the infrastructure or IT support to monitor cyber threats reap the benefits of additional protections.
- Experts can equip organizations to better handle a breach by providing PR services, forensic research, credit monitoring and assistance with regulatory fines and penalties.
With the extra protection cyber insurance provides, leaders (and their IT departments) can enjoy peace of mind when it comes to running their business safely and efficiently across an interconnected landscape.