Nine Cyber Risk Questions Every Board Should Ask
October 16, 2023
When a data breach or other cyber event occurs, the damages can be significant, often resulting in lawsuits, fines and serious financial losses. Moreover, cyber exposures impact businesses of all kinds, regardless of their size, area of focus, or status as a private or public entity.
For organizations to truly protect themselves from cyber risks, corporate boards must play an active role. Not only does involvement from leadership improve cybersecurity, but it can also reduce liability for board members. To help oversee their organization’s cyber risk management, boards should ask the following questions:
1. Does the organization use technology to prevent data breaches?
Every company must have robust cybersecurity tools and anti-virus systems in place. These systems act as a first line of defense for detecting and preventing potentially debilitating breaches. While it may sound obvious, many organizations fail to take cyber threats seriously and implement even the simplest protections. Boards can help highlight the importance of cybersecurity, ensuring that basic, preventive measures are in place. These preventive measures must be reviewed regularly, as cyber threats can evolve quickly. Boards should ensure that the management team reviews company technology at least annually, ensuring that cybersecurity tools are current and effective.
2. Has the board or the company’s management team identified a senior member to be responsible for organizational cybersecurity preparedness?
Organizations that fail to create cyber-specific leadership roles could pay more for a data breach than organizations that do. This is because, in a cyber incident, fast response and clear guidance are needed to contain a breach and limit damages.
Boards must be involved when establishing a chief information security officer or similar cyber leadership role. Cyber leaders should have a good mix of technical and business experience. This individual should also be able to explain cyber risks and mitigation tactics at a high level so they are easy to understand for those not well-versed in technical terminology.
It should be noted that hiring a chief information security officer or creating a new cyber leadership role is not practical for every organization. Organizations should identify a qualified, in-house team member in these instances and roll cybersecurity responsibilities into their current job requirements. At a minimum, boards must ensure that their company has a go-to resource for cybersecurity management.
3. Does the organization have a comprehensive cybersecurity program?
Does it include specific policies and procedures? Companies need to create comprehensive data privacy and cybersecurity programs. These programs help organizations build a framework for detecting threats, remain informed on emerging risks and establish a cyber response plan.
Corporate boards should ensure that cybersecurity programs align with industry standards. These programs should be audited regularly to ensure effectiveness and internal compliance.
4. Does the organization have a cyber incident response plan in place?
Even the most secure organizations can be impacted by a data breach. Moreover, it can often take days or even months for a company to notice its data has been compromised. While cybersecurity programs help secure an organization’s digital assets, a cyber incident response plan provides clear steps for companies to follow when a cyber event occurs.
Cyber incident response plans allow organizations to notify impacted customers and partners quickly and efficiently, limiting financial and reputational damages. Board members should ensure that crisis management and breach response plans are documented. Specific actions noted in breach response plans should also be rehearsed through simulations and team interactions to evaluate effectiveness. In addition, response plans should clearly identify key individuals and their responsibilities. This ensures that there is no confusion during a breach and that your organization’s response plan runs as smoothly as possible.
5. Has the organization discussed and formalized a cyber risk budget?
How engaged is the board in providing guidance related to cyber exposures? Both overpaying and underpaying for cybersecurity services can negatively affect an organization. Creating a budget based on informed decisions and research helps companies invest in the right tools. Boards can help oversee investments and ensure they are directed toward baseline security controls that address common threats. With guidance from the chief security officer or a similar cyber leader, boards should also prioritize funding. That way, an organization’s most vulnerable and important assets are protected.
6. Has the management team provided adequate employee training to handle sensitive data correctly?
While employees can be a company’s greatest asset, they also represent one of their most significant cyber liabilities. This is because hackers commonly exploit employees through spear phishing and similar scams. Employees can unknowingly give criminals access to their employer’s system when this happens. To ensure data security, organizations must provide thorough employee training. Boards can help oversee this process and instruct management to make training programs meaningful and based on more than just written policies. In addition, boards should ensure that education programs are properly designed and foster a culture of cybersecurity awareness.
7. Has management taken the appropriate steps to reduce cyber risks when working with third parties?
Working alongside third-party vendors is common for many businesses. However, whenever an organization entrusts its data to an outside source, there’s a chance that it could be compromised. Boards can help ensure that vendors and other partners know their organization’s cybersecurity expectations. Boards should work with the company’s management team to draw up a standard third-party agreement that identifies how the vendor will protect sensitive data, whether the vendor will subcontract any services and how it intends to inform the organization if data is compromised. To learn more, read our blog post: A Guide to Understanding Your Data Supply Chain Security.
8. Does the organization have a system for staying current on cyber trends, news, and federal, state, and industry international data security regulations?
Cyber-related legislation can change with little warning, often having a sprawling impact on how organizations do business. If organizations do not keep up with federal, state, industry and international data security regulations, they could face serious fines or other penalties.
Boards should ensure that the chief information security officer or similar leader knows their role in upholding cyber compliance. They should ensure a system is in place for identifying, evaluating and implementing compliance-related legislation. Additionally, boards should constantly seek opportunities to bring expert perspectives into boardroom discussions. Often, authorities from government, law enforcement, cybersecurity agencies and risk management consultants can provide invaluable advice. Building relationships with these entities can help organizations evaluate their cyber strengths, weaknesses and critical needs.
9. Has the organization conducted a thorough cyber risk assessment? Has the organization purchased or considered purchasing cyber liability insurance?
Cyber liability insurance is specifically designed to address the risks of using modern technology—risks that other types of business liability coverage won’t cover. The level of coverage your business needs is based on your operations and can vary depending on your range of exposure. As such, boards, alongside the company’s management team, need to conduct a cyber risk assessment and identify potential gaps.
From there, organizations can work with their insurance broker to customize a policy that meets their specific needs. Asking thoughtful questions can help boards better understand management's strategies to prevent, detect and respond to data breaches.
When it comes to cyber threats, organizations must be diligent and thorough in their risk prevention tactics, and boards can help move the cyber conversation in the right direction. Cyber exposures impact organizations from top to bottom, and all team members play a role in maintaining a secure environment. However, managing personnel and technology can be challenging, particularly for organizations that don’t know where to start. That’s where Hylant can help. Contact us today to learn more about cyber risk mitigation strategies you can implement today to secure your business.
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Organizations are more cyber-aware than ever, but cybercriminals continue to find new ways to exploit human and technological weaknesses. Read our e-book, 5 Ways to Manage Cyber Risks and Limit Financial Losses, to learn how to limit the potential for losses and protect your company’s bottom line.
The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.
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