Investors can and should encourage companies to prioritize cybersecurity. A new World Economic Forum report, Incentivizing responsible and secure innovation: principles and guidance for investors, proposes a framework for investors to measure and address cybersecurity efforts.
Cyberattacks
have almost doubled in the past five years, undermining consumer confidence and
driving demand for more secure digital products that protect consumer privacy.
Recent research by Bain & Company shows that consumers would buy more
products and pay higher prices for Internet of Things (IoT) devices if their
worries about cybersecurity were addressed.
Cyber-attacks
also result in economic losses for investors: during Verizon Communication’s
recent acquisition of Yahoo, the disclosure of two data breaches resulted in a
$350 million price reduction.
Investors
providing capital to start-ups and small and medium-sized enterprises therefore
have an opportunity and a responsibility to ensure that companies prioritize cybersecurity
early in their development. This cyber due diligence can help businesses meet
consumer demands, provide investors with reliable returns and contribute to a
more secure digital market.
“Investors
cannot ignore the cybersecurity of their target companies,” said Alois Zwinggi,
Head of the Centre for Cybersecurity at the World Economic Forum. “Without
proper due diligence of policies on cyber threats, security risks will turn
into business risks.”
The
report outlines five ways investors can increase cybersecurity, beyond the
regulatory compliance and legal obligations:
Incorporate
a cyber risk tolerance threshold: include cyber-risk in assessments of business
risk
Conduct
cyber due diligence: evaluate the integration of cybersecurity into the
company’s policy and culture
Determine
an appropriate incentive structure: define cybersecurity expectations,
benchmarks and enforceability
Secure
integration and development: develop and follow action plans to continually
support cybersecurity efforts
Regularly
review and encourage collaboration:ensure cybersecurity actions are in place
and updated as necessary
Investors
already play a significant role in helping entrepreneurs develop, optimize and
mature their businesses. By prioritizing cybersecurity, they can increase the
potential for long-term success and help facilitate innovation in the digital
space.
***Contributors
to the report include representatives from: Accenture; AlixPartners; Bank of
America; BCG Digital Ventures; Blackstone; Boston Consulting Group; Columbia
University; FCLTGlobal; Hewlett Packard Enterprise; Hillspire; Ionic Security;
Massachusetts Institute of Technology; S&P Global; Salesforce; Team8; Vista
Equity Partners; Willis Towers Watson.