Statistics on cyberattacks in the U.S. from IBM’s 18th annual Cost of a Data Breach report are staggering.
“The global average cost of a data breach in 2023 was USD $4.45 million, a 15% increase over 3 years.”
“Fifty-one percent organizations are planning to increase security investments as a result of a breach, including incident response (IR) planning and testing, employee training, and threat detection and response tools.”
“Nearly one-quarter of attacks involved ransomware. Ransomware attack costs increased significantly in 2023.”
As we’ve touched on previously in this three-part cyber series – in our first post overviewing due diligence best practices and in our second post on how private equity boards can amp up their cyber expertise – cyber security issues for private equity firms are unique in that they can arise for individual portfolio companies as well as for the firm as a whole. This setup means that cyber incidents by nature don’t occur in total isolation. An attack on a single portfolio company can cause ripple effect damage across the entire organization.
In this final post, we explore the ins and outs of a cyber incident response plan, which is critical to the long-term success of a business. We have seen time and time again – both in the private equity sector and more broadly – that taking a proactive approach to address cyber risk and fostering resiliency with a plan for a response is ultimately a smart operational, reputational, and financial move. And, for private equity firms with responsibilities to investors, protecting the financial health of the firm and portfolio companies is paramount.
While they all differ according to the organization, a thorough incident response plan should specify:
Private-equity-specific incident response plans should go beyond the basics and take into account the added vulnerability that a parent firm has across its entire portfolio. The plan should include:
There is a team of people who should spring into action if a cyberattack occurs. Internally, this may include members of the private equity executive team, such as the CISO and CIO; in-house legal counsel; human resources; or the finance team. Externally, depending on the nature of the incident, third-party vendors, law enforcement or regulators should be alerted.
Insurance carriers are often a firm’s greatest advocate for weathering a cyberattack. They have the shared goal of minimizing any financial damage and most likely have a panel of resources available to assist companies. Many, for example, will have breach coaches, forensic incident response firms, access to bitcoin vendors and cyber extortion negotiation firms to help respond to ransomware claims. These resources are crucial when negotiating, resolving, and sometimes paying in a ransomware situation, for example. Forensic firms, tapped by an insurance carrier, specialize in minimizing losses and the amount of data that may be compromised – experience that can prove invaluable in tense situations.
The bottom line: Insurance carriers bring experience and access to resources, which can dramatically change the impact of a cyberattack.
It is a best practice to be proactive and develop an incident response plan ahead of an attack, but it is also important to ensure the incident response plan is properly maintained. There are a few milestone moments to revisit an incident response plan each year:
While it’s daunting to think about developing a cyber incident response plan, it’s vital to do so. Private equity firms small and large have unique cyber vulnerabilities that necessitate proactive planning. Developing a plan, testing it, and making an effort to continually keep cyber security top of mind ultimately helps protect a firm’s investments and long-term business objectives.
Liberty Mutual’s dedicated underwriters, close partnerships with our clients and brokers, and expert mitigation and claim resources help us deliver cyber liability solutions appropriate to the individual needs of companies across geographies and industries. And learn more here about how we help private equity firms manage their unique risk needs.
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