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Jul 08, 2019

Forum urges investors to push for cyber-security

Framework proposed to help investors address issue that causes big losses

The World Economic Forum in a new report is calling for investors to press companies to prioritize cyber-security – and is proposing a framework for them to aid those efforts.

Cyber-attacks have almost doubled in the past five years, undermining confidence in some companies and driving demand for more secure digital products. Attacks can cause major losses to investors by driving down company valuations.

Investors providing capital to start-ups and small and medium-sized enterprises therefore have an opportunity and a responsibility to ensure that companies prioritize cyber-security early in their development, according to the Forum. This cyber-due diligence can help businesses meet consumer demands, provide investors with reliable returns and contribute to a more secure digital market, the authors of the report write.

‘Investors cannot ignore the cyber-security of their target companies,’ Alois Zwinggi, head of the Centre for Cyber-security at the World Economic Forum, said last week. ‘Without proper due diligence of policies on cyber-threats, security risks will turn into business risks.’

The report outlines five ways investors can contribute to cyber-security, beyond regulatory compliance and legal obligations:

  • Incorporate a cyber-risk tolerance threshold that includes cyber-risk in assessments of business risk
  • Conduct cyber-due diligence. Evaluate the integration of cyber-security into the company’s policies and culture
  • Determine an appropriate incentive structure. Define cyber-security expectations, benchmarks and enforceability
  • Secure integration and development. Develop and follow action plans to continually support cyber-security efforts
  • Regularly review and encourage collaboration. Ensure cyber-security actions are in place and updated as necessary.

Investors already play a significant role in helping entrepreneurs develop, optimize and mature their businesses, the report notes. By prioritizing cyber-security, the authors states that investors ‘can increase the potential for long-term success and help facilitate innovation in the digital space.’