Cyber risk commonly refers to any risk of financial loss, disruption or damage to the reputation of an organization resulting from the failure of its information technology systems. Cyber risk could materialize in a variety of ways, such as:

  • Deliberate and unauthorized breaches of security to gain access to information systems.
  • Unintentional or accidental breaches of security.
  • Operational IT risks due to factors such as poor system integrity.

Businesses have always faced different kinds of risk, but in the last two decades, cyber risk has become one of the fastest-growing threats to businesses, their data, and their financial success today. As technology advances and changes, cybercriminals are using it to compromise and steal organizations’ assets. Add to that internal errors, like misconfigured servers or employees who accidentally leave data open to the Internet, and cyber risk opens a company up to many threats, from theft to reputational loss.

According to the most recent Allianz Risk Barometer, cyber risk is the third most important business risk in 2021. If it weren’t for current events, cyber risk would be #1 on that list; the global pandemic and the business continuity risks associated with COVID-19 bumped cyber risk from the top spot this year.

Cyber risk continues to be a top concern: according to The Center for Strategic and International Studies (CSIS), almost $600 billion — nearly 1% of global GDP — is lost to cybercrime each year, and last year according to the Identity Theft Resource Center 300,562,519 individuals were impacted by publicly reported data breaches.

Poorly managed cyber risks can leave you open to a variety of cybercrimes, with consequences ranging from data disruption to economic destitution. In many cases, businesses will also find themselves in the middle of a public relations nightmare as they struggle to recover lost assets and prevent further theft.

Determining your cyber risk

Whether you’re a small business or a multi-million dollar corporation, cybercrime could be lurking right around the corner. Without the right preventative measures in place, your business could be vulnerable. First things first: it’s time to get more familiar with the cyber risks you may be facing.

In many cases, the more sophisticated and extensive a business’ digital operations, the higher the cyber risk involved. The following are some elements that can increase cyber risk:

  • Employees or customers accessing your system from remote locations.
  • Staff using company-owned devices at their homes or while traveling.
  • Employee access to administrative privileges on your network or computers.
  • A Bring Your Own Device (BYOD) policy in the workplace.
  • Public building access (without the use of an ID card).
  • Employees using computers to access bank accounts or initiate money transfers.
  • A lax policy when it comes to regularly updating passwords.
  • Critical information that would be lost in the event of a network disaster.
  • Neglecting to review your company’s cyber security policies over the last 12 months.

All businesses face the risk of a cyber breach at some point during their life cycle, but understanding your risk level – and where the threats could come from – can go a long way to preparing an effective response.

While “cyber risk” may seem self-explanatory, it’s not always clearly defined and may mean different things to different people. At its most basic level, however, cyber risk is the risk of damage to an organization through its information systems.

To quote a definition from PwC:

Cyber risk is any risk associated with financial loss, disruption or damage to the reputation of an organization from failure, unauthorized or erroneous use of its information systems.

Cyber risk may take several forms. Cybercrime, cyber terrorism, corporate espionage, the faulty safety controls of vendors and other third parties, and insider threats all are sources of cyber risk. Those risks can take specific forms, like ransomware or phishing attacks.

How cybercrime targets businesses

Some of the biggest cyber threats stem from the move to new technologies, like the Internet of Things (IoT). As networks disperse and more devices develop greater connectivity, security measures will have to evolve, too. Here are a few common reasons businesses fall victim to cyber attacks:

Staff shortcomings can leave you vulnerable. Cyber criminals can come from anywhere – and they could be closer than you think. More company employees are carrying out cyber attacks, and given their access to sensitive information, they have the ability to cause significant damage. However, even well-intentioned employees can be a weak link in your business: phishing scams and malware attacks can spread quickly when email attachments are opened and shared haphazardly.

Cloud computing challenges security. The workforce is more mobile than ever, and when operations move off-site, traditional security measures will fall short. As more businesses connect to the cloud, data can become more difficult to defend with firewalls, and cyber criminals are increasingly attracted to the potentially lucrative target.

Ransomware can infiltrate networks. Whether or not your business is connected to the cloud, ransomware is a serious threat that can quickly derail your operations.

Tips to help reduce your risk of cyber attacks

Educate employees. In today’s workplace, security awareness training isn’t a luxury – it’s a necessity. Take the time to teach employees:

Simulating a phishing attack can be a very effective teaching tool.

Segment networks. Worried about who’s accessing your files? Manage user privileges to ensure only authorized employees are able to access certain data sets, and remember to communicate any changes you make to the network.

Update software. Keep all software up to date so there are fewer weaknesses for criminals to exploit. It’s important that you apply patches and other software fixes as they become available: keeping your software up-to-date won’t protect you from all attacks, but it may be enough to block automated attacks, and at least discourage many hackers from proceeding.

Invest in a good defense system. Apply an in depth approach to your IT system. Using multiple layers of security controls – firewall, intrusion prevention system (IPS), and intrusion defense system (IDS) – you ensure your system has adequate backup in the event that a vulnerability is exploited. The idea is to have an appropriate form of defense against any sort of attack that comes your way.

Stick to your policies. Compiling a list of policies and procedures to keep your business safe is a start, but you’ll have to commit to enforcing those policies if you want to defend against cybercrime. Here are some helpful tips:

  • Create protocol for when a company device has been lost or stolen.
  • Perform audit checks to ensure policies are being followed.

Be prepared for an emergency. You can’t predict when an attack will come, so it’s always a good idea to have backup and recovery strategies in place and ready to go. Encrypt all sensitive information when storing it or transferring it, but also have a contingency plan in case systems go down. The more closely you monitor your systems, the quicker you’ll be able to respond to attacks.

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