As businesses become increasingly Internet and network reliant, cyber-liability risk is a very real concern. With the proper awareness, businesses can reduce their exposure to the costs of cyber-liability risks.
What is Cyber Liability?
Cyber liability is the risk posed by conducting business over the Internet, as well as other networks and even electronic storage technology.
First-party cyber liability occurs when a business’s own information is breached. An example of this is a hack that exposes internal company emails containing trade secrets and financial documents. The potential effects of this include threatened competitiveness and reputational damage.
Cyber liability is considered third-party when customer or partner information is breached. Incidences of this can include a hack that results in the theft of customers’ social security numbers. The potential effects of third-party liability can include lawsuits, statutory fines, loss of consumer trust, and reputational damage.
Cyber-Liability Exposure is a Growing Risk
For several reasons, cyber liability has a growing risk of exposure. Risk is accelerating because of our Internet-based and networked systems. The lack of awareness of the risk is leaving many unknowingly vulnerable to liability. To make matters worse, current laws are inadequate to protect businesses from cyber-liability exposure.
The Types and Cost of Cyber Crimes
The most costly cyber crimes are caused by malicious insiders, denial of services attacks, and web-based attacks:
- Malicious Insiders: Threats to an organization that come from current or former employees or others with inside information concerning the organization’s security practices, data and computer systems.
- Denial-of-Service: An attempt to make a computer or network resource unavailable to its intended users, commonly achieved by saturating a resource with external communications requests.
- Web-Based Attacks: Malicious manipulation of a website’s code or application via viruses, malware and other methods.
Other cyber crimes include “phishing,” stolen devices, malware and viruses. The rising costs of cyber crime include physical and financial losses, as well as a loss of productivity.
The factors affecting the cost of a breach are many. Factors that increase costs will include lost or stolen devices and any third-party involvement. Factors that actually help to reduce costs include having an incident response plan in place and maintaining a strong security posture.
Cyber crimes and liability are ever-evolving and complex subjects. It’s crucial to consult a professional who is well versed in the area. Talk to your independent agent about potential exposures and available insurance coverage.