Recent violations of privacy including accusations of hacking at law, telecoms and insurance companies as well as revelations of potential state-sponsored hacking, have thrown cyber and electronic risk into the spotlight like never before.
What began as a niche issue for technology companies and banks now creates exposures for all employers, not-for-profit organisations and even government agencies. The latest WillisWire special feature on cyber risk covers not only hacking and electronic threats, but also negligence and violations of privacy, breach of corporate information and intellectual property, board level issues, liabilities, regulatory advancements and other challenges for modern businesses.
Some highlights of the feature include:
• Tim Holt, Head of Intelligence at SCR’s Alert:24, explores cyber risk in the developing world. Holt says that generally, conditions in the developing world make for poor cyber security; “Where recourse to the law is weak, cyber offensives catalysed with influence may combine to a potent degree, leaving multinational companies to worry about: critical assets of their supply chains, vulnerability of their corporate intranets through less robust local offices, disgruntled employees susceptible to persuasion or coercion and social media activism.”
• Francis Kean, Executive Director in Willis’ FINEX Global, warns that directors are generally under a duty to gain a basic but sufficient understanding of the nature of all risks, including cyber. Kean explains that once a board is aware of a cyber-security issue, the dilemma is what to do with that knowledge: “On the one hand, as SEC guidance issued in 2011 makes clear, there are perils associated with non-disclosure. On the other hand, however, there are risks associated with exposing and disclosing cyber breaches without having first fixed the problem. Whilst this dilemma is and remains particularly acute in the US, the basic threat and the various conundrums which it poses remain the same for directors everywhere,” he warns.
• Kim Quarles, Senior Vice President at FINEX North America E&O and eRisk, says that lawyers are increasingly the target of hacktivists, cyber criminals, and foreign governments. “Hackers are financially motivated and law firms’ computer systems are perceived as being more easily accessible than those of their clients. Law firms are a repository of extremely valuable confidential information—information that, in the wrong hands, can be worth billions of dollars,” she explains. “Attorneys have ethical, common law and contractual obligations to protect client confidences. Failure of law firms to take appropriate steps to protect client data could have disastrous consequences including malpractice claims, bar complaints, or serious damage to a firm’s reputation,” she warns.
• Jannie Viljoen, Broking Executive, Willis Re South Africa, discusses the opportunities and threats posed by “bring-your-own-device” (BYOD) programmes, where employees use their own devices for work purposes; “A BYOD policy should clearly state the responsibility of the employee to report a lost or stolen device, including procedures for the company to remotely erase data from devices in such an event. In addition, the encryption of mobile devices is a key underwriting rating criteria for a cyber-insurance policy,” he explains. “Mitigating the additional risks and potential costs of a BYOD policy should be a priority in boardrooms, rather than left to IT departments to deal with in isolation.”
• Karl Pederson, Senior Vice President at Willis North America’s FINEX Cyber & E&O Team, says coverage is failing to keep up with the growing risk to trade secrets; “While there is tremendous interest from all industries in the loss of value associated with an electronic breach of trade secrets—there is very little insurance coverage currently available. With the well-publicized cases of Google in China, Northrop Grumman, Wikileaks and others in the past three years, the understanding of the need to address this risk through insurance is rising and such coverage will continue to evolve.”
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