Cybersecurity Risk Management in Technology M&A Transactions

The rise of the mobile platform drives the growth of the technology business; yet, this puts the industry at a disadvantage in the fight against cybercrime. Cybercrime was a leading threat to organizations globally in 2017, with estimated costs of $21 million for U.S. enterprises, and expected damages of $6 trillion by 2021. The nature of technology makes the tech industry a perpetual target for cybercriminals. Data breaches can have a substantial effect on a company’s bottom line. This is why cybersecurity risk management and insurance are essential for technology companies.

When deciding whether to underwrite an M&A deal, insurers assess a company’s security score. To determine a company’s security rating, insurers consider the following factors:

Security program development and crisis management: Insurers evaluate a company’s ability to identify and respond to cyber threats. This includes the company’s incident response plan, security awareness training, and incident management procedures.

Occupancy of data management and authorization: Insurers review the company’s data management and access control processes to ensure that sensitive data is protected and that only authorized personnel have access to it.

Security of their activities and reactions: Insurers assess the company’s ability to protect its operations and respond to cyber threats. This includes the company’s network security, incident response, and recovery procedures.

Risk of security breaches: Insurers evaluate the company’s exposure to security breaches and the potential impact of a data breach on the company’s operations and reputation.

Insurance for Cybersecurity Risk Management

Effective cybersecurity safeguards can reduce a company’s exposure to risk and make it more appealing to insurers. Companies must implement a thorough cybersecurity program to protect themselves against cyber threats. Cyber insurance can provide firms with additional security and lessen the risk associated with cybercrime in the technology industry. This can protect the value of the M&A transaction and give the company and its investors peace of

mind. Moreover, businesses must be aware of and continuously upgrade their cybersecurity procedures to keep up with the ever-changing threat landscape.

In addition to cyber insurance, companies can also implement other measures to protect themselves from cybercrime. This includes regular security assessments, employee training, and education, and implementing security protocols such as firewalls, antivirus software, and intrusion detection systems.

Furthermore, companies should also consider hiring a dedicated cybersecurity team or consulting with cybersecurity experts to ensure that their systems are protected against the latest threats. This includes staying up to date with the latest security patches, and software updates, and monitoring for potential vulnerabilities.

Cybersecurity Incident Response Planning

Another important aspect of cybersecurity is incident response planning. This includes having a plan in place for how to respond to a security incident, such as a data breach or cyber-attack. This should include identifying potential vulnerabilities, implementing countermeasures, and having a team in place to respond quickly and effectively in the event of an incident.

In conclusion, cybercrime poses a significant threat to the technology industry and companies must take proactive measures to protect themselves. Implementing a comprehensive cybersecurity program, purchasing cyber insurance, and staying up to date with the latest threats and countermeasures are essential to protecting the value of M&A transactions and ensuring the security of a company’s assets and operations.




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