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A great discussion of the SEC final cyber rule, materiality and D&O insurance. The question of materiality and the SEC Final rule is a complex one. It applies to the Left and Right of Bang evaluation of Risk. Left through the reporting of material cyber risk on a corporations 10k and Right when reporting material cyber incidents through an 8k submission. While many discuss cyber incident reporting, the conversation that is often lacking is the evaluation of material cyber risk and 10k reporting. Cyber risk management is where the predominant costs and complexity of cyber regulatory compliance lies. Where, as the SolarWinds – SEC case is demonstrates, issues arise for corporate reporting. If the recent SEC charges and court filings are a proxy of what is to come.
As @Thaddeus Dziekanowski, Rachel V. Rose, JD, MBA Bob Dix and I wrote in 2023 (https://lnkd.in/gtvkFKQm) materiality alone is not the challenge. It is cybersecurity risk management Materiality(M), Adequacy(A) and the role of the Reasonable(R) investor that the SEC is looking for boards to consider, when developing compliance to the SEC final cyber rule. By considering MAR through a compliance lens, covered entities are better enabled to demonstrate compliance to their D&O and cyber insurers that they have taken reasonable, defensible steps to comply.
In ones opinion boards of cyber regulated entities (U.S and EU) should be concerned about their D&O and cyber insurance. Cyber regulation calls into question the role of accountable executives, increasing corporate and individual legal and compliance risk. Risk that requires boards demonstrate reasonable and adequate management of material cybersecurity risk. Adding further questions to the D&O policy and opportunities to refuse cover in the event of regulatory compliance failure.
@Thaddeus Dziekanowski Brian D. McCarthy Rachel V. Rose, JD, MBA
Veritas GRC
#cybersecurity #cyberriskmanagement #cyberregulation #cyberinsurance
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