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A very interesting question following recent events with FTX and a question that one suspects is being asked by VC/ PE and Private clients, as we head towards what is predicted to be a significant slow down in 2023. Are we simply not asking the right questions, providing continual oversight and not digging into the basics with due diligence?
The cyber tech sector is going through its own challenges. Challenges that poorly skilled investors, racing to perceived profits ignored. As the next ‘big tech thing’ came racing done the line, but the markers are there, insurance companies upping premiums, dropping coverage, attack frequencies, complexity and severity increasing, products chasing a problem that boards do not understand and a problem requiring integrated solutions and not products.
In fairness as is normally the case it takes a brave investor to jump off the rollercoaster. But there are 2 simple question to consider for cyber investors
1. If the U.S DoD requires DIB suppliers to manage 110 cybersecurity practices and 320 control criteria, how does any single product maintain cyber compliance?
2. If there is no regulated or enforced accountability or responsibility for cybersecurity how do you guarantee compliance?
The answer to question 1 is it doesn’t, the answer to question 2 is regulators are starting to driving the agenda, as they did through Basel accords in Financial Services. So sensible investors can still make returns, as regulators move ahead to enforce cyber.
Cyber compliance requires solutions, not products, and solutions should answer question 1 and that requires solutions to the question now being asked by regulators, ‘how do you manage cybersecurity risks’. A due diligence question that gives you different answers if you just consider cybersecurity, a question investors should be asking and a question regulators are asking. Get this right and returns will be more certain.
Ted Dziekanowski
#cybersecurity #cyberriskmanagement #cyberinsurance #cyberregulation
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