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Cyber Liability: Data Breaches and Role of the CEO

Cyber Liability Data Breaches and Role of the CEOA survey of 200 directors of public companies conducted by security firm Veracode and the New York Stock Exchange Governance Services (NYSEGS) shows that corporate boards have become much more serious about data breaches and are willing to hold top executives accountable for them, as recently discussed in an article in Christian Science Monitor. This is not at all surprising considering the havoc that data breaches wreak on companies and the recent spate of high-profile attacks such as those suffered at Anthem, Premera, Target, Home Depot, and Sony.

When a breach is disclosed, depending on the size of the attack and the organization itself, it can cost companies hundreds of millions of dollars, erode shareholder value, result in loss of intellectual property, and markedly tarnish the reputation of a brand. Yet, up to now CEOs and other top management organizations that have suffered such incidents have remained mostly immune from the fallout. But this may be changing as indicated by the Veracode/NYSEGS survey and other factors we have discussed in prior articles, including SEC Commissioner Luis Aguilar calling for corporate boards to ensure they’re taking the necessary steps to address and oversee their companies’ cyber risks.

In the Veracode/NYSEGS survey, more than four in 10 of the directors in the survey felt that a company’s chief executive officer should take the rap for a data breach. When asked to prioritize who should be held accountable for such incidents, corporate boards ranked the chief executive officer first, followed by the chief information officer, and then the entire executive team. The fact that the chief information officer is fourth on this list, according to the Christian Science Monitor article, suggests that directors are beginning to understand that they can only perform as well as the support and the resources they get from top management.

Cyber security is an emerging risk and has become a growing priority for boards. In fact, 81% of the directors in the survey said information security matters have become a topic for discussion at most or every board meeting, which underscores other recent surveys conducted by both Accenture and Deloitte. Unfortunately, two-thirds of respondents still feel uncertain of their company’s ability to avert a data breach. Moreover, over 70% said they were significantly concerned about security risk from third-party software in the supply chain.

Of course, cyber liability concerns are also a driving force behind the wake-up call for boards and directors and officers. Big breaches can often result in lawsuits from consumers, banks, and other affected parties. Target, Home Depot, and Anthem, for example, were all hit with dozens of lawsuits in the aftermath of their breach disclosures.

The importance of the role of the head of an organization regardless of its size when it comes to cyber risks is becoming increasingly clear. Equally crucial is having a top-to-bottom cyber security plan that includes Privacy & Network Security Liability insurance. Axis Insurance Services is positioned to provide you with a comprehensive insurance protection plan to address the various costs involved in a data breach or other cyber-related exposure. Give us a call at (877) 787-5258.

 

 

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Blogged on: June 10, 2015 by Mike Smith

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