Market Segment
Cyber breaches are increasing rapidly in both size and scope. Venture finance and private equity (PE) and venture capital (VC) firms, along with their portfolio companies, which reached an all-time high of $643 billion last year, face more cyber threats and breaches and need to be more prepared than ever before. In fact, the Securities and Exchange Commission (SEC) wants to ensure that registered investment companies such as PE and VC funds take cyber threats seriously. The SEC recently proposed a new set of rules that would require firms to adopt and implement written cybersecurity policies and procedures aimed at addressing cybersecurity risks and that significant cybersecurity incidents be reported to the Commission. The proposed rules and changes are designed to improve cybersecurity readiness and can increase investors’ confidence in the resilience of advisors and funds to cybersecurity threats and attacks, The SEC states that PE and VC funds, along with other investment firms and advisors, are exposed to and rely on a vast network of interconnected systems and therefore face a multitude of cybersecurity risks. He says the proposed rules are aimed at improving the SEC’s ability to assess systemic risks and better oversee these funds.
Midsize companies, along with their financial backers, are increasingly the target of hackers. Ransomware groups have been known to go after companies that have been recently funded because they scrutinize the headlines and know how much money they have in the bank. And if the hackers are successful, they know that it’s not just a company at risk, but potentially the entire portfolio of a private equity or venture capital firm.
While these trends are alarming, they are forcing PE and VC firms to take a closer look at their security systems and processes.
Today’s attack surface is greater than ever, thanks to the proliferation of mobile devices and the large number of employees working from home and logging in remotely. As a result, VC and PE firms must be extremely vigilant when evaluating the cybersecurity capabilities of any potential new investment. A cyber risk assessment should examine vulnerabilities in a portfolio company’s IT environments and the extent of damage that could occur in the event of a breach. While it is difficult to comprehensively evaluate every potential investment in effective cybersecurity measures, cyber diligence can provide a reasonable understanding of a company’s current capabilities. Today’s attack surface is greater than ever, thanks to the proliferation of mobile devices and the large number of employees working from home and logging in remotely. As a result, VC and PE firms must be extremely vigilant when evaluating the cybersecurity capabilities of any potential new investment.
A cyber risk assessment should examine vulnerabilities in a portfolio company’s IT environments and the extent of damage that could occur in the event of a breach. While it is difficult to comprehensively evaluate every potential investment in effective cybersecurity measures, cyber diligence can provide a reasonable understanding of a company’s current capabilities. It is imperative that VC and PE firms, portfolio companies, and potential investment targets identify key cybersecurity requirements to ensure they are not hackers’ toys. To set the right example for portfolio companies, they need to make sure their cybersecurity practices are top-notch. It is also important to plan the outage when and where a cyber incident occurs. Putting together an incident response plan can help PE and VC firms better identify, prevent and respond to business disruptions and potentially avoid the loss of millions. Additionally, your incident response plan should now include reporting to the SEC when significant cybersecurity incidents occur.
Managed detection and response (MDR) services can play a critical role in helping investment firms and portfolio companies remain protected. MDR service providers can help you keep an eye out for incoming attacks and take immediate action when and when they happen
Does the portfolio or target company properly train its employees on how to avoid getting caught in phishing or malware attacks? Has the company implemented technologies such as multi-factor authentication that can prevent bad guys from using weak or stolen passwords and credentials? If a cyber breach occurs, how quickly can the company detect and respond to the threat? Has it done a penetration test to see which systems are vulnerable to hacking?
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