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ANALYSIS BY MATTHEW CLARKE


HIGH-PROFILE HACKS ON HOUSEHOLD NAMES MIGHT GIVE THE IMPRESSION THAT CYBER ATTACKS ARE MAINLY A PROBLEM FOR LARGE COMPANIES.BUT SMALL AND MEDIUM BUSINESSES ARE IN THE FIRING LINE.


Cyber attacks: It’s not a matter of if but when


WE HAVE BEEN INUNDATED WITH reports over the last couple of years of huge cyber attacks on large companies that are household names across the globe. It is as if the Sony PlayStation attack of April 2011 awakened the world’s hackers to the vulnerabilities of businesses and the riches that lie within. There have been countless surveys


from global accounting firms and large IT security companies that attempt to put a dollar value on the impact of cyber attacks. While the figures on the global cost vary wildly from tens of billions up to several hundred billion dollars, all reports agree on the exponential increase in cyber attacks. The Norton Cyber Crime Report of 2013 has put the number of victims at more than one million per day; that equates to 12 victims every second. IT security firm Kaspersky Lab reported that they successfully neutralized more than five billion cyber attacks in 2013 alone. The impacts of an attack are now well known and best demonstrated by the recent high profile cyber attack that hit US retailer Target. The breach compromised more than 40 million customer credit cards and has already claimed the job of the company’s Chief Information Officer and its CEO. In February the share price had plummeted more than 12% and Target’s earnings slid 46% as costs associated with the breach continued to mount and consumer sales slumped. The full impact of the reputational damage will only be truly known in the years ahead, and it is not likely to be forgotten quickly with the company now facing more than 80 related lawsuits.


If you only trawled the headlines of the major media publications, you could be forgiven for thinking that cyber attacks were a phenomenon centred around large companies only. However, the largest credit card ID


fraud in Australia’s history occurred in December 2012 and was the result of an attack on 46 small to medium businesses – mainly service stations and retail outlets. They are hardly your stereotypical targets for this type of attack but that is precisely the reason they were targeted.


COMPANIES STILL VIEW THEMSELVES AS TOO SMALL TO BE TARGETED.


TOO MANY


Australian businesses remain complacent when it comes to the threat of cyber exposures. It is this very attitude that has made them the “low- hanging fruit” for international cyber criminals. Too many companies still view themselves as too small to be targeted, or they simply rely on their IT teams to manage the exposures. The profound impact of a cyber attack means that it should rank in the top three exposures to any business and, accordingly, it should be the CEO and the Board taking responsibility for the management of the exposures, not IT. All of this paints a pretty bleak picture, so what can brokers do to help protect their clients?


36 Insurance & Risk Professional – www.niba.com.au Raise awareness: cyber exposures


are not going away. If anything, they are only going to increase in frequency and sophistication. Ensure your clients understand what data they have and how they store it, and keep them up to date with what attacks are taking place generally. This way they can learn from others before they become the victim. Cover the basics: the majority of


attacks are not targeted and can be thwarted with simple IT security software. Ensure they are using firewalls and virus software that is up to date and that all of their data, particularly mobile data, is encrypted. Be prepared: if they haven’t got a business continuity plan in place, urge them to get one. Ask them how their business could operate without access to its data. Build a plan and test it; refine the plan and test it again. Prepare for the worst and hope for the best. Transfer risk: look to transfer any


exposure that you cannot manage. The proliferation of cyber liability policies available in the market provides broad cover for cyber exposures. These policies are not designed


to replace good risk management practices, but in the event that your risk management fails, cyber liability insurance will ensure that the impact to your business is mitigated.


Matthew Clarke is AIG’s Australasian Professional Indemnity Manager. He will give a seminar at the 2014 NIBA Convention exploring the risks of systemic technological failure and how brokers can best advise and protect their clients.


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