Fortune 1,000 firms in the health care, technology and insurance sectors top the list of industry groups most concerned about cyber threats, but many public companies still appear to be avoiding seriously addressing the risk, according to a report by Willis North America.
Among industries most concerned about cyber risk, health care, technology and insurance are closely followed by telecom, life science and retail sectors. Meanwhile, real estate, financial services funds, conglomerates, and the energy and mining sectors expressed the least concern for cyber risk, according to Willis.
The report found that among the Fortune 501-1,000, 22 percent remained silent on cyber risk. That is a “significant” increase compared to 12 percent of the Fortune 500 firms that remained silent in their disclosures, Willis said. “The reason for this may be as companies get smaller, they see themselves as less likely targets of an attack, or it may be that smaller companies needed more time to identify their cyber exposures,” the report says.
The Willis Fortune 1,000 Cyber Disclosure Report, 2013, examines U.S. public companies filings in response to U.S. Securities and Exchange Commission guidance, issued in 2011, asking U.S. listed firms to provide extensive disclosures on their cyber exposures
If smaller firms are silent because they see themselves as less vulnerable, then that is troublesome, according to Ann Longmore, executive vice president, FINEX, Willis North America and co-author of the report. “This is concerning because the view that firms may see themselves as less likely targets of an attack runs contrary to our experience, and in fact, many of these firms are sitting at the center of the bulls eye,” she said.
Another recent study found that cyber security risks have become more worrisome to large organizations than traditional natural catastrophe risks.
The study by Experian Data Breach Resolution and the Ponemon Institute reported that 41 percent of large businesses (those with 500-plus employees) believe cyber security risks are greater than other insurable business risks such as natural disasters, business interruption and fires. Another 35 percent of respondents said cyber security risks are equal to other insurable business risks.
The Exprian-Ponemon study found those firms that do not currently have insurance coverage – more than half of all survey respondents (57 percent) – indicated they plan to purchase cyber security coverage in the near future. The survey predicts 50 percent growth in policies purchased in the next year, with more than 100 percent growth within the next two years.
Other findings of the Willis report include:
- The top three cyber risks identified by the Fortune 1,000 include: privacy/loss of confidential data, reputation risk and malicious acts.
- Cyber terrorism and intellectual property risks ranked lower than expected among the Fortune 1,000 given the focus of the federal government on these areas of risk and their importance to the health of the U.S. economy overall, the report said.
- When describing the “extent” of cyber risk exposures, financial institutions and technology companies rise to the top of the list disclosing distinct cyber exposures. Meanwhile, firms in the energy and utility sector report the fewest distinct exposures.
- In evaluating loss control measures, the industry groups that disclosed the greatest number of technical protections against cyber risk, including firewalls, intrusion detection, and encryption, include the technology, health care, professional services and financial institution sectors. Within financial services firms, insurance companies refer to technical risk protection 63% of the time.
- With respect to cyber insurance protection, the funds sector (33%) followed by utilities (15%), the banking sector and conglomerates (14%) reported the greatest levels of insurance. Insurance and technology sectors both disclosed the purchase of insurance coverage at the 11% level. However, the report indicated that many companies may be under-reporting the level of cyber insurance coverage based on Willis data and other industry data indicating higher take up rates, particularly for the health care sector.
- The disclosure of actual cyber events remains at 1%, a seemingly low number given the number of attacks that appear in the press on a regular basis, the report said.
“Action taken at the U.S. federal level clearly shows that cyber-security disclosure is high on the federal agenda and will continue to pose a unique challenge for public companies,” said Chris Keegan, senior vice president, National Resource E&O and e-risk, Willis North America and co-author of the report. “Government authorities may require companies to step out of their comfort zone for disclosure in order to bolster IT security for the entire U.S., opening up greater liability to directors and officers in the process.”