Threats and risks are the forerunners of corporate crises. While some risks are relative and dependent on the type of business or industry an organization is in, others are universal and pose a threat to every organization. Whichever risks or threats a company faces, it must have a current crisis management strategy to handle any crises that may arise if the threat materializes. Developing efficient internal controls to recognize and reduce cybersecurity risks is more important than ever in a world that is becoming more digital.
Cyberattacks are still going strong. As cybersecurity risks evolve, investors, regulators, and stakeholders demand transparency about how companies manage them. Audit committees, which frequently monitor the entity’s cybersecurity risks, can be proactive in assisting organizations in understanding the impact on their financial reporting and re-evaluating their privacy and security standards.
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Recognize the risk and regulatory landscape
Following many significant data breaches in March 2022, the SEC published new proposed changes on cybersecurity risk and incident disclosures for public companies. The SEC had previously put forth regulations that would have required funds and registered investment advisers to adopt and carry out cybersecurity risk management policies and procedures. For public companies, the evolving cybersecurity reporting requirements undoubtedly add pressure.
Understand your risk level and Invest in privacy and security
A company should link its corporate strategy and growth goals to its data security and privacy plan. Companies’ customers and other stakeholders demand transparency in handling a vast amount of personal data. Organizations must invest in privacy and security capabilities and services to effectively oversee internal and external data uses and to show stakeholders that they have a proactive and consistent cybersecurity strategy and implementation if they are to protect the value that such data generates.
Keep up with regulatory requirements
Global regulations that are constantly changing can present difficulties, particularly for sensitive data (e.g. financial transactions, healthcare, and personal data). These rules can cover a wide range of topics, such as the SEC’s disclosure requirements, data privacy laws like the EU General Data Protection Regulation and the California Consumer Privacy Act, and comprehensive oversight over financial crimes and operational risks. Organizations will be more compliant, and their cybersecurity risk level will decrease if they follow all these and closely monitor new regulations.
The Biggest Challenge Organizations Face
The core of cyber assurance is data integrity
Because data silos frequently develop over the company’s existence, data presents one of the biggest challenges facing businesses and organizations. Both internal business processes and outside service providers contribute to these silos. More than 60% of business leaders believe their organization should be doing more to strengthen current data protection measures. By enforcing strict data practices throughout its supply chain, the board and audit committee should ensure the business can eliminate unnecessary data silos when necessary.
Enhancing the board’s ability to adapt to the emerging Cybersecurity Landscape
While enforcing strict controls over data practices throughout its supply chain, the board and audit committee should take their time to eliminate unnecessary data silos. The ever-evolving nature of cybersecurity risks necessitates constant monitoring and assessment of all controls to ensure their continued applicability and the possibility of achieving continuous improvement so that organizations can address new risks.
To help create comprehensive cybersecurity and privacy strategy, boards should ask management for information on cyber incidents and threats, risk assessments, and safeguards. The Boards may also establish a more comprehensive data governance framework that incorporates adherence to privacy laws and regulations, the organization’s policies and procedures regarding data ethics, data integrity, and other areas.
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Competing in a cyber-compliant world by making cyber-compliance a priority
When preparing their financial statements, businesses must consider the immediate economic impact of a cyber incident. Inadequate controls can result in expensive legal action when data breaches occur. Without reassuring investors and customers about cybersecurity and privacy standards, a company’s brand reputation may suffer, which may also impact the company’s financial performance.
Rather than seeing cybersecurity as a risk, business leaders should view it as an opportunity. In the boardrooms of many businesses and organizations, the wheel toward improved cybersecurity controls is already turning. Almost all technology leaders consider cyber security to be a competitive advantage, and their growth and cyber security strategies are aligned.
Building an auditable plan can be the first step in pursuing this opportunity to develop a solid assurance strategy that includes comprehensive considerations and trustworthy metrics. The race for cybersecurity readiness can be turned into a competitive advantage by boards and audit committees, which will support growth, enable stakeholder trust, and promote organizational resilience.
Technological advancements and other trends create emerging risks, which Internal Audit should address. At Buchprufer, our internal audits can help organizations improve their performance and analyze their financial situation.