Why Cybersecurity Programs are Facing Increased Scrutiny from Private Equity Firms

How secure is your company? What does your cybersecurity insurance cover? Does your security program include incident response plans? Do you have a CIO or CISO?

These are the types of questions that companies searching for private-equity funding can expect to answer when going through the due diligence process. Cybersecurity is quickly becoming one of the key risk considerations for private-equity firms in the modern marketplace.

We know firsthand how valuable it is for an organization to have a mature cybersecurity program, as well as how potentially detrimental it can be to lack one. A poor cybersecurity program can have a significant impact on an organization’s bottom line and can put them in the crosshairs of not just of threat actors, but also of regulators and customers.

When an organization suffers a cyber incident, there are a myriad of costs and impacts that must be endured. From the technical investigation and forensics analysis to legal fees to lost business and potential regulatory fines.

Organizations must be aware of these potential financial impacts when considering cost/benefit decision analysis of investing in maturing and enhancing their cyber security program components. Doing so can help avoid the financial impact that suffering an incident or breach can have, which was over $9mm per breach for US based companies in 2021.

So, you can understand why private equity firms are increasingly concerned about cybersecurity – poor cyber programs put their portfolio at risk from both the buy-side and the sell-side.

In response to growing concerns over cybersecurity, many private equity firms are now requiring baseline cybersecurity measures through the application process. Measures include requiring potential investments to carry cyber insurance and provideaccess to incident response teams as well as other specific controls such as multifactor authentication or strong password policies.

This is why it is increasingly commonplace for private equity firms to have a cybersecurity firm on retainer to help evaluate potential investments.

The Growing Role of Virtual Chief Information Security Officers (vCISOs)

Additionally, many private equity firms are revisiting their current portfolios to ensure companies have not only the proper controls in place, but appropriate governance structures as well, including having a Chief Information Security Officer (CISO). Realizing that not all portfolio or potential target companies may have one in-house, firms are turning towards vCISOs as a solution.

A vCISO is an outsourced consulting solution that provides strategic and operational cybersecurity leadership to companies that don’t have the resources to carry one in-house.

A vCISO typically provides an array of services including tactical, governance and executive leadership to help organizations build and manage programmatic capabilities, based on leading practices, and designed to enhance the organizational security posture. The vCISO can be a single person, an experienced team or a combination of both.

Regardless of if you are part of a private equity firm searching for a cybersecurity partner or a company considering private equity finding, the Schneider Downs Cybersecurity practice can help.

If you have any questions, feel free to contact me directly at [email protected].

About Schneider Downs Cybersecurity

The Schneider Downs cybersecurity practice consists of expert practitioners offering a comprehensive set of information technology security services, including penetration testing, intrusion prevention/detection review, ransomware security, vulnerability assessments and a robust digital forensics and incident response team. In addition, our Digital Forensics and Incident Response teams are available 24x7x365 at 1-800-993-8937 if you suspect or are experiencing a network incident of any kind.

To learn more, visit our dedicated Cybersecurity page or contact the team at [email protected]. 

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