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View allBeing forced to suspend trading due to cyber interruption can cause bigger losses than the event itself. This article identifies key business vulnerabilities and offers risk management solutions.
When a company’s network goes down or is significantly impaired for sustained period, it can incur significant costs in getting the network back up and running to substantially the same level as it was before the incident. It can also suffer significant impairment to its business income both during the outage and for quite some time afterward.
Cyber-initiated business interruptions can be caused by malicious or non-malicious events. Examples of malicious causes are ransomware, DDoS (distributed denial of service) attacks or crypto-jacking. Most of the media’s recent ransomware focus has been on the escalating amounts of ransom demanded and paid, and the cost of data recovery when the victim’s network is not properly decrypted, but the affected company can also suffer a substantial loss of business income (as well as incur significant extra expenses) before even a decrypted network is fully restored.
Non-malicious cyber business interruptions can occur during system upgrades or network patches, or from software coding errors or incompatibilities. A software coding glitch crashed the network of a prominent company in the travel industry in 2017, and was reported to have caused a loss of more than $100M, according to news network CNN Money.
There are various ways in which a company’s income and operations can be affected by a cyber business interruption, either malicious or non-malicious in nature. The principal ones include
Cyber insurance can provide insurance coverage for the first three causes listed above; it is very difficult to obtain coverage for the fourth listed cause. Insurers normally ask companies to identify their key outsourced providers during the underwriting process. Insurers sometimes limit the cyber insurance coverage they will provide for outages, especially non-malicious outages, incurred by the insured’s outsourced providers.
Insurers also generally require ‘waiting periods’ ‒ the minimum amount of time that the business interruption must last before the loss becomes payable – and ‘restoration/indemnity periods’ ‒ the time boundaries for measuring the loss. Not all insurers define these terms the same way, and the differences can significantly affect coverage.
The extent of a company’s exposure to cyber business interruption and loss will depend on many factors specific to its operations and practices.
Main factors that contribute to the cyber impact on business interruption are the extent of its cyber risk management practices, and the ability to respond or react to a cyber business interruption — including incident response, business continuity and disaster recovery plans.
Other factors that come into play with cyber incident impacts on business are
The foregoing is a brief and necessarily incomplete general description of cyber business interruption and of the availability and extent of cyber insurance to address the full range of potential losses.
Talk to a Gallagher cyber specialist today, and learn more about how your business may be affected by a cyber business interruption, cyber insurance coverage options and available risk management solutions.
John Doernberg, National Director, Cyber Practice, Gallagher US
Robyn Adcock, Gallagher Cyber/Technology Practice Leader, Gallagher Australia
Insurance market update: business continuity and your plan B
Computer Meltdown May Cost British Airways over $100 Million, CNN
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