- Survey Says: Fortune 500 Disclosing Cyber Risks
- July 25, 2013 | Author: Adam M. Veness
- Law Firm: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. - Boston Office
Ever since our 2013 prediction, an ever increasing number of public companies are adding disclosure related to cybersecurity and data breach risks to their public filings. We previously analyzed how the nation’s largest banks have begun disclosing their cybersecurity risks. Now, it appears that the rest of the Fortune 500 companies are catching on and including some level of disclosure of their cyber risks in response to the 2011 SEC Guidance.
The recently published Willis Fortune 500 Cyber Disclosure Report, 2013 (the “Report”), analyzes cybersecurity disclosure by Fortune 500 public companies. The Report found that as of April 2013, 85% of Fortune 500 companies are following the SEC guidance and are providing some level of disclosure regarding cyber exposures. Interestingly though, only 36% of Fortune 500 companies disclosed that such risk was “material”, “serious” or used a similar term, and only 2% of the companies used a stronger term, such as “critical”.
Following the SEC’s recommendation in its guidance, 95% of the disclosing companies mentioned specific cyber risks that they face. The top three cyber risks identified by those companies that disclosed cyber risks were:
1) Loss or theft of confidential information (65%).
2) Loss of reputation (50%).
3) Direct loss from malicious acts (hackers, viruses, etc.) (48%).
Surprisingly, 15% of Fortune 500 companies indicated that they did not have the resources to protect themselves against critical attacks and only 52% refer to technical solutions that they have in place to defend against cyber risks.
The Report notes that despite the large number of Fortune 500 companies that acknowledge cyber risks in their disclosure, only 6% mentioned that they purchase insurance to cover cyber risks. This number runs contrary to a survey published by the Chubb Group of Insurance Companies in which Chubb indicates that about 36% of public companies purchase cyber risk insurance. For whatever reason, it appears that many of the Fortune 500 companies are simply not disclosing that they purchase cyber risk insurance as a means of protecting against cyber risk.
Almost two years after its issuance, the Report findings indicate that the 2011 SEC Guidance is in full swing and making its way into reality. As more large companies disclose cyber risks in their public filings, this will continue to trickle down to the smaller companies that rely on those filings for precedent and guidance. The Report provides a clear snapshot of where things stand in cyber risk disclosure by Fortune 500 public companies. The scope of the Report is expected to expand to include Fortune 1000 companies, and it will be interesting to see how this data changes, if at all, when comprised of a larger pool of public companies.