Private equity and the rising cost of cyberattacks

In brief

• Non-state actors are targeting the private equity (PE) industry explicitly.
• Many portfolio companies lack the cyber maturity required to monitor, protect and respond to incidents.
• PE firms can mitigate these risks, painlessly and without sacrificing speed.
• Models are emerging to reduce exposure and deliver cybersecurity capabilities across the portfolio.

Why private equity firms are prime targets

The announcement of a deal and the appeal of ready cash can attract cyber attackers the same way an open purse attracts pickpockets.

With the price tag comes an array of consequences: 

• The reputations of both the portfolio company and the private equity (PE) firm are at risk.

• The acquired portfolio company’s value creation can be sandbagged, not to mention the value of the overall holding enterprise.

• To add insult to injury, once paid, threat actors could come back, targeting the PE firm itself or infiltrating other portfolio companies.

Many business leaders are aware of cyber-risk issues. At the same time, just 27% feel confident their organization is cyber resilient.

Cyber Champions achieve lower costs per attack

Acquisition candidates are highly vulnerable. Mid-sized companies, the sweet spot of PE, tend to operate with lower budgets for their cybersecurity systems. At the same time, PE firms look to achieve growth and are keen to move at a fast clip.

As a consequence, there is a temptation to undervalue or completely overlook cybersecurity. This means most of these portfolio companies may fall into a category deemed “Cyber Risk Takers”.

Easy moves and small investments can make a big difference in exposure—financial, operational and reputational. Cyber Champions stop more attacks and face less disruption.

Five steps to improve cybersecurity

Based on the experience serving 3,100 clients worldwide, we recommend five steps that can be taken to improve a portfolio company’s cybersecurity capabilities before deals are inked. This helps firms prepare for the expected spike in incidents and build cyber resilience as part of a strong digital core:

1. Rethink the cyber model

Building internal capacity is neither fast nor necessarily useful. Instead, have someone else do the blocking and tackling.

2. Improve how you approach due diligence

PE firms can limit their due diligence efforts to a week, to then double down on remediation opportunities before deal announcement.

3. Provide basic security hygiene

There are often quick wins that don’t require significant interventions yet increase the resilience of the portfolio company. 

4. Reduce your blast radius

Not everybody should have access to everything. A quick review followed by one-time remediation prevents overly open access.

5. Ensure incident response readiness

Prepare for the worst with a tested response plan. The damage of an attack can oftentimes multiply because of misguided communication and uncoordinated action.

Increase resilience with ease and at speed

Cyber threats have raised the stakes for PE firms and their portfolio companies. Beyond any immediate costs, the reputations of everyone involved hangs in the balance. That’s the bad news. 

The good news? Interventions can be catalyzed quickly and painlessly. And can be done before deals are closed, to prepare for a surge in cyberattacks, manage the risk and ensure speed to value. 

Looking to improve cyber resilience for your portfolio while reducing your cybersecurity insurance expense? Accenture ranks first in cybersecurity service providers, employing more than 16,000 professionals globally.