Cyber compromises continue to rise globally, adversely impacting banking and financial services (BFS) institutions.
Cyber compromises are not only resulting in huge legal penalties for financial enterprises but also derailing their efforts to recover and rebound from the COVID-19 pandemic. There is great emphasis on strengthening cyber resilience among banks and financial institutions.
From an organizational standpoint, cyber resilience has heavily focused on infrastructure and monitoring enablement. These traditional fortification mechanisms, however, are unable to provide the necessary cover to business lines with wide and varied operating canvasses, which makes them prone to breaches.
Despite cybersecurity measures in place, this gap highlights the need for provisioning cyber insurance for the various business lines in both banks and firms across the financial services ecosystem, such as mortgage and settlement providers.
Read further to understand the need for banks and financial institutions to have a comprehensive cyber insurance strategy for managing cyberattacks. This will ensure business continuity and operational resilience.
Cyber insurance: An imperative for the finance industry
Banks and financial services firms have wide operating canvasses ranging from retail and corporate banking to mortgage and settlement services and forex and insurance services.
The value chain almost always comprises multiple vendors, applications, and heterogeneous environments for providing a range of customer services. In this scenario, to minimize cyber exposure and maintain a pre-incident state, cyber insurance must cover expenses from the time of the incident to the full recovery of the business. This exercise must be carried out by the chief information officer (CIO) or the chief risk officer (CRO). While there are some products in the market, most CIOs and CROs see deficiencies in their construct. Thus arises the need to understand the multiple business dimensions that warrant attention in arriving at a workable and feasible cyber insurance strategy from the CIO or CRO perspective.
For any line of business, the major components of cyber insurance range from maintaining core backend processing systems to real-time settlement systems and customer-connect systems. The infrastructure and applications that enable the ecosystem also constitute the consideration envelope.
The key tenets of a cyber insurance strategy
Several major components, each with its own unique business proposition and flavor, form a part of the cyber insurance requirements.