Valuation impact assessment
Understanding how a breach might impact a company's valuation is crucial for prioritising cyber security focus.
Whilst direct financial losses from cyber incidents, such as clean-up costs, should be considered, they will often only impact one or two years of P&L. As such, their impact on valuation may not be significant.
However, any impact on a company's brand, reputation, or strategic value-creation capabilities has a much greater impact on valuation. In addition, a breach that hits a company's core operations, like a payment system provider losing credit card details, can have a severe strategic impact.
Working through the list of threat actors per company and the potential security incidents they may cause can help identify and rate these valuation impacts. Again, a simple metric of high, medium, and low can be useful for further prioritisation.
Once valuation impact and potential threat level have been assessed, private equity firms can decide whether to take an active role in further cyber security assessments or leave this matter to senior management teams.
For instance, a PE firm may take a more hands-on approach if either impact or threat levels are high, but if not, take a hands-off approach.