A recent survey conducted by commercial insurance placement and disputes firm, Mactavish, reveals that numerous senior private equity professionals feel that the due diligence carried out by private equity firms on cyber security issues of target companies is lacking.
The survey results show that just 23% of those interviewed describe the due diligence undertaken as ‘good’ or ‘excellent’, with 30% describing the industry’s work on cyber security issues as ‘average’ and 27% saying it was either ‘poor’ or ‘terrible’.
The research was commissioned by Mactavish, which has been operating in the commercial insurance sector for more than 15 years.
Despite a lack of due diligence, a significant 83% of respondents to the survey insist that its portfolio companies all have cyber insurance policies in place within the next three years, suggesting that improvements in the cyber risk area are imminent in the private equity industry.
More than half of survey respondents said that more private equity firms are increasingly focused on buying cyber insurance for their own businesses, with 27% noting that one of the hindrances to getting cyber protection is that it costs too much relative to the exposure.
Interestingly, the same amount of respondents feel that the cyber risk threat facing the private equity sector isn’t serious enough to require protection, while 13% of those interviewed said it was a challenge to find the right cover.
Liam Fitzpatrick, Client Services Director at Mactavish, said: “Cyber risks are a major and growing threat to all organisations but private equity firms are unique in that they can be left particularly exposed in three distinct but interrelated areas: the private equity firm itself, their transactional work, and then the risks faced at the portfolio company level.
“It’s imperative that private equity firms and their portfolio companies have robust insurance in place. However, this is easier said than done as many off-the-shelf cyber policies are not up to the job and may not meet the requirements of a complex business like a private equity firm.”
