In today's digital age, cybersecurity is fundamental to business resilience and growth. It’s a complex balancing act that ensures the confidentiality, integrity and availability of information. A stumble or miscalculation can carry significant financial repercussions, damaging the organization for years to come. With such high stakes, we’re increasingly seeing CFOs taking a lead role in combating cyber threats. The result — more effective strategies that reflect the complexities of modern business environments.
the rising costs of cybersecurity
For many years, cybersecurity has been largely relegated to the IT department. And yet, cyber threats actually threaten the health of the entire organization. Considering the average cost of a data breach is $4.35 million, a successful attack can be devastating and potentially force a company to shut down. Even if the business stays afloat, data breaches can have legal ramifications and erode consumer trust. Rebuilding a reputation is a long and costly journey, requiring significant investments in public relations, marketing and — of course — stronger security measures.
These consequences underscore the need for organizations to view cybersecurity as a strategic business component, not just a technical challenge. In this respect, CFOs are uniquely positioned for the task. Here are five practical ways CFOs can help drive more effective cybersecurity strategies.
1. aligning cybersecurity with business objectives
Organizations often mistakenly believe they are either secure or not secure against cyber attacks. The reality is not binary — digital systems are always at risk to some degree. As such, a CFO is an ideal partner for the Chief Information Security Officer (CISO) in communicating a more nuanced and comprehensive view of cybersecurity.
CFOs can translate complex cybersecurity risks into clear financial terms that resonate with stakeholders. For example, they can quantify the potential financial impact of a cyberattack in terms of revenue loss, regulatory fines and reputational damage. Together, the CFO and CISO can extract cybersecurity from the IT silo and develop strategies from a holistic perspective.
2. safeguarding against financial scams
Studies have found 95 percent of cybersecurity breaches are caused by human error. In fact, finance teams are highly susceptible to Business Email Compromise (BEC) attacks as these common and costly scams typically mimic normal financial operations such as paying an invoice or making a financial transaction.
Again, CFOs can lead the way in the organization by establishing robust internal controls and verification processes for financial transactions. Training and awareness programs specifically tailored to finance teams are essential. These should focus on identifying and responding to common tactics used in financial scams, such as fraudulent emails or fake invoices. Financial scammers change ploys often, so the CFO must regularly update training programs accordingly. Organizations can also provide an extra layer of defense against BEC attacks by implementing advanced email filtering and fraud detection technologies.
3. understanding and quantifying risk factors
CFOs help foster a culture where cybersecurity risks are quantified and understood in the context of the company's overall risk profile. In collaboration with IT or cybersecurity teams, CFOs can develop frameworks for evaluating the likelihood and implications of different types of cyber incidents. For example:
risk assessments
Identify, analyze and evaluate the risks associated with an organization's digital systems and operations.
scenario planning
Include various “what-if” scenarios in financial forecasts to understand how different types of cyber incidents could impact the company's financial health. Model the financial impact of data breaches, system downtimes and compliance penalties.
regular reviews and adjustments
Cyber threats are evolving rapidly in our high-tech business environments. As such, CFOs and CISOs may need to evaluate and adjust cybersecurity strategies and spending more frequently — quarterly instead of annually, for example. This helps ensure the organization is always prepared for the financial implications of emerging threats.
These approaches are key to data-driven cybersecurity strategies and investments. By quantifying risks, CFOs can make more informed decisions about where to allocate resources and how to balance cybersecurity investments with other business priorities.
4. setting a strategic cybersecurity budget
How does your organization measure up to competitors when it comes to cybersecurity spending? IDC (International Data Corporation) estimates worldwide security spending is expected to grow 12.1 percent annually and investments in related hardware, software and services will hit nearly $300 billion by 2026. This spending is motivated by the ongoing threat of sophisticated cyberattacks, increasing demands for secure remote work environments, and evolving data privacy and governance requirements.
CFOs can prioritize cybersecurity budgets based on their potential to protect and enhance business value. They can align security spending with the organization's overall risk tolerance and business goals. Benchmarking against similar organizations and understanding the ROI of cybersecurity are essential to this strategy.
Another potential line in the cybersecurity budget is a contingency fund for unexpected cybersecurity incidents. This fund can be used to cover unforeseen expenses related to cyberattacks, such as emergency interventions, system repairs and legal fees.
5. assessing cost-effective cybersecurity solutions
CFOs are well-positioned to assess and advocate for cost-effective cybersecurity solutions that don’t compromise protection. This involves evaluating a range of options, from in-house security measures to outsourced services and cloud-based solutions. The key is to identify solutions that fit the organization's specific needs and risk profile.
Cyber insurance is becoming a common feature in comprehensive risk management strategies. However, policies vary widely so it’s important to compare your options. Organizations should understand the limitations of cyber insurance and ensure a policy complements, rather than replaces, effective security measures. CISOs and CFOs can regularly review and update cybersecurity strategies in line with evolving threats and business changes.
embracing a holistic approach to cybersecurity
The role of the CFO in cybersecurity and risk management cannot be overstated. As strategic thinkers and visionaries, CFOs are uniquely positioned to integrate cybersecurity into the fabric of business decisions. Their leadership is crucial in making cybersecurity an integral part of the business strategy.
Businesses must adapt to these digital trends, embracing a proactive and strategic approach to cybersecurity. This adaptation is not just about technology; it's about understanding the financial implications of cyber risks and embedding cybersecurity into the core of business operations. It's about protecting an organization's reputation and financial outlook. The future of the business depends on this holistic, forward-thinking approach.
Thinking of adopting a new approach to cybersecurity? Get in touch with us today to find out how Tatum can partner with your organization to solve today’s most pressing business challenges.