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Fortune 1,000 firms in the health care, technology and insurance sectors top the list of industry groups most concerned about cyber threats, according to a recent report by Willis North America, a unit of Willis Group Holdings.
The Willis Fortune 1000 Cyber Disclosure Report, 2013, published today, is the second in a series of reports examining U.S. public companies filings in response to U.S. Securities and Exchange Commission guidance issued in 2011, asking U.S. listed firms to provide extensive disclosures on their cyber exposures. For this report, Willis expanded the scope of the review to a wider pool of companies, focussing on the Fortune 1,000 while examining the responses of various industry groups.
The report found that among the Fortune 501-1,000, 22% remained silent on cyber risk. A "significant" increase compared to 12% of the Fortune 500 firms who remained silent in their disclosures, Willis said. "The reason for this may be as companies get smaller, they see themselves as less likely targets of an attack, or it may be that smaller companies needed more time to identify their cyber exposures," the report said.
Commenting on the firms that remained silent, Ann Longmore, Executive Vice President, FINEX, Willis North America and co-author of the report cautions, "This is concerning because the view that firms may see themselves as less likely targets of an attack runs contrary to our experience, and in fact, many of these firms are sitting at the center of the bulls eye."
The report also divided the Fortune 1,000 into 20 industry groups to compare the disclosures of each risk, weighing the scope of the risk; how the exposure would manifest; and what protections were being employed to mitigate the risk. With respect to "perceived risk," the report found that health care is the industry most concerned about cyber risk, closely followed by technology, insurance, telecom, life science and retail sectors. Meanwhile, real estate, financial services funds, conglomerates, and the energy and mining sectors expressed the least concern for cyber risk.
Other key findings include:
The top three cyber risks identified by the Fortune 1,000 include: privacy/loss of confidential data, reputation risk and malicious acts.
Cyber terrorism and intellectual property risks ranked lower than expected among the Fortune 1,000 given the focus of the federal government on these areas of risk and their importance to the health of the U.S. economy overall, the report said.
When describing the "extent" of cyber risk exposures, financial institutions and technology companies rise to the top of the list disclosing distinct cyber exposures. Meanwhile, firms in the energy and utility sector report the fewest distinct exposures.
In evaluating loss control measures, the industry groups that disclosed the greatest number of technical protections against cyber risk, including firewalls, intrusion detection, and encryption, include the technology, health care, professional services and financial institution sectors. Within financial services firms, insurance companies refer to technical risk protection 63% of the time.
With respect to cyber insurance protection, the funds sector (33%) followed by utilities (15%), the banking sector and conglomerates (14%) reported the greatest levels of insurance. Insurance and technology sectors both disclosed the purchase of insurance coverage at the 11% level. However, the report indicated that many companies may be under-reporting the level of cyber insurance coverage based on Willis data and other industry data indicating higher take up rates, particularly for the health care sector.
The disclosure of actual cyber events remains at 1%, a seemingly low number given the number of attacks that appear in the press on a regular basis, the report said.
"Action taken at the U.S. federal level clearly shows that cyber-security disclosure is high on the federal agenda and will continue to pose a unique challenge for public companies," said Chris Keegan, Senior Vice President, National Resource E&O and e-risk, Willis North America and co-author of the report. "Government authorities may require companies to step out of their comfort zone for disclosure in order to bolster IT security for the entire U.S., opening up greater liability to directors and officers in the process," he said.