Technology-Based Operational Risk and “First Party Cyber Risks”
Over the last 10 years, organizations have become heavily reliant on computer networks to support infrastructure functions and to transact business. The connectivity of an internal computer network is deemed a business critical tool - many firms simply would not be able to trade in the event of system failure.
Entities hold much or all of their data and documentation in an intangible form (i.e. databases) and consumer-facing industries especially manage transactions electronically. While the creation of automated real-time business processes has undoubtedly enabled significant improvement in productivity, this growing dependency brings with it great risk.
Today customer and employee personal data are aggregated in large data bases where internal and external computer networks access, process, maintain, and/or transfer such personally identifiable non-public information (PII). The most sensitive PII include banking account and credit/debit card information; national identifier number (national insurance number, U.S. social security number, for example), personal medical information, and individual medical subscriber data. Major breaches of security of such information have been followed by adverse publicity in media and direct potential financial loss.
Coupled with the dependence on network based technology, many critical business and IT functions are increasingly outsourced to off-shore external vendors or contractors. Performance failure of a critical vendor may have a serious impact on a client’s ability to function properly or in extreme circumstances to consider an alternative vendor or solution.
In 2007, Lockton and Lloyd’s developed a unique insurance protection program, called
Business Resilience Insurance Program to address the threats to electronic information assets and computer networks from non-physical causes. The 2008 expanded program including Data Breach Reputation Harm and Off-Shoring Protection can be purchased in its entirety or in various combinations of coverages to meet the needs of individual clients.
Contact Information:
Emily Freeman
Emily.freeman@uk.lockton.com
Ben Beeson
ben.beeson@uk.lockton.com
Malcolm Randles
Malcolm.randles@uk.lockton.com
Lockton Service
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