Cyber Resilience: The New Creditworthiness?
Banks are increasingly turning to cyber risk assessments as part of their lending criteria, a trend driven by the escalating frequency and financial impact of cyberattacks. This shift isn’t about penalizing businesses, but rather understanding and mitigating the risk of loan defaults stemming from cyber incidents.
The Rising Cost of Cyberattacks for Lenders
A successful ransomware attack or significant data breach can cripple an organization, impacting its ability to generate revenue and repay debts. As Luc Declerck, director general of Board of Cyber, points out, a cyber incident can lead to non-repayment or partial repayment of loans. In severe cases, companies can face liquidation due to financial fallout from cyberattacks.
Cyber Ratings and Maturity Assessments
To quantify cyber risk, banks are employing questionnaires and cyber rating solutions. These tools assess a company’s “cyber maturity” – its ability to prevent, detect and respond to cyber threats. Board of Cyber provides its cyber rating solution to Crédit Lyonnais, enabling the bank to assess the cyber health of potential borrowers.
A Discreet but Growing Practice
Although many banks are hesitant to publicly announce their leverage of cyber risk assessments for fear of deterring clients, the trend is gaining momentum. Some institutions prefer to remain discreet, as clients may avoid banks perceived as overly stringent on cybersecurity. However, forward-thinking organizations are embracing this approach.
Regulatory Pressure and the Evolving Landscape
New cybersecurity regulations, such as the directive NIS 2, are also driving this change. These regulations aim to strengthen the cyber posture of businesses, particularly SMEs and mid-sized enterprises. This regulatory push, coupled with increasing awareness of cyber risk, is making cybersecurity a core business issue.
Beyond Compliance: A Business Imperative
The integration of cyber risk into lending decisions isn’t solely about compliance. It’s about recognizing that cybersecurity is intrinsically linked to financial stability. Banks are increasingly viewing cyber resilience as a key indicator of a borrower’s overall health and long-term viability.
Assessment as Guidance, Not Punishment
Currently, cyber maturity assessments are primarily used as a diagnostic tool. Banks provide feedback to borrowers, recommending improvements to their cybersecurity posture. The goal is to encourage proactive risk management, rather than simply denying loans based on current vulnerabilities.
A Risk-Based Approach
Banks are adopting a risk-based approach, tailoring their expectations to the size and sector of the borrower. A minor business in a low-risk industry won’t be held to the same standards as a large corporation in a highly targeted sector. Assessments are adapted to the specific realities of each client.
How Cyber Maturity is Evaluated
Banks typically use a combination of questionnaires and automated assessment tools, such as those offered by Citalid and Board of Cyber. Questionnaires cover standard security practices like multi-factor authentication and access control management. Automated tools verify the accuracy of self-reported information.
The Future of Cyber Risk and Lending
The trend of incorporating cyber risk into lending decisions is expected to accelerate. Financial rating agencies are also exploring ways to integrate cyber risk into their credit ratings, further solidifying its importance. Some banks anticipate regulators will eventually mandate cyber risk assessments as part of the lending process.
FAQ
- Will a poor cyber security posture automatically disqualify me for a loan? Not necessarily. Banks are currently using assessments as guidance to encourage improvement, not as a strict disqualifier.
- What does a cyber maturity assessment involve? Typically, it involves completing a questionnaire and potentially undergoing an automated assessment of your security controls.
- Are all businesses subject to these assessments? No. Banks tailor their expectations based on the size and risk profile of the borrower.
Pro Tip: Regularly review and update your cybersecurity practices. A strong cyber posture not only reduces your risk of attack but can also improve your access to capital.
Did you know? The Banque de France highlights the increasing sophistication of cyber threats and the potential for significant financial disruption, emphasizing the require for robust cybersecurity measures.
Desire to learn more about strengthening your organization’s cyber resilience? Explore additional resources on cybersecurity best practices and risk management.
