As digital technologies revolutionise industries, businesses of all sizes are navigating a landscape where physical and digital risks increasingly intersect. From smart systems to cloud-based platforms, the adoption of advanced technologies is transforming operations across sectors. However, these innovations come with an undeniable challenge: the growing risk of cyberattacks.

At PARTNER RISK, we understand the complexities brokers and their clients face in navigating these emerging risks. While our expertise lies in property insurance, we recognise that cyber risks are reshaping the broader risk environment for businesses in the mid-market segment. Cyber threats may not fit into traditional definitions of property damage, but their consequences are real and potentially devastating.

How Cyber Threats Impact Businesses

Businesses have historically dealt with risks like fire, theft, and structural damage. Today, digital vulnerabilities present a new frontier. Smart technologies and interconnected systems bring efficiency but also increase exposure to cyberattacks. These risks affect businesses of all types, from property owners and tenants to service providers and retailers.

Consider these scenarios:

• Operational Disruption: Hackers infiltrate automated systems such as Heating, Ventilation, and Air Conditioning (HVAC) or access controls, leaving operations stalled and tenants locked out.
• Data Breaches: Sensitive customer or operational data stored digitally is exposed, leading to legal repercussions and reputational damage.
• Ransomware Attacks: Cybercriminals encrypt essential systems, demanding payment to restore functionality, resulting in costly downtime and operational challenges.

For businesses, these risks go beyond inconvenience. They threaten continuity, escalate liability, and strain relationships with stakeholders, areas where traditional insurance may not provide complete coverage.

A Changing Regulatory Landscape

Globally, regulators are stepping up efforts to address cybersecurity risks across industries. South Africa’s Joint Standard 2 of 2024, for instance, outlines comprehensive cybersecurity requirements for financial institutions. While initially targeting banks and insurers, the principles of proactive cybersecurity resonate with businesses, particularly those in the mid-market segment.

The adoption of interconnected systems expands potential attack surfaces, making robust cyber risk management essential. As regulatory frameworks evolve, businesses will increasingly be expected to meet higher cybersecurity standards – a reality brokers can use to spark critical conversations with clients about the indirect impact of cyber risks on their insurance needs.

Mitigating Cyber Risks in Businesses

While cyber insurance can address specific digital risks, proactive risk management is essential to minimise exposure. Key steps businesses can take include:

• Strengthen Cyber Hygiene:
  • Update software and IoT devices regularly to patch vulnerabilities.
  • Implement multi-factor authentication for systems handling sensitive data.

• Conduct Risk Assessments:
  • Audit systems to identify vulnerabilities.
  • Partner with cybersecurity experts to test defences through simulations.

• Secure Data:
  • Encrypt sensitive data to prevent unauthorised access.
  • Develop clear data retention policies to minimise risk.

• Develop Incident Response Plans:
  • Establish protocols for responding to cyberattacks, including clear communication strategies for stakeholders.
  • Regularly test these plans to ensure effectiveness.

By adopting these practices, businesses can protect their assets, reassure stakeholders, and strengthen their standing with insurers and brokers.

The Role of Brokers in a Cyber Risk World

For brokers, addressing cyber risks presents both a challenge and an opportunity. Helping clients understand how digital vulnerabilities intersect with their insurance needs positions brokers as trusted advisors in an ever-changing risk landscape.

While cyber risks are not directly covered by traditional property insurance, their impact on business operations can have far-reaching implications. For example:

• Operational Disruptions: Cyberattacks can lead to physical downtime that impacts rental income or tenant operations.

• Liability Issues: Breaches can escalate liability concerns, especially for tenant businesses relying on shared systems.

Brokers who address these issues proactively demonstrate their value in navigating complex risks. At PARTNER RISK, we stay ahead of industry trends to support brokers in understanding and mitigating these challenges for their clients.

Looking Ahead

As technology evolves, the risks faced by mid-market businesses will continue to grow in complexity. Cyber threats are no longer confined to IT departments – they are a business-wide concern with implications for operations, reputation, and financial stability.

At PARTNER RISK, we remain committed to supporting brokers and their clients in navigating these challenges. While we do not provide direct cyber insurance, our thought leadership in risk management ensures that we’re prepared to help brokers address the broader risk environment with confidence.

Cyber risks are no longer a matter of “if” but “when.” With the right insights, strategies, and partnerships, brokers can ensure their clients are prepared for the future, whatever it holds. Together, we can turn today’s challenges into tomorrow’s opportunities.