PE firms lefts exposed without cyber cover, Mactavish says

A new survey commissioned by Mactavish reveals that almost a third (30%) of private equity professionals describe the due diligence that private equity firms carry out on cyber security issues of target companies as ‘average’, and 27% consider it to be ‘poor’ or ‘terrible.’ The research suggests that there is still much work to be done, with only 23% describing the current level as ‘good’ or ‘excellent’.

The consultant’s survey of 30 senior private equity professionals reveals optimism for the future as 83% of respondents expect private equity firms to insist that its portfolio companies have specific cyber insurance policies in place within the next three years. Similarly, when asked about the overall due diligence private equity firms run when it comes to private equity firms buying cyber insurance for their own operations, 53% of industry professionals interviewed said they believe the industry is focusing more on this issue.

Client services director at Mactavish, Liam Fitzpatrick says: “Cyber risks are a major and growing threat to all organisations but private equity firms are unique in that they can be left particularly exposed in three distinct but interrelated areas: the private equity firm itself, their transactional work, and then the risks faced at the portfolio company level.”

The lack of take up of cyber insurance in this industry comes down to cost and risk benefit, with over a quarter (27%) saying cover is too expensive when compared with the risks they face. The same percentage of respondents say they feel the cyber risk exposure the private equity sector faces is not serious enough to require insurance, while 13% of those interviewed said it’s because it’s difficult to find the desired cover.

Fitzpatrick bemoans a gap in the market. “It’s imperative that private equity firms and their portfolio companies have robust insurance in place. However, this is easier said than done as many off-the-shelf cyber policies are not up to the job and may not meet the requirements of a complex business like a private equity firm.”

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