India’s economic progress today heavily banks on the Small and Medium Enterprises (SMEs) and Micro, Small and Medium Enterprises (MSMEs) that are the backbone of the business ecosystem. And, reasonably so, after all, together, these enterprises contribute more than 28 per cent to the GDP generating employment and trade opportunities. However, this also means they need a robust shield against any risks, given the high stakes. Especially, in this age of heavy digital reliance, businesses cannot afford to overlook the high financial and legal implications that come bundled with cyber risks.
Nonetheless, amid this economic vibrancy, SMEs and MSMEs are also more susceptible to cyberattacks. A recent report by cybersecurity firm Acronis indicated companies in India have reported more cyberattacks than anywhere else in the world. Government initiatives such as the Digital Personal Data Protection Bill also aim to protect and strengthen data privacy. But one also needs to be prepared with measures to tackle any unfavorable outcomes if such an attack were to actually happen.
This is why cyber insurance is the very first step for organisations towards ensuring cybersecurity.
SMEs and MSMEs have become prime targets for cybercriminals. They face a wide range of cyber risks including data breaches, malware attacks, phishing attacks and denial-of-service attacks. They are soft targets because compared with large corporations, they often have fewer resources to invest in cybersecurity. Also, they are less likely to have a team of security experts.
Studies also indicate that about 43 per cent of all cyberattacks are directed at small businesses and start-ups. The consequences are multi-pronged. They often result in financial losses, damage to reputation, and operational disruptions.
Cyber cover
Only Cyber insurance can provide SMEs and MSMEs the protection at a cost that they can afford. It provides a financial safety net, covering the costs associated with data breaches, ransomware attacks, and cyber incidents. For cash-strapped SMEs, this can be the difference between survival and insolvency.
Understanding the unique challenges faced by SMEs and MSMEs, insurers now offer specialised cyber insurance solutions tailored to their needs. These policies not only consider scale of operations but also the extent of digital reliance and specific cyber risks they are exposed to.
Cyber attacks on SMEs and MSMEs often come in the form of ransomware and cyber extortion. The perpetrators hack into the systems and block all access unless the victim pays a ransom. Cyber insurance can help navigate through such risks. The policy can cover a wide range of costs, including notification costs, which are the costs of notifying customers and other affected parties about a data breach.
These policies also assist with legal expenses arising from a data breach. Cyber insurance often covers the costs associated with restoring lost or compromised data as well.
Operational disruption
Most important, such incidents can lead to operational disruptions. Cyber insurance typically offers coverage for business interruption, compensating for lost income during downtime caused by a cyber event. Many cyber insurance policies also provide access to experts who can guide businesses through the process of managing and mitigating the impact of a cyber incident.
Intangible costs
For SMEs and MSMEs, the aftermath of a cyberattack extends beyond financial losses. The tarnishing of reputation becomes a critical cost. With a significant portion of their business often built on trust and relationships, any breach of data integrity can erode customer confidence.
The loss of trust results in a significant client exodus, impacting revenue and making client acquisition an uphill battle. Additionally, attracting talented professionals becomes challenging as potential employees hesitate to align with a business tainted by a cyber incident.
A cyber insurance policy often includes provisions for reputation management, helping businesses navigate the aftermath of a cyberattack and rebuild trust with stakeholders. In an era where digital inter-connectivity is the lifeblood of business operations, SMEs and MSMEs are now realising that cybersecurity is not a luxury but a fundamental business requirement.
(The writer is Head, Policybazaar for Business)