Cyber-attacks have become an increasingly common challenge for small businesses and the consequences can extend well beyond disrupted IT systems.
According to the latest Hiscox Cyber Readiness Report, almost two in five small UK businesses experienced a successful cyber-attack during the previous year, with the average attack costing £26,650.
Globally, cyber incidents result in an average of around 32 hours of operational disruption each year.
For businesses without sufficient financial headroom, the combination of lost income, recovery costs and disruption to normal operations could quickly become difficult to manage.
How can you financially prepare for a cyber-attack?
Cybersecurity may traditionally be viewed as an IT responsibility, but preparing financially for an attack can be just as important.
Cash flow forecasting can help you understand how long your business could continue to meet its obligations if an attack temporarily prevented it from trading normally.
It is also worth considering the financial value of important data and the potential cost of restoring systems, replacing compromised equipment or dealing with lost income.
Businesses should ensure that essential financial information can still be accessed if their usual systems become unavailable.
Keeping secure offline copies of important financial contacts, account information and recovery procedures can give key members of the business access to the information they need during an incident.
Robust payment controls are equally important.
Unusual payment requests and changes to supplier bank details should be independently checked before money is transferred, helping to protect the business from fraudulent requests.
Cyber insurance may provide another layer of financial protection, although businesses should understand what their policy covers and account for the premiums as part of their wider risk management costs.
What should you do financially after a cyber-attack?
Once the immediate threat has been contained, understanding the financial damage should be a priority.
Your accountant can help establish the value of lost revenue, stolen funds and damaged assets so that you have a clearer picture of the position your business is in.
Reviewing your accounting information and tax records can then provide a reliable starting point for recovery planning and help determine whether changes to cash flow, financing or the structure of the business may be required.
Accounting records can also prove important when making a cyber insurance claim.
Clearly documenting the financial impact of an interruption can support the evidence required by insurers and help demonstrate the losses suffered by the business.
Any insurance proceeds may also create tax considerations, making it important to understand how payments should be treated within your accounts.
Preparing your business for the financial impact of cybercrime
Preventing a cyber-attack may sit largely with your technology and cybersecurity arrangements, but protecting the financial health of the business requires wider planning.
Knowing how much disruption your business could withstand, maintaining suitable cash reserves and having access to accurate financial records can put you in a stronger position if an incident occurs.
Our team can work with you to assess these risks, strengthen your financial planning and understand the steps needed to recover if your business is targeted.
