5 Reasons Why Finance Professionals Need Cyber Insurance
To perform their jobs properly, certified public accountants get access to the full universe of their clients’ confidential financial data. That data is a tempting target for hackers and other cyber thieves, who can use it to steal identities and to siphon cash from corporate coffers with spear phishing and other schemes. When hackers cannot access a company’s financial data directly, they frequently look next to the networks and systems of the company’s accounting firm.
This broad scenario is a sufficient reason, in itself, for CPAs to procure cyber insurance for their operations. At least five specific reasons further support this decision:
Litigation Is Expensive
Regardless of whether a CPA is found liable for leaking a client’s financial data, the fees and expenses that a CPA will pay to defend itself in litigation over responsibility for a cyberattack can be ruinous. The accounting firm’s financial exposure can be monumental if it is found to be responsible for any data loss following a cyberattack. Attorneys who specialize in defending accounting firms often charge up to $1,000 per hour or more. Cyber insurance for CPAs can cover litigation defense costs and reduce the financial losses that an accounting firm might face in these circumstances.
Cyber Insurance Protects an Accounting Firm’s Reputation and Helps to Maintain Client Trust
An accounting firm’s problems might only begin with the loss of client data. Like all service professionals, CPAs build their reputations on the basis of client trust. A CPA firm that carries cyber insurance will give its clients the assurances that they need to understand that if something does happen to their data, the CPA has taken steps to help compensate for losses and to keep its own business moving forward. Clients are more likely to transact business with a CPA that is fully and properly insured.
CPAs Are Increasingly Susceptible To Ransomware Attacks
Hackers know that CPAs often operate under tight deadlines that are established by government regulatory bodies and their clients’ own internal reporting obligations. A hacker that launches a successful ransomware attack against a CPA firm can shut down its entire operations, placing immense pressure on the firm to pay all ransom demands. Studies show that ransomware attacks are now the single most prevalent threat to accountants, particularly during the busy tax season. Cyber insurance will not put an end to these threats, but it can help a CPA firm to respond to a ransomware demand and to recover operations with a minimum of down time.
Cyber Insurance Allows Accountants To Focus On What They Do Best
A cyberattack is one of the more distracting events that a CPA firm can experience. Rather than focusing on the needs and requests of a firm’s clients, a firm’s accountants will find themselves scrambling to recover lost data and systems and lining up resources to pay for damages and liabilities. Cyber insurance removes these distractions and allows the CPA firm to rebuild its business and to strengthen its relationship with clients whose data might have been exposed.
Cyber Insurance Eases A CPA’s Regulatory Compliance Obligations
Almost every state and territory in the United States imposes regulatory obligations on a CPA firm to notify affected individuals and authorities of a data breach. A CPA firm that provides services for companies that conduct business in several states may be required to comply with the notification obligations in all states in which its clients do business. Further, more than 50 federal statutes and regulations cover data privacy and security, and a CPA firm may have additional obligations under those federal laws. Cyber insurance can help the firm to identify the laws and regulations that require notifications and can cover costs associated with regulatory compliance.