Business Finance – Harry Croydon.

Digital risk, as it is known, covers everything from the accidental loss of computer-held data to malicious damage caused by hackers or disgruntled employees; from the failure of a website to a libellous email resulting in legal action.

Being an invisible risk makes it, if anything, even more dangerous. Electronically-held data may not appear on the balance sheet, but it can be a firm’s most valuable single asset; and also among its most vulnerable. If a factory is destroyed, you can rebuild it. What do you do if you lose vital data?

According to researchers McGladrey & Pullen, 43% of firms that suffer extensive data loss or damage will go out of business unless they retrieve it quickly.

Research from KPMG, Forrester Research, the German standards agency and other bodies have all produced some alarming conclusions, pointing to digital failure as one of the main economic issues of the 21st century.

Last month, PricewaterhouseCoopers estimated the global cost of cybercrime alone at $1.4 trillion annually; and it is growing as traditional ‘bricks and mortar’ industries become ever more dependant on technology.

Most at risk from digital failure are small and medium-sized enterprises.

These tend to lack the IT infrastructure of their larger rivals, and are usually more vulnerable to sudden financial shocks. They are also the least aware of the potential threat.

According to research conducted by MORI for Safeonline, 75% did not see the issue as a serious problem until it was drawn to their attention.

MORI also found that most SMEs think wrongly that such a failure would be covered by their existing property insurance.

Several insurance companies are now offering digital risk insurance.

Any insurer is likely to insist on a certain amount of security measures before you or your client are considered an acceptable risk – in other words, they will advise you on how to prevent the loss happening in the first place.

Some insurance brokers are already demonstrating a specialist interest in this subject, and will point you to the provider that is most suited to your needs.

If the result is a secure business environment, it could make all the difference between corporate success and failure.

– Harry Croydon is chief executive officer of digital insurance provider Safeonline.

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