Cybersecurity: Expense or Investment?

As a business owner or chief executive you focus on increasing the value of your business. Costs that don’t produce a return, if sometimes necessary, are unwanted expenses.

As the practice of cybersecurity has emerged, many organizations have looked at implementing a cybersecurity program as an expense. But even beyond protecting your organization from potentially catastrophic data thievery, a cybersecurity program is an investment that adds real, quantifiable value to your business—added value clearly evident as owners look to merge or sell their businesses.

Consider the many businesses spanning myriad industries that have fallen victim to cyber attacks or data breaches subsequent to being acquired. FitMetrix, a MindBody acquisition; Starwood Group, a Marriot acquisition; MyfitnessPal, an Under Armor acquisition; and Bongo International, a FedEx acquisition are glaring examples.

All markets and industries have been affected. As a result, a company’s cybersecurity program --or lack thereof-- is a central consideration in current M&A due diligence.

In a recent survey conducted by the International Information System Security Certification Consortium, or (ISC)², 96 percent of respondents say they take the maturity of cybersecurity programs into consideration when determining the value of a company. (ISC)² is a non-profit organization offering training and various certifications to cybersecurity professionals.

Moreover, 53 percent of respondents said values can vary widely depending on the maturity and effectiveness of the cyber program; 45 percent agreed that a cybersecurity program adds value but said that they assign value via a plus-or-minus or pass-or-fail indicator.

Perhaps most interesting, the study revealed cybersecurity infrastructure—including “soft” assets such as a risk management policy, security awareness training programs and other governance initiatives that might not traditionally be considered infrastructure—actually has a greater impact on value than IT.

Conversely, the lack of cybersecurity infrastructure indicates a liability potentially devaluing the company.

To illustrate the value of your cybersecurity initiative, we recommend you develop a formalized and documented cybersecurity program. The program should be continually improved and reviewed at least annually by an appropriate third party firm.

Simply put: Invest in cybersecurity. Secure the future of your business and its value.

HBK can help develop and implement a cybersecurity program that fits your organization’s risk appetite and budget. Our assessment will offer a road map for continual improvement through cost-effective solutions. Contact Matthew Schiavone, CPA, CISSP, CISA for questions or to schedule an assessment.

About the Author(s)
Matt is a Senior Manager in HBK’s Quality Control department and works primarily in the Pittsburgh, Pennsylvania office. He specializes in risk advisory services, system and organization control (SOC) reporting, internal controls, IT audit, information security, and cyber security for all types of industries.
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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