Traditionally, the Chief Financial Officer (CFO) was responsible for overseeing a company’s financial operations and reporting. However, the evolving global business landscape has broadened the CFO’s role. In 2023, CFOs are not only integral to financial management but also contribute significantly to shaping strategic objectives, while often managing risk and data security (including data protection and data privacy). While the Chief Executive Officer (CEO) sets the company’s overarching vision and financial objectives, the CFO plays a collaborative role, working closely with other executives to ensure strategies are viable, budgets optimised, and the company culture aligns with its mission.

Enterprise Risk Management (ERM) has always had financial risk within its domain, and the CFO’s involvement in it isn’t new. However, the rapid advancement of technology and the digitalisation of businesses have introduced complex cyber risks and cyber threats. These threats aren’t limited to potential reputational damage, regulatory consequences, or share price volatility; they also encompass operational disruptions, intellectual property breaches, and potential legal ramifications.

Historically, discussions about cyber security among CFOs were often initiated by external insurance inquiries. But as the digital sphere grew and cyber attacks became more sophisticated, this focus has shifted. Now, with cyber threats having multifaceted impacts on organisations, the role of the CFO has become pivotal in orchestrating a balanced and comprehensive approach to risk within the broader ERM strategy. Consequently, CFO engagement with cybersecurity has become paramount for several reasons:

How Can CFOs Engage With Cyber Security?

Transparent dialogue between Chief Information Security Officers (CISO) and CFO: Dialogue between CFOs and CISOs is a cornerstone of robust cyber defences. Without clear communication, an organisation becomes susceptible to cyber adversaries, leading to cyber attacks, data breaches, ransomware and the inevitable financial implications. This highlights the need for CFOs to maintain continuous collaboration with CISOs, ensuring that cybersecurity discussions are holistic, encompassing challenges at various levels and with diverse stakeholders.

Understand cyber security basics: Cyber security, being a complex domain, often presents challenges for CFOs. It is replete with intricate details, rapidly changing threats, and specialised jargon. Despite these complexities, it is incumbent upon CFOs to familiarise themselves with major threats, such as phishing and Business Email Compromise, to stay vigilant and proactive. Importantly, CFOs must be in the vanguard of crafting incident response plans. However, it is essential for CFOs to not only focus on the technical measures but to also understand the broader implications, like regulatory penalties and reputational impact.

Benchmarking cyber security resource allocation and budgeting: Resource allocation for cybersecurity presents another challenge. With the understanding that absolute elimination of all threats is neither achievable nor financially sound, CFOs must evaluate their organisation’s risk threshold. This involves a careful assessment of risks, setting priorities for cybersecurity initiatives, and making prudent investment decisions that align with the organisation’s risk tolerance. Cybersecurity budgeting is a fundamental area where the CFO’s expertise becomes crucial. Their role involves shaping financial strategies for cybersecurity, comparing expenditure with industry benchmarks, and ensuring judicious use of funds. In the same vein, a transition from conventional narrative-based cybersecurity methods to more numeric risk evaluations is necessary, especially when precision in budgeting is the objective.

Evaluating the pros and cons of Cyber Security Insurance: In the domain of cyber insurance, CFOs play a pivotal role. While cyber insurance can provide a financial buffer in the aftermath of a security breach, its limitations must be understood. It cannot compensate for certain intangible losses, such as those related to reputation. Additionally, regulatory compliances like the GDPR and PCI DSS further emphasize the CFO’s involvement, as adherence can bolster customer trust and non-compliance may lead to substantial penalties.

Managing potential third-party and supply chain threats: The modern supply chain’s complexity requires vigilance towards vendor-associated risks. As key players in the procurement process, CFOs must support cybersecurity assessments of potential vendors and suppliers, ensuring that partnerships don’t inadvertently introduce vulnerabilities.

Organisations, here are some questions to ask your CFO

Finally, companies have often failed to put cyber security at the forefront of business discussions. This has hindered businesses from grasping the enormity of the cyber threat challenge. A key to bridging this is expressing risks in financial terms, fostering cohesion among security, finance, and Enterprise Risk Management (ERM) sectors. To enhance this collaborative ethos, CFOs need to be part of cyber risk conversations.

Here are some questions for CFOs to consider:

1. Is cyber risk integrated within the ERM framework?
2. How can you, as a CFO, promote security at executive levels?
3. How might your strategy move from eliminating all risks to defining a risk threshold?
4. How do you view practical cyber maintenance beyond basic tools?
5. What methods do you use to measure cyber risks and refine financial aspects?
6. Are you set to tackle cyber risks balancing mitigation and transference, considering cash flow and cyber insurance?
7. How do you partner with the CISO and CIO/CTO for compliance with rules like GDPR?
8. How often do you and the CISO and CIO assess the cyber landscape from a business angle?
9. What is your role in developing your organisations Incident Response Plan?
10. What are your responsibilities when this plan has to be implemented following a security incident?

To Safeguard the Organisation, CFOs and Cybersecurity Need Each Other…

It’s imperative for CFOs to understand the ever-present nature of cyber threats, acknowledging that both large and small entities are perpetually under siege. They should also entertain the notion that breaches might have already occurred unbeknownst to them. The traditional concept of a secure perimeter has become obsolete, especially as remote work becomes a staple. This paradigm shift amplifies business vulnerabilities and the inherent cyber risks.

Consequently, CFOs and their finance teams must recognise cybersecurity not as merely a technical concern but as a strategic business risk. They must contribute actively to risk management efforts, ensuring the organisation’s resources are judiciously allocated to address all risk domains, inclusive of cyber threats. Given the financial ramifications of cyber incidents, the finance department’s role in risk evaluation and governance is pivotal. Cyber risks, owing to their potential financial repercussions, should command significant attention and influence from the finance domain.

Calls To Action

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2. Transform Qualitative Risks into Quantitative Metrics: Collaborate with Cyber Alchemy and leverage our expertise to transition from narrative-based cybersecurity methods to a numerical risk assessment. By integrating forensic tech experts’ insights, CFOs can make informed budgeting decisions, backed by a numerical understanding of cyber threats.
3. Align Cybersecurity with Broader Organisational Goals: Partner with Cyber Alchemy to ensure that your cybersecurity strategies seamlessly integrate with your overarching company objectives. Enhance your understanding by viewing cyber threats in potential monetary losses, bridging the gap between technical and financial perspectives.