Due diligence is essential in any investment. For private equity firms, that due diligence may include a business’ industry focus, cash flow, capital requirements, value creation, track record, and leadership team (among others). One area that is often overlooked or undervalued is cybersecurity. Private equity firms and, by extension, their portfolio companies inherently handle large quantities of highly sensitive data. That fact alone makes them prime targets for cybercriminals. But how big is the risk? 

Cybersecurity risk profile 

On average, private equity firms hold companies for 6 years, which is double what these firms experienced just a decade ago. The reasons may vary from heightened competition to value creation and market conditions. Whatever the reason, the longer a private equity firm retains its investment in a company, the longer that company poses a potential cybersecurity risk for the firm.  

Further, a recent survey of more than 100 global private equity firms showed that only 23% of respondents had fully operational and compliant cybersecurity programs in place. This leaves the firms vulnerable to cyber attacks, which can have far-reaching implications. 

Implications of a cyber attack 

Cyber attacks are not just inconvenient, they can cause significant damage to the target company. For example, did you know: 

• The average time to recover from a ransomware attack is nearly one month (24-26 days)
• The average cost of a ransomware attack is $4.45 million 
• The average time to identify and contain a data breach is 227 days
• 27% of cyber attacks in 2023 were related to cyber extortion (data theft)
• More than 72% of businesses around the world were victims of cyber attacks in 2023 

Beyond the financial, production, and data integrity implications, companies that fall victim to a data breach or other cybersecurity threat also face reputational damage. Trust in the organization is built slowly over time, but that can be gone in an instant if the company’s or its client’s data is damaged, stolen, or otherwise compromised. 

As a result, the company may not be able to grow or even sustain itself, requiring even greater investments from the firm or resulting in a financial loss. 

The missing link for private equity firms 

Cybersecurity threats have only increased in frequency and sophistication in recent years. Innovative tools like generative AI are not only helpful for businesses; they are also proving to be quite beneficial for cybercriminals. These tools, combined with cybercriminals’ unwavering persistence, create a perfect storm for many businesses and private equity firms. 

Overlooking or undervaluing cybersecurity when dealing with major capital investments and significant data stores is a recipe for disaster – or in this case, an open door with a welcome sign for cybercriminals. But as the saying goes, it’s difficult to protect what you can’t see. And that is certainly a challenge many private equity firms encounter. There may be limited visibility into the cybersecurity systems and practices within the firm’s portfolio, which can make it difficult to fully understand the risk profile of each investment. Additionally, there may be a lack of expertise within the organization, making it difficult to fully understand the potential risks and the best methods of protection to put into place. 

At GainSide, we work with a wide variety of organizations, including private equity firms to strengthen their cybersecurity practices, both internally and throughout their portfolio of companies. With a rich history of cybersecurity and IT management within our team, we provide the expertise, tools, solutions, and partnerships you need to truly protect your firm and your investments. 

In today’s digital-first business world, it’s no longer a matter of IF you will experience a cyber attack, but WHEN. The cybersecurity systems and processes you have in place today will mean the difference between an attack that bounces off and one that takes down one or more of your investments. The missing link to protect your investments is GainSide.