Companies with Strong Cybersecurity Programs Deliver Higher Returns for Shareholders
Investing in cybersecurity can help organizations prevent data breaches and avoid regulatory fines, but there are other benefits. A recently released report from Diligent Institute and Bitsight shows organizations that have a strong cybersecurity program tend to have better financial performance and deliver higher returns for their shareholders.
For the report, Diligent Institute and Bitsight analyzed data from 4,149 mid to large-sized organizations in multiple sectors across Australia, Canada, France, Germany, Japan, the United Kingdom, and the United States. Cybersecurity oversight at the committee level was assessed to determine the impact on cybersecurity risk ratings and each company’s cyber oversight structure was correlated with their security performance data, with each company given a security performance classification of basic, intermediate, or advanced.
The study revealed companies with advanced security ratings created almost 4 times the amount of value for their shareholders as companies with basic security ratings. Over three and five years, companies with an advanced security rating had a Total Shareholders’ Return (TSR) of 372% and 91% higher respectively, compared to companies with a basic security rating. Over three and five years, the average TSR for companies with an advanced security rating was 71% and 67%, compared to a 37% and 14% TSR for companies with a basic security rating.
The report showed that healthcare and other highly-regulated sectors appreciate the importance of cybersecurity and understand that cybersecurity is not simply an IT problem, rather it is an enterprise risk that can have an impact on the company’s short-term performance and long-term health. Healthcare outperformed other sectors in terms of cybersecurity performance and had the highest average security rating of all industries represented in the study.
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In addition to the correlation between cybersecurity performance and shareholder return, the researchers found a correlation between board structure and security ratings, with companies that had specialized risk or audit committees performing better than those that did not. Companies with specialized risk or audit committees had an average security rating of 710, compared to an average rating of 650 for companies that had neither of these committees.
Integrating a cybersecurity expert into a board committee tasked with cybersecurity risk oversight makes a significant difference to an organization’s security performance; however, simply having a cybersecurity expert on the board does not mean a company will have a better security rating. Companies with cybersecurity experts on the board had an average security score of 580, compared to an average rating of 700 for companies that had cybersecurity experts on either audit committees or specialized risk committees. The researchers note that it is rare for boards to include cybersecurity experts, with only 5% of the assessed companies having cybersecurity experts on their boards. “Companies seeking to hire cybersecurity expertise for the board should first ensure that the board is appropriately organized so that expertise can be properly incorporated into the oversight mechanisms,” suggested the researchers.
