Private Equity and Cybersecurity – Gaining a Holistic View
An emerging trend among private equity firms is their growing attention to the remediation, monitoring and reporting of cybersecurity capabilities of the companies in their portfolios. Historically, they have not fully appreciated the varying degrees of cybersecurity risk relative to a company’s specific industry. And understandably, the emphasis on investing in promising businesses and improving their operations to add value and create attractive acquisition or initial public offering candidates has typically taken precedence over other considerations.
Yet today, enhancing a company’s valuation means ensuring it possesses sound cybersecurity systems, protocols and procedures. It is a requirement that has become as vital as shoring up an accounting, supply chain or customer service function, particularly over the past several years amid the rising threat of companies falling victim to cybercrime.
At a time when cybercrime is growing, private equity firms need to illustrate that they are governing their portfolio companies in a way that recognises and addresses cybersecurity issues. The maturity level of private equity firms varies on these matters, but regardless of where they find themselves, private equity firms should adopt a holistic approach to ensure that their portfolio companies have an acceptable minimum threshold of cybersecurity proficiency.
Private equity executives must set the tone at the top in order for the firm to take action. Those that step forward will not only enhance the chances for a profitable exit of their investments, but they also will demonstrate proper governance to their investors. Private equity firms will undoubtedly be happy to highlight both capabilities when it is time to raise capital.
The current market environment presents both challenges to and opportunities for the traditional private equity operating model. Firms that have increased their operational focus are enjoying a competitive advantage stemming from their ability to strengthen their portfolio companies while at the same time identifying and mitigating challenges presented by rapidly changing markets. Increasingly, firms are looking to implement portfolio-wide risk management programmes to create greater governance and confidence. At the portfolio company level, the focus is on executing targeted business, operational and financial changes that improve cash flow and enhance competitive advantage.
Private equity firms are turning to Protiviti for our problem-solving capabilities as they look to identify and create value. From our business consulting skills to our risk management and internal audit depth, we work with private equity firms and leaders of portfolio companies to help them achieve greater confidence in this changing environment. We seek to understand the unique strengths, risks and opportunities of your portfolio companies and where you want to take these businesses. We then collaborate with you to build custom solutions that maximise your chances for success and bring a tailored, multidisciplinary team of professionals that fits your situation. While the process is never simple, our goal is to help you face the future with confidence.