This is the second installment of our series on Cyber Risk: Are you Protected? This article highlights the top ten ways to manage cyber risk, including strategies for preventing a cyber breach, creating a response plan in the event of a cyber breach, and procuring adequate insurance coverage to offset some or all of the costs if a cyber breach occurs.

1.     Human Nature Is Your Greatest Risk.
Curiosity and trust of unsuspecting employees are the greatest threats to cyber security. Cyber criminals prey on these traits and can create convincing traps to entice employees to inadvertently disclose data or grant unauthorized access to sensitive information. Beware of such things as suspicious emails even if you think you know the sender, free or found thumb drives, and using technology without robust password protection.

2.     Regularly Assess Your Cyber Risk.
Consider using a broker or insurance recovery attorney to assess your cyber risk and provide guidance on how to: (1) identify your areas of potential exposure; (2) protect your company from a cyber breach; and (3) have a plan in place to respond to a cyber breach if it occurs. Those with expertise in cyber security may have risk assessment tools or surveys to help analyze your needs. At a minimum, conduct internal audits of cyber and privacy breaches within your company on an annual basis.

3.     Create A Qualified Team.
Identify key personnel within your company who are charged with monitoring cyber security. The team should include IT personnel and management level employees, each of whom should have well-defined roles. For larger companies, consider designating a CSO ("Chief Security Officer").

4.     Develop Written Policies And Procedures.
Develop and implement a written information and security program. Have your cyber team research and implement best practices to protect against internal and external threats. Written policies should describe internal reporting requirements for security breaches and must include a crisis response plan with a clear chain of command.

5.     Create A Culture Of Privacy.
Review company policies to ensure they create a culture of security and respect for privacy. Update training as necessary to enhance understanding and compliance with privacy policies.

6.     Have A Strong First Line Of Defense.
Secure passwords are an important first line of defense against preventing cyber breaches. Consider implementing mandatory password protection and log-in procedures for all electronic devices, including private computers and cell phones that your employees use for business purposes. Require passwords to be unique, long, and complex. The longer the password, the harder it is for a hacker to crack. Implementing mixed-case letters, numbers, and symbols, and preventing the use of common words will greatly improve the strength of your passwords. Require employees to change their passwords at regularly defined intervals. Do not keep passwords on post-it notes accessible on your desk! In addition, obtain and update data security software to detect and delete viruses and prevent hackers from accessing your information.

7.     Stay Up To Date.
Your cyber/privacy team must continually stay abreast of developments in this fast-paced area. Remember, cyber criminals are often at least one step ahead. Provide regular opportunities in continuing education for your cyber team.

8.     Seek Help When Needed.
Many small to medium-size companies do not have the capacity to implement the most up-to-date security protocols. As such, they are the most attractive targets of cyber criminals. A third-party data storage vendor may be a valuable resource in maintaining cyber security. Recognize however, that third-party data storage vendors (including "the cloud") cannot assure absolute protection and will likely attempt to disclaim liability for data breaches. The cost of a breach will ultimately fall on you both in terms of reputational damage and lost information.

9.     Know Your Vendors.
If your vendors, consultants and service providers have access to your clients' sensitive information, ask them about their cyber security policies. What are their cyber security policies? What is their track record on security breaches? How do they protect the privacy of your information and that of your clients/customers? What is their protocol in the event of a breach?

10.   Maintain Adequate Insurance Coverage.
Have a qualified broker or insurance recovery attorney review your existing insurance policies for gaps in coverage relating to privacy and cyber security. Consider adding endorsements to existing policies or obtaining specialized cyber policies to fill in any gaps in coverage. Remember, you may need more than one type of policy to cover your risks.

Stay tuned for the third article in this series which will address what to look for in a comprehensive cyber insurance program.

Attorneys in the Sherman & Howard Insurance Recovery Practice Group are available to assist with these and other issues.