Understanding Digital Security: A Guide for Small Business Owners

By Olivia Chen | NerdWallet

In an increasingly digital world, small-business owners are leveraging technology to streamline operations, manage finances, and reach new customers. However, this digital transformation comes with significant risks. As businesses embrace digital tools, they become more vulnerable to cyber attacks and security breaches. A recent report by Hiscox, a business insurance company, reveals that exposure to cyber threats is now the top concern for small-business owners, even surpassing worries about inflation and other economic challenges.

The Rising Threat of Cyber Attacks

The consequences of cyber attacks can be devastating. According to the Hiscox report, 25% of small-business owners reported that cyber incidents negatively impacted their brand or reputation, while 20% faced difficulties in attracting new customers due to security breaches. This highlights the importance of understanding the evolving landscape of digital security.

Small Businesses Are Not Immune

It may seem that cyber criminals would prefer to target larger corporations, but the reality is that small businesses are increasingly in their crosshairs. The Hiscox report indicates a 13% rise in cyber attacks on firms with fewer than 10 employees since 2020. Shawn Waldman, CEO of Secure Cyber Defense, emphasizes that hackers are indifferent to the size of a business; their primary goal is to access money and data.

Certain industries are particularly vulnerable, especially those that handle sensitive client information. Shavon J. Smith, a business attorney in Washington, D.C., notes that small management and IT consulting firms, as well as medical offices, are often targeted due to their access to valuable data and perceived lack of security.

Prevention Is Key: Proactive Measures

Preventing a digital security breach is far easier than dealing with one after it occurs. Smith points out that 95% of breaches can be traced back to human error, making it crucial for businesses to implement robust internal policies.

Assessing Vulnerabilities

The first step in safeguarding your business is to conduct a thorough assessment of your vulnerabilities. Smith suggests identifying potential weak points in your systems, such as open ports that could be exploited by hackers.

Establishing clear employee policies regarding the use of company-issued devices is also essential. For instance, prohibiting employees from taking laptops on vacation or home can significantly reduce the risk of data loss. Additionally, limiting access to confidential information can further protect your business from potential breaches.

The Cost of Cheap Solutions

Investing in digital security can be daunting, but the costs of neglecting it can be even higher. The Hiscox report states that the median cost of a cyber attack for businesses with 10 to 49 employees was $9,500 in 2023.

Many small businesses make the mistake of relying on free or low-quality antivirus software and neglecting regular updates. Waldman warns that transitioning to cloud email providers without implementing security controls or multi-factor authentication can leave businesses vulnerable. Email remains the weakest point of entry for cyber attackers, making it imperative to prioritize security in this area.

The Importance of Cybersecurity Insurance

Investing in cybersecurity insurance is another critical step for small businesses. This type of insurance can provide financial protection and resources in the event of a cyber attack, helping businesses recover more quickly.

Developing a Response Plan

Despite best efforts, breaches can still occur. Having a well-defined response plan can significantly impact how quickly a business can recover. Smith outlines several key steps to include in your response plan:

1. Contact Cybersecurity Specialists or Legal Counsel: It’s advisable to consult with experts when creating your plan, ensuring you have a point of contact in the event of a breach.

2. Notify Your Insurance Company: When purchasing cybersecurity insurance, ensure your broker understands your business operations. This knowledge will help them assess the scope of a breach effectively.

3. Engage Law Enforcement: While immediate action may not be possible, reporting the incident can contribute to ongoing investigations and help law enforcement track new attacks.

4. Reach Out to Clients: Many businesses are contractually obligated to inform partners of a data breach, making timely communication essential.

5. Alert Your Customer Base: If your business serves consumers, be prepared to notify them promptly about the breach and offer compensation or credit monitoring services.

Conclusion

As small businesses continue to embrace digital tools, understanding and prioritizing digital security is more important than ever. By taking proactive measures, investing in proper security solutions, and developing a comprehensive response plan, small-business owners can protect their operations and maintain customer trust in an increasingly complex digital landscape.

For further inquiries or assistance, feel free to reach out to Olivia Chen at ochen@nerdwallet.com.

The article "What Small-Business Owners Need to Know About Digital Security" originally appeared on NerdWallet.