New research shows cybersecurity is an organisation-wide issue, and stronger board oversight practices lead to better cybersecurity performance.
Companies with advanced cybersecurity performance create 372% higher shareholder return compared to their peers with basic cybersecurity performance, according to a new report from Diligent and Bitsight.
The report also reveals that highly regulated industries, such as healthcare and financial services, have the highest cybersecurity ratings, and companies with either a specialised risk committee or audit committee achieve better cybersecurity performance compared to those with neither – with ratings of 710 and 650 respectively.
“These findings show that cybersecurity is not just an IT problem — it is an enterprise risk that has material impact on a company’s near-term performance and long-term health and one that management and the board needs to be up to speed on,” said Dottie Schindlinger, Executive Director, the Diligent Institute. “With increased pressure from regulators for organisations to demonstrate how they oversee cybersecurity, now is the time for boards and leaders to build their competency around cyber risk.”
“Cybersecurity is no longer about simply mitigating risk, it’s now a key indicator of financial performance. Companies must treat cybersecurity as a cornerstone of their business strategy, guided by clear, ambitious benchmarks, and backed by the full support of their boards,” said Dr. Homaira Akbari, CEO of AKnowledge Partners, Board of Director member for Banco Santander and Landstar System and member of Bitsight’s Advisory Board.
In the Cybersecurity, Audit and the Board report, Diligent and Bitsight analysed more than 4,000 mid to large-cap companies in public indices globally, including the Top 300 ASX-listed companies in Australia.
Additional findings include:
Companies with measurably stronger cybersecurity performance deliver higher financial performance than their peers
● The average total shareholder return (TSR) for companies with advanced security performance ratings over a five-year and three-year period was 71% and 67%, respectively, while companies in the basic performance range delivered 37% and 14% TSR over the same time frames.
● Companies with a higher number of independent directors are more likely to have advanced security ratings. About 76% of directors on the boards of these companies with advanced security ratings are independent, compared to 66% in the basic security performance category.
Companies with specialised risk or audit committees have better cybersecurity performance
● Australia scores an average security rating of 700, securing third place at a global level after Canada and the United States, both scoring 710.
- While Australia ranks #1 ahead of the UK and Canada in having the highest percentage (90%) of specialised risk committees within the top 300 ASX listed companies’ boards, the country ranks second to last when it comes to having a cyber expert on boards accounting for only 1%. However, the median cybersecurity rating for companies with specialised risk committees is 730, compared to 720 for companies with just audit committees – indicating there is not a significant difference in the ability of the audit committee to oversee cyber risk compared to a specialised risk committee.
● Having a cybersecurity expert on the general board is not enough – those experts need to be directly involved with cyber oversight. Companies with cybersecurity experts on either audit or specialised risk committees achieve an average security performance rating of 700, whereas companies with cybersecurity experts on the general board, but not on either committee attain a security rating of 580.
Highly regulated industries outperform other industries in cybersecurity performance
● The healthcare sector had the highest average security ratings overall at 730. Of the companies with advanced security performance ratings, 33% came from the financial services sector, with an average rating of 720.
● By comparison, 24% of companies with basic security performance ratings came from the industrials sector, and the sector with the lowest overall performance rating was the communications sector, at 630.
“The research shows that market leading companies that prioritise cyber risk management outperform their peers,” said Derek Vadala, Chief Risk Officer, Bitsight.
“This cannot be achieved without a strong understanding of cybersecurity performance and clear benchmarks shared across the executive team and board. The role of the CISO has shifted – cyber risk is a key component of business performance.”