How To Conduct A Security Risk Analysis When Raising Capital For Your Business

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Even small businesses that are experiencing newfound growth and success often wind up either taking on debt from loans or raising capital to fund their expansion.

Business owners who decide to use their startup as equity to raise capital aren’t required to pay money back to a bank the way they would with a loan. With equity, you don’t risk the success of your entire business if things go wrong. There are, however, risks involved with raising capital that business owners should be aware of.

Businesses ready to raise capital first need to conduct a security risk analysis for investors. A thorough security risk analysis is necessary to prove to your business’ investors that you have the appropriate plans to safeguard your financial assets, funds and proprietary sets of data. To that end, let’s quickly cover the process of conducting a practical risk analysis of your assets.

 

Defining a risk analysis

A risk analysis is a process your business will use to gauge the number and severity of threats to its assets. Your analysis should measure and address areas for improvement in the safeguards you use to secure your tangible and intangible business assets.

It’s more important than ever to have a risk analysis process that regularly measures for deficiencies in cybersecurity. Modern cybersecurity threats like ransomware can compromise assets such as website servers and data backups, and must be monitored for. Despite the pandemic, last year set a new record for cybersecurity investments, with almost $8 billion invested in the industry.

As of 2020, ransomware attacks had grown by 150 percent since the previous year and held countless sets of sensitive company data hostage for massive payment amounts, most notably $4.4 million in the Colonial Pipeline attack and  $11 million in the JBS attack.

The risk analysis process you create should account for your business environment’s unique vulnerabilities, threats and associated risks at regular intervals. A risk analysis that can regularly address the storage, processes and controls related to your assets can better equip your business to contend with major cybersecurity threats, such as ransomware, that can compromise your success. You’ll need to follow a few steps, though, to create and conduct an effective risk analysis process.

 

Collect your security data

Conducting a risk analysis begins with information gathering. The collection of information related to your security is vital to measuring the applications and controls that your environment contains. A thorough risk analysis involves the collection of data related to as many assets as possible that you’re interested in examining.

The post-COVID world of business is largely remote. It’s important to determine what all of your assets are to prevent your more elusive ones from slipping through the cracks. Assets are anything tangible or intangible that possess potential or realized value. 

Consider how remote working has increased your risks associated with mobile device use, for instance, to track down devices with potentially unsecure internet connections that your employees regularly use. You can mitigate security issues related to business and personal devices that have access to corporate data by accounting for those devices during your risk analysis.

Make your information gathering more efficient by breaking things up by departments. Require each of your departments to identify the applications and processes they regularly use. Solicit the help of all of your employees to widen your range of perspective when accounting for all assets with potential and realized worth. Don’t forget to consider applicable laws or regulations that impact your departments as they collect sensitive financial or personal information from customers and their web-based and digital applications.

 

Conduct your analysis

Your risk analysis should account for all threats to your organization’s assets and should focus on external as well as internal threats. The types of threats you face may vary wildly and your risk analysis should consider security confidentiality, integrity and availability to account for as many types of threats as possible. 

Your process of risk analysis also needs to consider the above three facets of security to accurately predict how someone may realistically compromise your data. For example, is it possible for someone to steal data from your website via network vulnerabilities and publish it on a public site? If you’re not sure, it’s time to involve your IT department and corporate executives in your risk analysis.

It’s important to ask similar questions about the overall integrity of your business environment’s cybersecurity and how you can best remediate your deficiencies. According to Toronto-based cybersecurity expert Ludovic Rembert of Privacy Canada, requiring all employees or remote workers to use a VPN is one of the smartest cybersecurity decisions startups can make. 

“A virtual private network is your first line of defense when working from home, and particularly when connected to public Wi-Fi,” Rembert said. “As the effects of the pandemic persist, we anticipate that VPNs will become a de-facto security tool for remote workers in the new normal.”

Once you understand the threats and risks in your environment, you should create solutions to remediate and mitigate them. Your solutions plans should involve each of your departments as well as any executives you may have for sign-off on major policy changes. Enforce penalties against backdoor methods around your policy and, to properly implement your changes and ensure your employees accept them, create a detailed explanation of your potential threats associated risks for both your employees and investors to review.

 

Conclusion

A risk analysis that’s conducted properly makes it much easier to understand the current and projected security posture of your business. Leverage your risk analysis to give your investors and employees the information they deserve to become advocates of your new security policies and involve all of your departments when making major policy changes.


Kiara Taylor is an expert on the integration of finance and technology. She writes about the impact of both micro and macro trends on global finance.