Cybersecurity noncompliance results from neglecting the guidelines established by the United States Securities and Exchange Commission (SEC), making your sensitive data vulnerable to hackers. Data breaches also affect your customer’s trust in your company and compromise their information.

Given the inherent risks of a cyberattack, the SEC introduced new rules requiring public companies to be aware of their cybersecurity risk and proactive about managing it. These guidelines include:

  • Form 8-K Item 1.05: Companies must report material cybersecurity disclosures within four business days.
  • Regulation S-K Item 106: Companies must produce annual reports disclosing their risk management, governance, and strategy.

These new rules result in companies having written documentation of their cybersecurity measures to enhance accountability and transparency.

Penalties of noncompliance

Noncompliance results in numerous consequences for public companies, most of which are:

  • Financial: Regulatory bodies can fine companies who don’t comply with cybersecurity requirements. The more severe the breach is, the heftier the fine will be. However, fines of any amount impact your bottom line, taking away financial resources that could have served your business’s growth.
  • Legal: After a noncompliance incident, affected parties may levy a lawsuit to get reparations for the damages incurred. Regardless of the number of lawsuits or amount of damages paid to the plaintiffs, your company’s reputation may be affected, and you’ll use valuable time and resources.

Considering the financial and legal ramifications, companies need to be proactive about compliance.

How to ensure compliance with cybersecurity disclosures

Enhance your cybersecurity with a strategic approach that covers many potential risk areas:

  • Data encryption and privacy: Encrypt your sensitive data when it’s stored and sent to make it unreadable and unusable for bad actors if it’s stolen in a breach.
  • Security infrastructure: Defend your network with intrusion detection systems, authentication protocols, and firewalls. Install software and system updates regularly to repair vulnerabilities.
  • Monitoring and audits: Conduct routine audits to ensure compliance with SEC guidelines and identify vulnerabilities. Auditing also allows you to respond to threats sooner to mitigate damage and the risks of noncompliance.
  • Employee training: Make sure your employees are aware of the cyber threats your company faces and how to respond. Train your team in tactics that hackers use, like social engineering and phishing.
See also  What is the best database for a hedge fund?

Contact Agio for a mock SEC audit today

Security measures allow your public company to avoid the risks of not being compliant with SEC cybersecurity guidelines. Our cybersecurity consulting service includes compliance assessments, where our team will conduct a mock audit to help you prepare for your formal SEC audit. Contact us today to learn more.