Here are 4 ways investors can influence more secure and responsible innovation

investors 2019

(Unsplash, 2018)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Algirde Pipikaite, Project Lead, Governance and Policy, World Economic Forum


Modern society is systematically dependent on digital technologies, and has reached a point of no return. The Fourth Industrial Revolution, in enabling our transition to the digital world, has created opportunities. Digitization provides many benefits, but given its rapid pace, we live in cyber insecurity.

Cyber attacks against businesses have almost doubled in the last five years. Since we can’t remove digital technologies from our economies, daily lives or public safety practices, we must take responsibility and apply security much more thoroughly when innovating, in order to prevent major cyber attacks, loss of data, loss of privacy and other negative outcomes.

In the past, the most famous cyber breaches have been related to infringement of privacy and confidentiality. In the near future, the much bigger problem will be potential attacks on integrity and availability, like the infamous Maersk attack that shut down a company’s network and operations for days. If trust in technology is low now, what will happen when hackers are able to tamper with data integrity, and change patients’ health records, including their blood type, allergies, and medical history? What will happen when hackers can attack availability, causing a train signalling system to malfunction, leading to multiple accidents?

In order to rebuild trust, we must put responsibility and security at the forefront of businesses’ innovation development. In the long term, prioritizing these two values is in the interest of investors. Investors who provide the capital to feed innovation must guide start-ups and SMEs to put security first.

These investors should recognize that security is fundamental to any sustainable investment, and that they have a key role to play in ensuring it. In many cases, investors take a very proactive role in helping portfolio companies to succeed. Part of success is providing a long-term vision for the innovation being funded and its impact on society.

Investors need to take the lead, because it is cheaper and more efficient to incorporate security at the beginning of product development rather than adding it at the end, just as it is much cheaper to prevent fire than stop it from spreading after it has started. Businesses that prioritize security early can evaluate their options and make reasonable choices based on the nature of their business needs and the sensitivity of their data.

Here are four ways investors can influence more secure and responsible innovation.

Investor education

In order to close the knowledge gap between the tech community and investors, investors have to understand the critical nature of security in their investment portfolio companies. As cyber risks are increasing, it is important to educate investors on the need to assess cyber risk within the investing process. A better understanding of what makes technology more secure, an educated judgement of a company’s security posture and an ability to evaluate risk management strategy are becoming essential elements of thorough investment due diligence. Investors should learn about upcoming market trends, understand the importance of cybersecurity better, and be able to ask and challenge the current status quo of security in innovation.

Standard language

It is important that investors and the technology community speak the same language when referring to cybersecurity. Currently, investors speak one language, managers another, and technology managers a third. The need for a universal language is much more pronounced among smaller companies. In order to improve the understanding of cybersecurity and its importance, there should be a standard language for the investment community to address cybersecurity as a business risk, rather than just an IT issue.

This includes agreeing where cybersecurity expertise falls within the company; how cybersecurity risk is disclosed and measured; what the key cyber threats are; what should be included in a cybersecurity audit and assessment; and finally, details such as if the board is responsible for cybersecurity issues. Currently there is a wide gap between the investment community and technology innovators when referencing security. Agreeing on basic terms of reference will help bridge this gap.

Understand security’s impact on investments

As cyber threats continue to escalate, consumers are seeking more cybersecurity and questioning their data privacy. Companies that prioritize security in their development will gain an advantage over their competitors. According to the Ping Identity 2018 Survey, following a data breach, 78% of consumers are inclined to stop engaging with the affected brand online, and 36% said they would stop engaging with the brand completely. Nearly half (49%) of respondents said they wouldn’t engage a service or application that had experienced a recent data breach. As the survey shows, cyber breaches can be very damaging, especially to companies that are still establishing their name. A breach for a not well-known brand could be fatal.

As new digitally native generations join the consumer market, the demand for better embedded security will rise. According to the Deloitte/SSI 2016 Consumer Survey, younger generations (millennials and Gen Z) take more protective steps than older generations.

Due care standard

During the investment process, investors look at quality of earnings and revenue. Why aren’t investors looking at the quality of security of the company and its product? If there was a universally agreed due care standard that companies could be evaluated on, then investors could adjust investments and incentives accordingly. Such a cybersecurity due care standard should be inclusive and incorporate both basic cross-industry standards, as well as different levels of evaluation for different stages of a company’s development, from start-up to small and medium-size enterprise. If a due care standard is developed, companies can be evaluated and benchmarked on how they perform based on the due care standard in a fair and transparent way.

Investors and innovators have to find the right balance between fear and hope in developing new technologies. In order to do that, both communities have to speak the same language, and have a similar understanding of the importance of security and responsibility in innovation development.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Climate change is destroying a barrier that protects the US from hurricanes

Why the fight against nature loss should be a business priority

In an era of global uncertainty, the SDGs can be our guide

Fair completion rules and the law of gravity don’t apply to banks

State aid: Commission approves €380 million German rescue aid to Condor

Future fit: 3 ways fashion can be more sustainable

Data Protection Regulation one year on: 73% of Europeans have heard of at least one of their rights

The British are the most positive in Europe on the benefits of immigration

FROM THE FIELD: ‘A piece of me’ was taken

Ignorance or Refusal: Determinants in the individual’s choice for palliative care

EU Commission – US hasten talks to avoid NGO reactions on free trade agreement

France breaks budget promises once again and the EU’s finance offices are shaking

6 ways social innovators are responding to the COVID-19 pandemic

Hope for ‘long-elusive progress’ in negotiating peace in eastern Ukraine

Australia’s record heatwave: From fainting tennis players to dead fish

Yemen war: UN chief urges good faith as ‘milestone’ talks get underway in Sweden

WHO chief underscores need to address climate change following visit to Bahamas

The impact of COVID-19 on the life of the elderly

5 Ways Companies Can Progress More Women into Leadership Roles

This Latin American country is keeping COVID-19 firmly under control. How?

Shaping Europe’s digital future: op-ed by Ursula von der Leyen, President of the European Commission

Reducing disaster risk is a good investment, and ‘the right thing to do’, says Guterres

Burning Amazon rainforests: Darting towards the doom of Human Race

Young people meet in Malta to shape the future of Europe

The four top Americans who flew to Europe perplexed things about Trump’s intentions

3 actions for business to prepare for a post-pandemic future

Germany and OSCE support an east-west dialogue in Ukraine without exclusions

The global liberal order is in trouble – can it be salvaged, or will it be replaced?

Humanitarian Aid 2016: The needs, the highlights, the crisis and the relief

Thursday’s Daily Brief: Safeguarding civilians, strengthening Ebola response in DR Congo, marking Fistula Day, updates on CAR and Syria

Burundi election countdown amid ‘deteriorating’ human rights situation

This Syrian national has been trapped at Kuala Lumpur airport for 3 months

UN chief urges Hamas and Israel to ‘step back from the brink of another devastating conflict’ in Gaza

EU’s new environmental policy on biofuels impacts both the environment and the European citizen

These 3 countries are global offshore wind powerhouses

We need to talk about mental health at work, say employees

COVID-19, higher education and the impact on society: what we know so far and what could happen

Investing in education and skills can improve the health of both humans and planet. Here’s why

We need better alignment between climate and trade. Here’s a roadmap

The unpleasant truth of plastic straws

Asia and Pacific on course to miss all Sustainable Development Goals, says UN region chief

How global tech companies can champion ethical AI

European Union launches WTO trade dispute against Colombia’s unfair duties on frozen fries

EU Cohesion policy: Commission and EBRD promote innovative use of data in public procurement involving EU funds

FROM THE FIELD: What do you want to be when you grow up? One day I will…

Why the downturn is good news for subscription companies

Aid convoy for north-east Syria postponed over security concerns – UN relief chief

China’s stock markets show recovery signs while EU is closely watching in anticipation of the €10bn investment

Governments should step up their efforts to give people skills to seize opportunities in a digital world

Digital Single Market: Europe announces eight sites to host world-class supercomputers

Technological innovation can bolster trust and security at international borders. Here’s how

Challenges remain in DPRK despite ‘slight’ improvements in health, wellbeing: UNICEF

Gender Hierarchy in Medicine: From University to Specialization

On youth unemployment: unemployment is even bleaker for youth with disabilities

Youth not prioritised in new Commission

Can ECB’s €60 billion a month save Eurozone?

‘Complacency’ a factor in stagnating global vaccination rates, warn UN health chiefs

The EU Commission is lying to the “Right2Water” campaign

‘You can and should do more’ to include people with disabilities, wheelchair-bound Syrian advocate tells Security Council in searing speech

Guterres lauds UN peacekeeping, highlights need to bridge ‘critical’ gaps

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s