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.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

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

UN health experts warn ‘dramatic resurgence’ of measles continues to threaten the European region

Human Rights breaches in Russia, Afghanistan and Burkina Faso

Your morning cup of coffee contains 140 litres of water

How each country’s share of global CO2 emissions changes over time

OECD sees global growth moderating as uncertainties intensify

The EU wants to create 10 million smart lampposts

Gynecologic care in the 21st century

Easier Schengen Visas for non-EU holiday makers: A crucial issue for south Eurozone countries

Here are six bold ideas to accelerate sustainable energy innovation

Reforms in the Western Balkans and Turkey: annual assessments and recommendations

Facts and prejudices about work

The cuts on 2014 Budget will divide deeply the EU

Is there a cure for corruption in Greece?

Nicaragua: MEPs condemn brutal repression and demand elections

Google once more under EU crossfire from a possible record fine and new Right to be forgotten case

UN postal agency ‘regrets’ US withdrawal

3 natural mysteries that could be explained by quantum physics

Reconciliation helps ‘repair fractures’, enable lasting peace, Security Council hears

INTERVIEW: Poverty, education and inclusion top new General Assembly President’s priority list

This is how we can feed the planet while saving the ocean

Data capture, not disclosure, is the way to meet our climate goals

The Europeans back Russia-Turkey on Syria: A ‘Waterloo’ for Saudis and their Crown Prince

The US will impose tariffs on Mexico, says President Trump

On our way to China

Can the US-Iran rapprochement change the world?

Checks, fines, crisis reserve: MEPs vote on EU farm policy reform

UN chief welcomes new Government in Lebanon, after eight-month impasse

EU elections 2019: Rise of nationalist trends and populism in Europe challenges the EU edifice

Brazil: A strategic partner for the EU

Crowdfunding: what it is and what it may become

Factory workers are facing a mental health crisis. Here’s how to respond

In the United States, there aren’t enough hours in the week to make rent

Fake news and Freedom of Press: can the EU ever find the fine line?

EU and Indian flags at EU-India Summit in New Delhi last October (copyright EU 2018, Source: EC - Audiovisual Service)

India and the EU get close to revive talks on proposed Free Trade Agreement

My twin from Guangzhou

3 ways governments and carmakers can keep up with the future of transport

Afghanistan: UN envoy urges further extension of ceasefire with Taliban, as Eid ul-Fitr gets underway

The Ukrainian crisis to destabilize Europe and the world for a long time

Rising human trafficking takes on ‘horrific dimensions’: almost a third of victims are children

VAT Gap: EU countries lost €137 billion in VAT revenues in 2017

UN chief urges India and Pakistan to dial down tensions in wake of Kashmir attack

Multilateralism more vital than ever, as World War centenary looms: Security Council

WEF Davos 2016 LIVE: “European unity and cooperation is being called on question”, Vice President Joe Biden criticizes from Davos

International trade statistics: trends in first quarter 2019

One third of poorer countries face both undernutrition and obesity: WHO report

‘Revved up climate action’ needed to counter ‘prolonged’ and deadly storms like Cyclone Idai: Guterres

There is a mental health crisis in entrepreneurship. Here’s how to tackle it

How to fix our planet: the pioneers fighting to bring nature back

‘Agile’, multilateral response vital to combat terrorism – UN chief Guterres

Europe bows to Turkey’s rulers, sends Syrian refugees back to chaos

Here’s how we can rethink the way we eat meat

UN chief ‘deeply alarmed’ over military offensive in south-west Syria

G7 summit: Trump Vs. G6 leaders on trade and climate change

EU-Singapore trade agreement enters into force

Davos participants call for digital trade deal

These will be the main cybersecurity trends in 2020

Want to shop more sustainably and recycle better? This app could help

The world is a book and those who do not travel read only one page

Eurozone: Economic Sentiment Indicator recovering losses

EU and China resolve amicably solar panel trade dispute

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