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In Cybersecurity– A Good Offense is the Best Defense

Client Alert
November 16, 2021

2021 has been a watershed moment for cybersecurity incidents, as cybercrime has become a frequent headline, and cyber criminals have thrived on unsuspecting and/or unprepared businesses and institutions. For example, the Solar Winds attack exposed sensitive data from top companies like Microsoft as well government agencies[1], and the Colonial Pipeline attack substantially disrupted the petroleum supply chain[2]. We have seen an almost 20% increase in data breaches and attacks since last year.

Changing Laws and Expectations:

In response to these threats, President Biden issued an executive order in May 2021 to overhaul the federal regulations governing cybersecurity policies that are applicable to government agencies and federal contractors. This is only a first step; it is likely that states will implement similar policies.

In the private sector, larger companies such as financial firms and healthcare organizations have already implemented mechanisms to protect sensitive business, customer, and patient data, given compliance regulations and requirements. While large companies may be ahead of the curve, many are still unprepared given the sophisticated and ever-changing cyber security landscape.

For small and medium sized businesses (SMBs), the challenges are even greater. The U.S. National Cyber Security Alliance found that 60% of small businesses went out of business within six months of a data breach or cyber security attack. Moreover, many SMBs contract with the government and/or larger corporations, which are increasingly shifting the risks of data breaches and cyber security attacks onto smaller entities through indemnity provisions in their contracts. Therefore, SMBs often face significant first-party and third-party risks.

SMBs often believe they are not targets because of their size. A 2019 Cyberthreat Study found that 60% of senior SMB decision makers believed that they were unlikely to be attacked[3]. On the contrary, SMBs are easy marks for cybercriminals because their systems are data-rich and vulnerable. While 62% of cyberattacks hit SMBs in 2020, only 43% had any type of cybersecurity defense plans. It’s likely that these numbers only grew worse in the last few years given the number of employees working remotely.

Protect yourself and remain compliant:

So, the question is what can SMBs do to protect themselves? To begin with, SMBs should implement proactive solutions to prevent attacks and safeguard data such as:

  • initiating employee cybersecurity training;
  • preparing or updating policies and procedures governing information security practices;
  • instituting managed and monitored patching; and
  • implementing multi-factor authentication (MFA).

These are basic steps that can help minimize these risks. Additionally, SMBs should consider sitting down with legal counsel and their insurance broker to evaluate first-party and any third-party risks in the event of a data breach or cyberattack.

Get covered:

One of the most effective ways to mitigate your risk to a cyberattack is to obtain cyber insurance coverage. Cyber insurance is not one-size fits all. Cyber coverage needs to be tailored to your business and to the risks in your business. Otherwise, a cyber policy may provide little to no coverage for first-party or third-party harm in the event of a breach.

For SMBs with existing cyber coverage, you should expect to see premium increases of between 60-100% of your current premiums given the rising incidents. For SMBs that have no implemented MFA, monitored patching, or compliance and training programs, your premiums could go up even higher. Many underwriters may reduce coverage or even cancel existing coverages if technical and compliance policies, like those noted above, have not been implemented.

For SMBs without cyber coverage, you should consider discussing coverage with your broker before your upcoming renewal. Insurance companies are implementing stringent underwriting requirements for cyber coverage, which will require the implementation of technical and compliance policies.

As we move into 2022, SMBs should examine their existing systems, policies, and insurance coverages to ensure that they are protected if and when a cyberattack or data breach occurs.

If you have any questions about whether your cybersecurity risks, and whether your business is protected, please contact BMD’s Cybersecurity Practice Leaders, Kyle Johnson at kajohnson@bmdllc.com or Brandon Pauley at btpauley@bmdllc.com.

[1] https://www.businessinsider.com/solarwinds-hack-explained-government-agencies-cyber-security-2020-12

[2] https://www.bloomberg.com/news/articles/2021-06-04/hackers-breached-colonial-pipeline-using-compromised-password

[3] https://www.keepersecurity.com/assets/pdf/2019-CybersecuritySMB-Infographic-branded.pdf

CybersecurityKyle A. Johnson
Client Alert

Changes to FFCRA Paid Leave: Congress’ Revisions to Employment COVID-19 Leave Benefits Signals the Light is at the End of the Tunnel

December 28, 2020Late in the evening on December 27th, President Trump signed into law the government’s $900 billion COVID-19 relief package (the “Stimulus Bill”). Among other economic stimulus benefits, the Stimulus Bill contains the $600 stimulus checks that will be issued to eligible individuals as well as, relevantly, changes to the Families First Coronavirus Response Act (“FFCRA”). The FFCRA was implemented in April 2020 and provided benefits to individuals who missed work as a result of an actual or suspected COVID-19 illness or to care for a child when their school or childcare service was closed because of COVID-19. Importantly, the Stimulus Bill extends eligibility for employer payroll tax refunds for leave payments made to employees on or before March 31, 2021 under the FFCRA, signaling to the American people that Congress believes many of the employed public will be vaccinated by this time, the light at the end of the tunnel. However, the Stimulus Bill does contain a caveat that employers are no longer required to provide FFCRA leave benefits after December 31, 2020, but if they do, they will receive the payroll tax credits, up to the maximums provided in the FFCRA, for payments made prior to April 1, 2021. Below we provide a list of questions and answers we received to date following the passage of the Stimulus Bill. We expect the U.S. Department of Labor (“DOL”) to issue additional questions and answers as the Stimulus Bill is implemented, and we will update this Client Alert as these are received.Client Alert

Healthcare Speaker Programs: New OIG Alert

December 11, 2020In a rare Special Fraud Alert issued on November 16, 2020 (the “Alert”), the Office of Inspector General (“OIG”) urged companies who host speaker programs to reassess their programs in light of the “inherent risks” associated with these activities. The Alert reports that, in the last three years, drug and device companies have reported paying nearly $2 billion to health care professionals for speaker-related services.Client Alert

Value-Based Care Advances – CMS Issues New Final Rules for Stark and Anti-Kickback Statutes

December 11, 2020The Centers for Medicare & Medicaid Services (“CMS”) and the Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) issued two highly anticipated (and quite extensive) Final Rules to reform the Stark Law and Anti-Kickback Statute (“AKS”) regulations. The Final Rules generally take effect on January 19, 2021. The Final Rules include new safe harbors for the AKS and new exemptions to the Stark Law to allow for greater flexibility. According to the HHS, the goal of updating both laws is to make it easier for providers to engage in care coordination and value-based care programs without running afoul of the statutes. Please note that this client alert could not cover the full extent of the Final Rule changes so please contact your BMD Healthcare attorney with questions.Client Alert

Mandatory Filings Under CFIUS New Rules

December 11, 2020On September 15, 2020, the Committee on Foreign Investment in the United States (“CFIUS”) promulgated a final rule modifying its mandatory declaration requirements for certain foreign investment transactions involving “TID US businesses” (sensitive U.S. businesses dealing in critical technologies, critical infrastructure and sensitive personal data) dealing in “critical technologies” – i.e., U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. The new rule also makes amendments to the definition of the term “substantial interest” (used to determine whether a foreign government has a substantial interest in an entity). The final rule became effective on October 15, 2020.Client Alert

IRS Guidance on Employee Retention Credit

December 11, 2020The Employee Retention Credit created under Section 2302 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Since the adoption of the CARES Act, employers have expressed concern that if one employer acquires another employer that previously received a PPP loan, the acquirer’s entire aggregated group may no longer be eligible to claim the Employee Retention Credit.
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