BVR Briefing – Cybersecurity in Business Valuation: Addressing the Impact of Data Breaches on Value

March 2020 PDF (37 pages)

Business Valuation Resources, LLC

Every company – large and small alike – now faces material risks related to data security and privacy concerns that need to be addressed when performing a business valuation. The evolving and increasing risk of data security and privacy is one that cannot be ignored in a credible business valuation. Addressing data security is a challenging area for experts because it is a complex issue and there is scant guidance or empirical data to help quantify these risks. 

This BVR Briefing presents some emerging ideas and techniques that are helping to pave the way to better understand and measure the impact of data security and cyber liability risks on the value of a business. Renowned cybersecurity pros Charles Hoff and Michael Blake share their deep knowledge and proven strategies.
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Categories: company-specific risk


Table of Contents

Introduction     
                                                                                           

PART 1: Understanding the Data Security Issues That Impact Business Value

  • Why Data Security and Privacy Are Important to Company Value
  • Overview of Common Vulnerabilities
  • Data Security Regulatory Frameworks
  • How to Assess Whether Cybersecurity Requires Attention

PART 2: Integrating Cyber Risk/Liability Assessment Into the Appraisal 

  • 2-1. Asking the Right Questions to Quantify Cyber Risk
  • 2-2. Quantifying Cyber Risk
  • 2-3. Cyber Risk Value Levers
  • 2-4. Income Approach to Integrating Cyber Risk Into the Valuation
  • 2-5. Market Approach to Integrating Cyber Risk Into the Valuation
  • 2-6. Treat Probability of a Data Breach as a Contingent Liability
  • 2-7. Using Option Theory to Quantify Cyber Liability
  • 2-8. Quantifying the Client’s Cyber Insurance Needs
  • 2-9. Make Cyber Risk an Exclusion in the Valuation Engagement
  • Closing Considerations