Operational Risks and Cyberattacks Failures
In any wartime, businesses can expect to face operational risks. A company’s board of directors can ensure the organization takes steps to mitigate these risks. This article will explore the effects of operational failures on businesses and their board of directors during the war.
According to ASEAN 2022 Board Trends, which surveyed 250 board of directors from The Institute of Corporate Directors Malaysia (ICDM), – the Vietnam Institute of Directors (VIOD), Singapore Institute of Directors (SID), Thai Institute of Directors Association (Thai IoD), Indonesian Institute for Corporate Directorship (IICD), Myanmar Institute of Directors (MIoD) and Institute of Corporate Directors, Philippines (ICDPh) under the ASEAN IOD Network initiative.
60% Re-evaluated their risk, crisis, and business continuity plans, 43% Accelerated the shift to digitalization and Innovation, (64%) and enhanced oversight on crisis management and business continuity (55%) – these being significant changes made to the board to address the challenges posed by COVID-19.
Operational risks are inherent in any business but can be amplified during wartime. Companies must take steps to mitigate these risks or face litigation from stakeholders. The board of directors ensures the organization takes steps to minimize these risks. A cyberattack can lead to litigation.
War Times Operational Risks
During wartime, businesses may face increased operational risks. It can migrate the risks by taking certain precautions, such as increasing oversight ofcrisis management and business continuity plans.
If a company experiences a data breach or cybersecurity incident, it may face litigation. This article will explore the effects of operational failures on businesses and their board of directors.
Litigation Examples during war times to the board of directors
There have been several examples of the board of directors being sued during wartimes. One example from the USA in the case of Doe v. Trump. Trump sued the board of directors of the Trump Organization for breach of fiduciary duty.
The board was accused of failing to properly oversee the organization’s risk management practices, which led to the company’s involvement in money laundering and other illegal activities.
Textbook case study example is the case of In re WorldCom, Inc. Shareholders’ Litigation. Sued the board of directors for breach of fiduciary duty, which eventually led to the passing of the Sarbanes Oxley Act.
The board was accused of failing to properly oversee the company’s financial reporting, which led to the company’s bankruptcy.
How to Mitigate Operational Risk?
One way is to increase board oversight of crisis management and business continuity plans.
It will help ensure that the organization is prepared in the event of an incident, from Internal and external regulators Communication plan who is responsible CEO, Chairman, Corporate Secretary.
- Another way to mitigate risk is investing in cybersecurity measures, employee mandatory security awareness training requirements, and annual disaster recovery exercises recovering from the Cloud Governance. It can help protect the company’s data in a cyberattack.
- Finally, businesses need to have adequate Directors insurance coverage. It can help cover the costs of any damages that may occur due to an operational failure.
Supply Chains are More Disrupted in War Times
- According to the Australian Institute of Directors (AICD), The war in Ukraine is a significant new risk to the global economy.’ Governor Philip Lowe of the Reserve Bank of Australia conceded that it was ‘difficult to know what the full implications are’ but added that at present, ‘the main economic effects stem largely from higher commodity prices.’
There are various ways businesses can mitigate operational risks; however, in war times, minimizing disruption to business takes priority, setting customers’ expectations, transparency to supply chain disruptions, and fulfilling customer orders.
Operational Risks, Cyber Risk & ESG, Risks Heightened during Wars.
The board of directors is responsible for ensuring that the organization is taking steps to mitigate risks, such as cyberattacks, which can lead to litigation from stakeholders.
Russian hackers are targeting the US., Ukrainian & EU allies entity accounts for espionage and winning the war over social media (as stated in my last video blog)
Operational risks are not limited to businesses; ESG supply chains are also disrupted during wartime. Because many suppliers are located in war-torn countries, obtaining the necessary supplies for production can be challenging. In addition, transportation costs may increase due to the need to transport goods through conflict zones. As a result, businesses may face increased charges and difficulty obtaining supplies.
Applying Artificial Intelligence in discovering and remediating Security Vulenbarilities
When it comes to cybersecurity, businesses can no longer afford to be reactive. They must take a proactive approach to protect their data. One way to do this is by investing in artificial intelligence (AI). AI can use AI to discover and remediate security vulnerabilities.
It can also use to monitor and respond to security incidents. By taking a proactive approach to cybersecurity, businesses can help to protect themselves from operational failures during wartime.
Dealing with the Aftermath of an Operational Failure
Suppose a business experiences an operational failure during wartime. In that case, it is crucial to take steps to mitigate digital Innovation by keeping Security Patches Updated conducting successful recovery of data from the cloud.
Boards must board oversight on Continuous monitoring of Digital Risks and have an action plan to address them.
Require IT CIO and CISO to provide monthly Key performance Indicators dashboard of IT Risks, Security posture, IT Headcount, and ESG Data points to discover and identify new risks to the Enterprise, Systems, and Cloud Governance. It will help ensure that the organization is prepared for an incident.