Although it is not news that companies are often the targets of hackers, what might be news is the Securities and Exchange Commission’s recent push for disclosure.  From a public relations and an investor relations perspective, such disclosures have merit.  Linda Sandler explains the rationale (“The SEC Says Speak Up About Hack Attacks” Bloomberg Businessweek 9/10/12–9/16/12, pp. 49–50):

“The SEC doesn’t have the authority to order companies to spend money on security controls.  What it can do is make them report cyber-risks so potential investors are aware of the problems.  Under securities law, companies must disclose ‘material’ information, meaning data that might influence investors’ decisions.” (p. 50)

Increasing numbers of companies have received letters from the SEC about this concern, including Google, Amazon, American International Group, Hartford Financial Services, Eastman Chemical, and Quest Diagnostics.  I suspect this new emphasis will motivate many companies to enhance their cybersecurity.  If you can lock down your IT systems more effectively today, then you greatly reduce the risk of having to publicize an embarrassing hacker victory tomorrow.

Although the need for increased scrutiny is unfortunate, happily, it generates some very positive outcomes with respect to public relations and investor relations.  If I’m doing business with a company or investing in that company, I want to know it is running a tight ship.  Improved cybersecurity accomplishes that.

Finally, when those painful and embarrassing hacks do happen, full disclosure at least keeps customers, partners, and investors in the loop.  Then everyone is free to move ahead with the benefit of full knowledge.

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About James Meadows

Currently I serve as a training team manager for Tyco Integrated Security at a customer-care center in Kansas City. Additionally, I am a business consultant, a freelance corporate writer, an Assembly of God ordained minister, a Civil Air Patrol chaplain, and a blogger. I believe we are living in the most fascinating times of human history. To maximize the opportunities these times present, I have a passionate interest in leadership development and organizational success, both of which I view as inextricably linked.

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