Six Reasons Why Cybersecurity Portfolio Oversight Is Essential

From Risk to Advantage: Securing Success for Private Funds

Cybersecurity risks are ever present and pressure to secure investments is mounting. Private equity and venture capital firms are facing a growing challenge: cybersecurity portfolio oversight.

While many firms engage in some form of cybersecurity oversight, the majority of oversight programs are inconsistent, difficult to maintain, and poorly governed, and there is a growing disconnect between current practices and what limited and general partners (LPs and GPs) want to see.

Firms need to act now to build and operate a formal program of cybersecurity portfolio oversight and conduct ongoing assessments of their portfolio companies’ cyber posture over the entire investment lifecycle. A programmatic approach to cybersecurity portfolio oversight can do this.

Here are six ways a programmatic approach to cybersecurity portfolio oversight can help position your company for success:

1. Value Creation

A poor cybersecurity program is a poor reflection on portfolio company (PortCo) management and calls into question the readiness of a PortCo to grow, either organically or through an acquisition. Disappointing cybersecurity diligence can impact exit valuations as much as 3%. Conversely, a documented track record of well-managed, audited cybersecurity efforts can ease diligence.

Moving to a programmatic cybersecurity portfolio oversight program can improve exit valuations by creating a track record of data-driven cybersecurity program improvements at your PortCos.

2. Increase (re)investment from LPs

Ad hoc oversight, however effective it may be, is difficult to explain to LPs, especially those without cybersecurity expertise. A programmatic approach to cybersecurity portfolio oversight is easier to explain to a layperson and builds LP confidence.

This is a competitive advantage for attracting and retaining investment from LPs. Tomorrow, it could be table stakes.

3. Improved ROI by managing risks

By embracing cybersecurity portfolio oversight, you:

• Reduce value erosion from unseen risks through comprehensive, yet low-cost monitoring of PortCo cybersecurity posture
• Ensure your resources are optimally allocated by identifying the cybersecurity risks that matter most to your fund’s performance
• Minimize exposure by responding quickly and efficiently to new threats with timely advice from experts

4. Reduce downside risk

A strong portfolio oversight program will identify risks that could be missed by ad hoc approaches:

• Assess risks not only during due diligence, but at least annually to detect risks across the investment lifecycle
• Monitor the entire portfolio rather than just the PortCos with obvious risks
• Use an assessment framework based on real risks rather than the bare minimum standard many firms apply today

5. Save time

Ad hoc efforts waste time that should be spent helping PortCos improve valuations. A programmatic approach to cybersecurity portfolio oversight:

• Provides all the risk and project data you need in one dashboard. No more combing through reports and struggling to adjust findings to your context.
• Supplies standardized playbooks to help PortCos remediate problems
• Analyzes the portfolio for companies at risk from new threats

6. Gain additional financial benefits

A programmatic approach allows you to analyze all PortCos at one time and benefit from combining the needs of various PortCos such as:

• Obtain reduced premiums for cybersecurity insurance
• Identify opportunities for economies of scale when purchasing products and services
• Share approaches and resources among PortCos

There are no more excuses for ignoring cybersecurity risk in your portfolio. A programmatic approach can ensure you are addressing the concerns of LPs and GPs while protecting your portfolio from a cyber-attack.

How do you implement effective cybersecurity oversight?

ACA has helped more than 100 private equity, venture capital, and hedge fund firms improve cybersecurity oversight of their investments. Based on our learnings from those interactions, we provide a path forward in our white paper and webcast.

Download our white paper to learn how to rebut common myths that stand in the way of firms’ adopting programmatic oversight. We then offer a framework for organizations to begin evolving their approach, enabling them to avoid value destruction, better compete for capital, and increase valuations.

Watch our webcast for a discussion on what a programmatic approach to cybersecurity oversight is, the benefits to this approach, and how ACA can help you adopt it.

How we help

Our new portfolio oversight solution, ACA Vantage for Cyber, is the only cybersecurity product designed specifically for private equity, venture capital, and private debt portfolio oversight. With this solution, you get expert support to build an oversight program that is formally governed, applied consistently, and designed to grow valuations.

ACA Vantage for Cyber can provide ongoing visibility to monitor and oversee your portfolio companies’ cyber health, giving you control to navigate risk, add value, and gain a competitive advantage. Powered by ACA Aponix^®, this solution combines our renowned advisory service with our award-winning regulatory technology, ComplianceAlpha^®, and our exclusive "RealRisk" risk assessment methodology. 

ACA Vantage for Cyber will help you to:

• Align your cybersecurity oversight program to investor needs by leveraging best practices developed working with over 100 firms on oversight 
• Save time with instant access to assessment results and the status of related remediation efforts 
• Keep stakeholders informed and direct resources where they are needed most 
• Uncover your firm’s risk from your investments from the fund level all the way down to individual cyber capabilities at individual portfolio companies. 

Contact us to find out how we can help you protect your portfolio. 

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