Learn How a Financial Services IT Consultant Will Help You Make Sure Your Agency’s Cyber Risk Does Not Sink Your Selling Price
Considering selling your agency before your retirement years? You need to be aware of how financial and insurance agencies are valued these days. EBITDA, your unique selling proposition, and client relationship health all matter of course, but increasingly, buyers are scrutinizing your agency’s cyber risk. They want confidence that your agency won’t carry hidden liabilities for them.
Do you know if your agency’s cybersecurity can stand up to this level of scrutiny?
Trick question (sorry). Many small to mid-sized agencies can’t actually answer that question. However, many agency owners also don’t know that working with a reputable financial services IT consultant can help them tighten up their cybersecurity stance in a manageable timeframe. If you focus on this aspect of your business now, it can help you stand out to potential buyers andnegotiate a better valuation when you’re ready to sell.
But, first, you’ll need to understand the details on how your cybersecurity can impact your agency’s valuation.
Why a Higher Cyber Risk May Reduce Your Sale Price
In Q4 2019, the IBM Institute for Business Value (IBV) surveyed 720 executives responsible for M&A functions at acquirer organizations. Of those, well over 100 experienced a data breach after making a purchase (nearly 20%).
A post-M&A data breach doesn’t just harm your agency’s brand and customer trust. It also hurts your acquirer’s brand and customer trust, and it can land them in legal hot water and result in significant regulatory penalties for noncompliance. For that nearly 20% of acquisitions we mentioned, the acquirers inherited a client base, a hard-working team, and lurking cyber risk. As they found out later, they had paid for a cybersecurity time bomb.
No one wants to pay a premium for risk, which is why it’s no surprise that M&A deals are now increasingly incorporating cyber-risk assessments into the process. If you can demonstrate that your agency has taken its cybersecurity and compliance tasks seriously, you’ll start off on strong negotiating ground.
How to Demonstrate Cyber Discipline to Build Your Credibility with Buyers
Having a solid cybersecurity stance shows buyers that you’ve dotted your i’s and crossed your t’s. It signals that you understand that the value your business offers extends beyond just client lists — it’s the data, the processes, and the safeguards that maintain trust.
Well and good — but your acquirers may be following advice from the Wall Street Journal: “Consider carrying out a holistic review of the target company’s cyber risks, including an in-depth analysis of its IT governance, operations, business continuity, physical security, and overall risk posture.”
Not sure how to handle all that? You can learn all this yourself, hire an internal IT team, or work with a financial services IT consultant who takes care of the details for you.
Whichever you choose, you’ll want to focus on your:
- Cybersecurity & monitoring
The day-to-day work of cybersecurity may seem like a dull waste of time, but it can make a tangible difference — both to your peace of mind now and your valuation in the future. Buyers (and their assessors) notice details like proactive threat detection, endpoint detection and response, patch management, and access controls (in fact, the WSJ article suggests that access management is key to a deal), whereas lapses in these areas can create doubt.
- Security awareness training
Phishing and other social engineering attacks trick your staff into giving up their login credentials. If your employees don’t know how to defend themselves from phishing attacks, that can be a liability for your acquirer. However, if your team regularly participates in phishing trainings and ongoing simulations, you can demonstrate to a buyer that your staff is a cybersecurity asset to them.
- Backups, IT administration tasks, and compliance
Managing backups and IT administration matters too, along with compliance. Working with a financial services IT consultant can help you show potential buyers that your agency is consistently meeting responsible operational and regulatory practices, including compliant data handling, business continuity planning, and tech asset management.
To manage these items yourself, you’ll need to know a lot about your internal IT and cybersecurity vulnerabilities. Most retirement-age agency owners have zero interest in learning all this so soon before they retire.
Partnering with an expert financial services IT support company like SWK Technologies helps you prepare your agency so it’s ready to handle deep scrutiny. When you work with an expert, buyers see a well-run, secure, and compliant operation, which preserves confidence in the value you’ve built.
SWK provides managed services and solutions for financial services IT support, business continuity and disaster recovery (BCDR) planning, data security compliance enablement, and more. Our comprehensive approach provides a well-rounded and solid cybersecurity stance that reflects your agency’s careful approach to risk. With us, you can enter negotiations knowing that your cybersecurity is expertly managed.
Work with a Financial Services IT Consultant to Make Sure That Your Agency’s Value Supports the Future You Deserve
KPMG advises buyers that, “Prior to M&A activities, it is essential to conduct thorough cybersecurity due diligence to uncover any security risks and liabilities, as well as the costs for remediation. This assessment will help inform investment decisions and legal documents.”
But you have the power to help inform your buyer’s investment decisions, too.
By taking the right steps now to manage your cybersecurity and compliance, you not only reassure buyers but also protect your own future. Thoughtful preparation can ensure the sale goes smoothly and maximizes your financial outcome, giving you the peace of mind in your retirement years that you’ve been working toward all this time.
Your potential buyers want to see that your agency knows how to handle its data. They want proof that your systems are monitored, your operations are organized, and your clients’ sensitive data is properly handled. But you don’t have to do all that yourself. When you work with SWK, you’ll know that these areas are being expertly managed around the clock for you, so you don’t have to track every detail yourself.
Instead, you can start planning for what you want to do in a few years’ time when you don’t have to work every day.