Pressure intensifies for private equity cybersecurity

One of the most significant issues facing PE funds is the lack of visibility into cybersecurity practices across their portfolio companies. PE funds may conduct an initial risk assessment, but without ongoing oversight, they lack assurance that identified risks are being managed appropriately. Without consistent visibility into portfolio companies’ cybersecurity status, PE firms are often blindsided by vulnerabilities that may lead to costly breaches.

Many portfolio companies, especially smaller ones, may lack the dedicated personnel to manage cybersecurity or the budget to invest in top-tier security measures. Highly skilled cybersecurity talent is hard to find, and smaller companies may not have the capacity or budget to staff cybersecurity functions adequately. This resource gap leaves portfolio companies more vulnerable and makes it challenging for PE funds to rely on them to independently maintain robust cybersecurity programs.

Hackers are increasingly utilizing artificial intelligence and other emerging technologies to launch more sophisticated and automated cyberattacks. Therefore, maintaining a comprehensive and up-to-date cybersecurity strategy is essential to help portfolio companies keep pace. If one portfolio company falls behind on critical protections, it makes them vulnerable to attacks that can quickly spread throughout the portfolio.

The first step in building an effective cybersecurity program is aligning with the portfolio’s diverse cybersecurity needs. Some portfolio companies may be highly advanced, while others are less mature, so a one-size-fits-all approach rarely works. The right solution will balance cost with effectiveness and be scalable across companies with varying cybersecurity postures. This is a job for highly skilled and focused workers, not a time for cost-cutting or overburdening in-house staff.

Cybersecurity is a long-term commitment, not a one-time fix. As such, a cybersecurity program must be adaptable over time to be effective. A sustainable program should incorporate continuous assessments and real-time updates to keep pace with both the portfolio companies’ needs and the broader threat environment. Programs that are rooted in industry best practices—such as industry-recognized cybersecurity frameworks provided by the National Institute of Standards and Technology and the International Organization for Standardization—are more likely to endure over the long haul.

Effective cybersecurity should add value to portfolio companies, particularly when it comes to buy-side and sell-side activities. On the buy side, a robust cybersecurity program helps ensure that new acquisitions are secure and can lead to a stronger investment. On the sell side, maintaining a well-managed cybersecurity program can increase exit value. In this way, cybersecurity isn’t just a defense mechanism; it’s an asset that can enhance valuation.

A qualified provider should perform thorough, industry-standard risk assessments to accurately identify security gaps within each portfolio company. A valuable assessment should include benchmarking capabilities and the ability to provide a consistent risk profile across companies to ensure that all portfolio companies are assessed against the same metrics.

Real-time dashboarding provides PE funds with crucial visibility into each portfolio company’s cybersecurity status. By centralizing monitoring and reporting, a provider can help identify emerging vulnerabilities, enabling funds to make proactive, data-driven decisions.

The provider should offer flexible options to customize security solutions to match the unique regulatory requirements, business needs and risk tolerance levels of each portfolio company. Look for a program that covers the entire cybersecurity lifecycle versus only part of the equation. For instance, RSM provides a full spectrum of solutions, including a holistic assessment, strategy development, remediation and managed services.