How Concerned Should I Be About Cyber Fraud?

According to Information Week this month, cyber fraud against medium and small businesses is up 42% this year over 2011. Cyber criminals can gain access to your sensitive banking information (account #, user names, passwords) and start transferring large sums of cash out of business accounts. Read on and you will learn that cyber crime can take many forms.

 The New York Times reports that banks take no responsibility for money lost by cyber fraud when perpetrated against business accounts. After hearing about this increasing risk, many of my clients ask, “Is there a way to insure myself from cyber fraud?”

Cyber Fraud

A client of mine has been affected by cyber fraud twice in the last five years. The first time, their computer system was hacked by an employee who had simply walked into their office to obtain information and stole thousands of dollars. The bank was unwilling to help them, the local police recovered as much as they could, and the insurance plan we had established covered the rest.

 After that experience, I consulted with them to add an extra layer of cyber insurance and they’re glad we did, because recently they were hacked a second time from a computer outside the country. The amount stolen was five times the amount of the first fraud. They’d received no alerts even though all of the transactions were highly unusual. They went to their bank and again were denied a refund. However, the plan we had established covered cyber crime and fraudulent transactions of this very nature and for a very low cost recovered 100% of their loss.

 Some Cyber Advice

Keep in mind that fraud insurance does not cover all cyber crime. Like my client, you need a separate rider attached to the policy. Because of this, I recommend:

  • Recognize exposures – Seriously limit access to information. Designate a single computer to online monetary transactions and register the IP address with your bank.
  • Set up alerts for all transactions –This seems tedious, but the faster you react, the lower the risk.
  • Tailor your insurance –Make sure you have a policy that reflects your payroll and annual cash flow and revisit it regularly as your business grows to avoid a major gap in coverage.

The Hospitality Practice Group understands that cash flow for the hospitality industry is often extremely tight and cyber fraud can deal a deathly blow to many businesses. Let me show you how to be prepared.

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