The Cybersecurity Scare

Cyberattacks may be on the rise, but directors’ anxieties don’t necessarily have to be. So writes Philadelphia partner Doug Raymond in his Directors & Boards editorial on “The Cybersecurity Scare.” The article delves into the ramifications of data breaches – reputational damage, financial losses, regulatory actions and costly litigation – as well as the target such attacks can place on directors’ backs. Doug states that the last few years have seen a wave of complaints “asserting breach of fiduciary duty and seeking to hold the directors (or their D&O insurers) liable for failing to prevent a significant data breach.” But while these cases may have been attended by much fanfare in the press, plaintiffs have had little success in court, with the business judgment rule generally shielding the board.

Directors can preserve this shield so long as they stay abreast of cybersecurity risks and maintain robust data protection processes and protocols. To that end, Doug’s article offers practical guidance to ensure directors’ actions ladder up to these obligations.

Associate Eric Dante assisted in the preparation of this column.