The Impact Cybersecurity Liability Can Have on Your Business

A client’s data breach can put Security Operations Center as a Service and other security solution providers in the position of having to defend their businesses. Is it worth the risk?

The Security Operations Center as a Service (SOCaaS) space grows more active as businesses realize they need help managing and monitoring security solutions to help keep their networks and data safe. This represents a real opportunity for managed services providers (MSPs) to expand their offerings and grow their businesses — but providing third-party cybersecurity services is not without risk. If your client becomes the victim of a data breach, your life can become a whole lot more complicated.

Victim or Responsible Party?

When a data breach occurs, the business or organization that was using or storing the data initially focuses on containing and removing malware, repairing IT systems, and making notification in accordance with federal and state laws. Although the business is the victim of a crime, they are still responsible for appropriately responding to a breach. The business may also be liable for damages that result from the breach and face lawsuits from their customers or enforcement action from regulatory agencies.

As a business looks for the cause and sorts through the legal outfall from a data breach, they may assert that responsibility lies with their security solution or services provider. Their position may be that the solution you sold (even if you are the reseller or provider and not the developer or manufacturer) didn’t do what you said it would. Or, they may allege that as you provided services, you didn’t do everything you could to prevent or stop a data breach.

Even if you did everything by the book to secure your client’s systems and data, you still may find yourself in the position of having to defend your business in lawsuits. Besides, the hard truth is, mistakes happen. A data breach could have resulted due to an error that a member of your team or a subcontractor made.

Third-Party Cybersecurity Insurance

Businesses have the option of taking out cybersecurity insurance to protect themselves and cover expenses in the event of a cyberattack. Likewise, SOCaaS and other security service and solutions providers can take third-party cybersecurity insurance. Third-party cybersecurity insurance can cover costs for attorneys to defend your company, settlement costs, court-ordered damages, and other legal or court fees.

Third-party cybersecurity insurance is often included in professional liability insurance, a.k.a., errors and omissions insurance, coverage that protects you if a client alleges that you didn’t fulfill a contract, made a mistake, or provided incomplete or incorrect work.

Infosec Counsel

It’s also smart to seek experienced legal counsel from professionals with expertise in IT security. Over the past few decades, more lawyers have focused on information security law. Infosec lawyers can advise you on how to keep your businesses in compliance with regulatory requirements related to security, and protect your business when you enter into a contract. They also address liability related to security breaches, and can defend you in the event of a data breach.

Is Protecting Your Clients Worth the Risk?

It’s never been more important for businesses to secure their networks, monitor them for intrusion, detect malicious activity, and respond quickly. Moreover, with the threat landscape growing more sophisticated and complex and the demand for security professionals far outpacing supply, businesses have never needed more help.

When some MSPs weigh the potential liability and damage to their reputation and brand that a client’s data breach could cause, however, they choose not to provide Security Operations Center as a Service or other security solutions. But others see a return greater than the risk, which includes the relationships they can build as total solutions providers.

If your business moves forward as a third-party cybersecurity service provider, retain expert counsel, have adequate insurance coverage, and keep your eyes wide open about the benefits and risks involved in offering these services.