How to use cybersecurity to increase your business’s value

Strong cybersecurity can also boost business valuations and inspire buyer confidence. Both sides of the transaction should treat cybersecurity as a key factor in building enterprise value.

No business is safe from a cyberattack — and the timing could make the fallout even worse. If you plan to put your company on the market within the next one to three years, a breach could depress valuation or even derail the entire deal.

Strong cybersecurity can also boost business valuations and inspire buyer confidence. Both sides of the transaction should treat cybersecurity as a key factor in building enterprise value.

Cyber considerations during a transaction

• Research cybersecurity history. Buyers and sellers should evaluate a company’s record of security breaches. The damage, liability and other consequences of a breach can be expensive and ongoing.
• Assess cybersecurity posture. Breaches are inevitable. Companies with stronger cybersecurity defenses are lower risk from an investment perspective.
• Understand valuation impact. A poor cybersecurity history could limit valuation. And if a breach occurs during the sales process, buyers may try to renegotiate terms or even withdraw from the deal.
• Protect product launches and operations. Cyberattacks can interfere with major business events, including product launches. A strike at the wrong moment could reduce investor interest or delay a transaction.
• Meet customer expectations. Customers and prospects increasingly expect vendors to demonstrate strong cybersecurity practices. For firms selling SaaS software, SOC attestation or HITRUST certification have become table stakes.

How cybersecurity can increase valuation

Cybersecurity is one way for non-AI companies to build value and stand out. Businesses looking to boost valuation through cybersecurity should consider these steps:

1. Work with a cybersecurity advisor

Cybersecurity is too broad and complex for most internal IT teams to manage alone. External advisors can help identify blind spots, conduct penetration testing and evaluate cybersecurity practices against established frameworks.

2. Add executive cybersecurity leadership

Cyber is both a major risk and a value driver — and it warrants a seat at the executive table. A chief cybersecurity officer (CCO) can help oversee strategy, coordinate defenses and align practices with industry standards. Depending on your company size, a fractional CCO could deliver the support you need without adding a full-time, in-house role.

3. Assess current defenses

Conduct penetration testing and a cybersecurity assessment to identify vulnerabilities. Many organizations pursue SOC audits or HITRUST certification to strengthen their cybersecurity posture.

4. Implement a cybersecurity framework

Frameworks help formalize cybersecurity policies, data governance and metrics. Embedding these practices across the business helps make cybersecurity an integral part of the culture and everyday operations, rather than a reactive response.

5. Consider cybersecurity insurance

Even the best defenses cannot eliminate risk. Cybersecurity insurance demonstrates proactive risk management and can provide protection if a breach occurs mid-transaction.

How to choose the right cybersecurity framework

Several security frameworks are widely used, including SOC, HITRUST and ISO. The best option for your company depends on industry, company size and your proximity to a sale.

• SOC 1 or 2 are commonly used by software companies to demonstrate controls and security practices to potential clients.
• HITRUST certification is often used by companies that handle sensitive personal information like medical data.
• ISO 27001 certification is commonly used by firms in the manufacturing industry that require internationally recognized security standards.

Financial institutions may also undergo Bank Secrecy Act and anti-money laundering audits as part of broader compliance programs.

If you’re not sure which framework is best for your business, look at the RFPs you typically bid on. Which certifications are potential clients looking for?

How to make cybersecurity a business priority

When your team is putting out fires elsewhere, cyber can feel like a problem that can wait. Then one day, it becomes the fire.

Ignoring the issue can be costly. Instead, view cybersecurity as a driver of enterprise value. Stronger cyber defenses can reduce risk and increase valuation in a future sale.

Risk modeling can also help quantify the decision. Compare the potential financial impact of a cyberattack against the cost of strengthening defenses to clarify the ROI of lowering your risk profile.

How Wipfli can help

We help business leaders strengthen cybersecurity defenses and boost enterprise value. Our team can assess your cybersecurity needs and provide transaction advisory services to help you maximize value when buying or selling a business.