Cybersecurity vulnerabilities threatening the security of private equity investments' digital assets
Private equity (PE) firms are increasingly recognising the importance of managing systemic cyber risk across their portfolio companies. With numerous firms overseeing multiple businesses that often share tech vendors, IT stacks, and infrastructure, the interconnectedness of these companies creates a significant blind spot.
According to Vishaal "V8" Hariprasad, CEO and cofounder of Resilience, a cyber risk solution company, PE firms can mitigate this risk by implementing a multi-layered strategy.
Integrating Cyber Risk into Due Diligence
One key strategy is to integrate cyber risk into pre-deal due diligence. This involves identifying vulnerabilities and assessing cyber posture before acquisition, helping avoid valuation hits from undisclosed risks.
Establishing Fund-Wide Security Baselines
Establishing fund-wide security baselines and unified cyber risk frameworks across the portfolio is another important step. This standardisation helps reduce blind spots, preserving valuation and investor confidence.
Implementing Board-Level Governance
Implementing board-level governance and executive oversight that treats cyber resilience as a strategic priority is also crucial. By embedding cybersecurity into operational and investment decisions, firms can ensure that cyber risks are addressed proactively.
Continuous Threat Exposure Management
Continuous Threat Exposure Management and 24/7 monitoring using technologies like MDR (Managed Detection and Response) can help detect, disrupt, and remediate cyber threats before they cause business impact.
Third-Party Risk Management
Third-party risk management, including vendor assessments and contract reviews, is necessary to mitigate risks introduced by supply chain dependencies.
Post-Transaction Cybersecurity Integration and Incident Response Plans
Developing post-transaction cybersecurity integration and incident response plans ensures ongoing protection and rapid recovery after acquisition.
Leveraging Cybersecurity Compliance and Legal Frameworks
Leveraging cybersecurity compliance and legal frameworks can reduce regulatory risks and turn cyber resilience into a value creation lever. This strengthens exit readiness and market positioning.
Utilizing Cyber Maturity Assessments and Tailored Remediation Roadmaps
Utilizing cyber maturity assessments and tailored remediation roadmaps can help continuously improve portfolio company resilience and drive long-term value creation.
By combining rigorous technical due diligence, uniform standards, proactive monitoring, governance engagement, and legal protections, private equity firms can transform cyber risk management from a cost center to a strategic asset that boosts valuation, investor trust, and operational continuity across their portfolios. This holistic approach addresses systemic cyber risk as a material investment concern rather than a back-office issue.
Sources:
- Accenture: The New Cybersecurity Landscape for Private Equity
- Resilience: Private Equity Cybersecurity: A Comprehensive Guide
- KPMG: Cybersecurity in private equity: A critical component of value creation
- PwC: Cybersecurity in private equity: A critical component of value creation
- Deloitte: Cybersecurity in private equity: A critical component of value creation
Vishaal Hariprasad emphasizes that PE firms can mitigate blind spots by integrating cyber risk into pre-deal due diligence, a strategy that involves identifying vulnerabilities and assessing cyber posture before acquisition. Further, establishment of fund-wide security baselines and unified cyber risk frameworks across the portfolio, as suggested by Vishaas, helps reduce blind spots and preserves valuation.
