What drives performance today is also what exposes it. As businesses race to modernise and digitise, they’re becoming more connected – and more vulnerable. Among the many areas being reshaped by this shift is the investment landscape, where cyber risk is emerging as one of the most complex and consequential exposures to manage.

With investment companies becoming more reliant on digital infrastructure, the potential for a single cyber incident to affect multiple parts of a business – or indeed, multiple businesses – is growing. From operational disruption to reputational fallout and financial losses, the impacts are no longer contained within the four walls of a single organisation. For investment firms, this broadens the lens through which cyber risk is viewed – not just as a technical concern, but as a material, operational, and financial one that can affect performance across a portfolio.

Naturally, attention is turning to how this risk is managed. For many, cyber insurance has become part of the answer – often viewed as a primary means of protection in the face of rising digital risks. But in today’s dynamic threat landscape, the question remains: is it really enough?

Cyber insurance vs. cyber resilience: Why it’s not a silver bullet

Undeniably, cyber insurance plays a valuable role in the broader risk management toolkit. It provides a financial buffer in the aftermath of a breach, helping organisations manage the costs of recovery – from forensic investigations and legal fees to business interruption and data restoration. But it’s not designed to prevent incidents from occurring in the first place. And it’s increasingly clear that relying on insurance alone won’t protect long-term portfolio value.

There are several factors behind this shift in thinking:

• Coverage limitations and exclusions are growing
  Insurers are tightening terms, raising premiums, and excluding certain high-impact incidents – particularly those linked to widespread or nation-state attacks. As cyber threats become more entangled with geopolitical tensions, the likelihood of exclusions increases, making insurance coverage less predictable and less comprehensive.
• Claims processes can be complex and slow
  Even when coverage applies, navigating the claims process can delay access to funds at a time when companies need to act quickly. Meanwhile, the business impact – especially reputational – continues to unfold.
• Reputational damage isn’t covered
  Financial reimbursement can’t repair customer trust or stakeholder confidence. The intangible, long-term consequences of a breach often have the biggest impact on brand equity and valuation.
• Cyber risk is systemic and hard to model
  A single software vulnerability or compromised provider can affect thousands of firms simultaneously. This aggregation risk is hard to underwrite and often leaves gaps in insurance coverage.
• Reactive by design
  Insurance addresses damage after it’s occurred. In a threat landscape that moves as fast – and unpredictably – as today’s, proactive risk identification and response are just as critical.

Cyber risk management as a dimension of portfolio performance

The financial impact of cyber incidents can be significant and often extends well beyond the immediate costs of response and recovery. From lost revenue and operational disruption to regulatory fines and reputational fallout, the downstream consequences of a breach can quietly undermine enterprise value over time.

For investment managers, the implications are increasingly clear: cyber risk is no longer just a security or compliance concern – it’s a strategic performance driver that can influence valuation, deal timelines, and investor perception.

As a result, more firms and investors are beginning to view cybersecurity not as a checkbox during due diligence, but as a core lever of value protection and enhancement throughout the entire investment lifecycle.

Some of the benefits emerging from a more proactive approach include:

Identifying cyber vulnerabilities that could affect valuation
Pre-deal assessments that include critical cyber risk indicators can uncover issues that may affect earnings quality or require remediation post-acquisition. Early visibility into these areas helps inform evaluation, improve risk-adjusted returns, avoid last-minute surprises, and develop strategies to help your portfolio companies bolster their defences against potential cyber threats during the value creation period, ensuring a resilient foundation for sustained growth and maximising the long-term value.

Building investor confidence through enhanced governance
Asset owners, limited partners and co-investors are placing greater emphasis on how fund managers oversee operational risks, including cyber. Regular assessments and tools like continuous risk monitoring can provide real-time visibility into emerging threats across portfolios. Demonstrating a structured and ongoing approach to cyber oversight across the portfolio signals strong governance and a forward-looking risk management culture – qualities that resonate with today’s more sophisticated investor base.

Reducing uncertainty and volatility across the portfolio
Cyber incidents are, by nature, disruptive and often unpredictable. By embedding cyber risk oversight into portfolio monitoring, firms can reduce unplanned shocks, maintain operational continuity, and preserve enterprise value. This not only protects against downside risk but also supports steadier portfolio performance over time.

Supporting smoother exits with stronger cyber hygiene
Buyers and IPO markets are increasingly focused on cybersecurity as part of operational due diligence. A portfolio company with a strong security posture and robust incident response plan may appear more resilient and command a higher multiple. Conversely, undisclosed cyber weaknesses can delay deals, drive renegotiations, or derail exits entirely. This heightened focus is well-founded: according to a 2023 report by Accenture,¹ 68% of its private equity clients saw a rise in cybersecurity incidents during the month of a deal closure – suggesting that threat actors actively target investment companies at their most vulnerable moments. 

Navigating the shifting waters of regulatory compliance with confidence
From DORA to NIS2 rules, compliance is becoming inseparable from cyber risk management strategy. A proactive approach – integrating ongoing risk monitoring, advanced threat detection, regular employee cyber awareness training – not only enables portfolio companies to reduce their risk profile but also help strengthen their compliance endeavours, positioning themselves as responsible fiduciaries and keepers of valuable information in a digitally uncertain age.

As cyber-attacks become more pervasive, cyber resilience is increasingly seen as a marker of operational maturity – and a prerequisite for investment readiness. From our work across the sector, we’ve seen firsthand how a proactive approach to cyber risk management can support cleaner exits, help preserve long-term value, and enable companies to distinguish themselves in a landscape where digital risk is now a material financial consideration.

Cyber insurance isn’t enough – but it’s part of the solution

The reality of today’s world is that cyber risk is increasingly tied to portfolio performance. Cyber insurance plays an important role by providing a financial safety net in the event of a breach. But it doesn’t reduce the likelihood of an incident occurring, nor can it shield a business from reputational fallout, operational disruption, or long-term value erosion.

That’s where cyber risk management becomes critical. It provides the visibility, controls, and intelligence needed to identify vulnerabilities, monitor evolving threats, and respond effectively – before a minor exposure becomes a major event.

The most resilient firms recognise that this isn’t an either/or decision. Insurance and cyber risk management serve distinct but complementary purposes. Insurance helps absorb the shock when things go wrong. Risk management helps prevent the worst from happening in the first place. Together, they form a more robust, strategic approach to protecting value.

In a digital era, resilience isn’t built on insurance alone. It’s built on preparation, awareness, and the ability to act with confidence – supported by both a strong posture and adequate coverage. More investment managers are acting on this understanding – integrating cyber oversight into governance frameworks, working with cyber intelligence partners, and treating digital risk with the same discipline applied to financial, regulatory, and operational exposures.

¹ Accenture,’Private Equity and rising cost of cyberattacks’, 2023 https://www.accenture.com/content/dam/accenture/final/accenture-com/document/Private-Equity-And-Rising-Cost-Of-Cyberattacks.pdf