Cyber threats continue to evolve, and businesses of all sizes have sensitive information worth protecting. Customer records, employee information, financial data, passwords, payment information, and proprietary business data can all become targets.
Phishing, ransomware, compromised accounts, employee mistakes, and other cyber incidents can also create consequences that extend beyond the initial security problem. A cyber event may interrupt operations, require data recovery, trigger customer notification requirements, or create unexpected legal and financial expenses.
As businesses head into 2027, protecting company data requires a combination of good security practices, employee awareness, qualified technology support, and appropriate risk management.
Following proven data security best practices can help reduce the likelihood and potential impact of a cyber incident. But even strong security measures can’t eliminate every risk. That’s where cyber liability insurance can become another important part of a business’s overall risk-management strategy.
Here’s what business owners should know.
What Is Data Security and Why Does It Matter?
Data security refers to the measures businesses take to protect digital information from unauthorized access, theft, alteration, loss, or destruction.
For businesses, sensitive data can include:
- Customer information
- Employee records
- Financial and payment information
- Login credentials
- Business communications
- Proprietary information
- Contracts and other confidential documents
Three principles commonly form the foundation of data security:
Confidentiality: Sensitive information should only be accessible to authorized individuals.
Integrity: Information should remain accurate and protected from unauthorized changes.
Availability: Authorized users should be able to access important information and systems when needed.
Technology plays a major role in protecting these areas, but data security isn’t solely a technology issue. Employees, vendors, internal policies, access permissions, and everyday business processes can all affect a company’s exposure to cyber risks.
Common Data Security Risks Businesses Face
Understanding common threats can help business owners recognize where vulnerabilities may exist and where additional safeguards may be appropriate.
Phishing and Social Engineering
Phishing and social engineering attacks attempt to convince people to reveal sensitive information, click malicious links, download harmful files, transfer money, or provide access to accounts.
These attempts can arrive through email, text messages, phone calls, social media, or other communication channels.
As fraudulent communications become increasingly sophisticated, employees should be cautious about unexpected login requests, payment instructions, requests for sensitive information, and messages that create an unusual sense of urgency.
Ransomware and Malware
Malicious software can compromise devices, steal information, interrupt business operations, or prevent organizations from accessing important systems and files.
Ransomware can be particularly disruptive because attackers may encrypt data or systems and demand payment in exchange for restoring access.
Compromised Passwords and Account Takeovers
Weak, reused, or stolen passwords can give unauthorized users access to email accounts, cloud applications, financial platforms, and other business systems.
Multi-factor authentication and appropriate password practices can provide additional layers of protection against unauthorized access.
Business Email Compromise
Business email compromise can occur when criminals impersonate executives, employees, vendors, or business partners in an attempt to redirect payments, change banking information, obtain sensitive information, or gain account access.
Businesses should consider having verification procedures for unusual or sensitive financial requests, particularly when payment or banking information changes unexpectedly.
Employee Mistakes and Insider Risks
Not every cyber incident begins with a sophisticated attack.
An employee could accidentally send sensitive information to the wrong recipient, click a phishing link, use an insecure password, mishandle confidential information, or provide access to someone who shouldn’t have it.
Employee education and clear internal procedures can help reduce these risks.
Third-Party and Vendor Risk
Many businesses rely on outside vendors, contractors, software providers, and cloud platforms.
These relationships can involve access to company systems or sensitive information, which means a business’s cyber exposure may extend beyond its own employees and devices.
Businesses should understand what information third parties can access and periodically review whether that access is still necessary.
Essential Data Security Best Practices for Businesses
There is no single technology or security measure that eliminates cyber risk. Businesses generally benefit from multiple layers of protection working together.
The appropriate safeguards will depend on the size of the organization, its industry, the technology it uses, and the type of information it handles.
Business owners should work with qualified IT or cybersecurity professionals when determining and implementing the appropriate technical protections for their organization.
1. Use Strong Passwords and Multi-Factor Authentication
Passwords remain an important security measure, but relying on passwords alone can leave accounts vulnerable.
Multi-factor authentication, commonly called MFA, requires an additional verification step before someone can access an account.
Businesses should discuss appropriate authentication requirements with their technology provider, particularly for systems containing sensitive or financial information.
2. Keep Software and Systems Updated
Outdated software can contain known security vulnerabilities.
Operating systems, applications, plugins, devices, and other technology should receive appropriate security updates and patches.
Businesses should work with their internal IT team or qualified technology provider to establish procedures for keeping important systems current.
3. Protect Business Devices and Networks
Computers, mobile devices, servers, networks, and other technology can provide potential entry points for cyber threats.
Firewalls, endpoint protection, monitoring tools, secure network configurations, and other safeguards may provide important layers of protection.
The appropriate security tools and configurations should be determined with qualified technology professionals based on the organization’s specific environment.
4. Protect Sensitive Data
Businesses should understand what sensitive information they collect, where it is stored, who can access it, and how it is transmitted.
Encryption may be appropriate for protecting certain information when it is stored or transmitted. Businesses should consult their technology professionals about encryption and other safeguards appropriate for their systems and data.
5. Limit Access to Sensitive Information
Not every employee needs access to every file, account, or system.
Limiting access based on job responsibilities can reduce the amount of information exposed if an employee account becomes compromised.
Permissions should also be reviewed when employees change positions or leave the organization.
Create Clear Data Security Policies
Technology is only one part of protecting business information.
Clear internal policies can help employees understand how company information should be accessed, handled, stored, shared, and protected.
Depending on the organization, a data security policy may address:
- Password and authentication requirements
- Access to sensitive information
- Use of company devices
- Remote access
- Data storage and sharing
- Vendor access
- Reporting suspicious activity
- Procedures for security incidents
Policies should be reviewed periodically as technology, personnel, vendors, business operations, and potential threats change.
A qualified IT or cybersecurity professional can help businesses determine which technical policies and safeguards are appropriate for their specific environment.
Make Employee Security Awareness a Priority
Employees can play an important role in preventing cyber incidents.
Security awareness training can help employees recognize suspicious activity and understand what to do when something doesn’t look right.
Training may cover:
- Password security
- Multi-factor authentication
- Phishing and scam recognition
- Business email compromise
- Handling sensitive information
- Device security
- Remote work practices
- Reporting suspicious activity
Cyber threats change over time, so security awareness shouldn’t necessarily be treated as a one-time onboarding task.
Periodic training and reminders can help employees recognize newer tactics and reinforce the role everyone plays in protecting company information.
Protect Data in Cloud and Remote Work Environments
Cloud applications and remote work have changed how businesses access and store information.
Employees may access company resources from offices, homes, mobile devices, or other locations, while business data may be spread across multiple cloud applications.
Businesses should work with qualified technology professionals to evaluate safeguards such as:
- Multi-factor authentication
- Secure remote access
- Identity and access management
- Device security
- Appropriate cloud permissions
- Encryption
- Regular access reviews
Businesses should also understand the division of responsibility between themselves and their cloud or software providers.
Using a cloud platform doesn’t necessarily mean every aspect of data security is handled by the provider.
Have a Plan for Cyber Incidents
Even businesses with strong security measures can experience cyber incidents.
Having a response plan in place before something happens can help a business determine how it will respond if systems or data are compromised.
A response plan may identify:
- Who employees should contact when suspicious activity occurs
- Who is responsible for investigating the incident
- How affected systems may be contained
- How important data can be recovered
- When IT, cybersecurity, legal, insurance, or other professionals should be contacted
- How business operations will continue or be restored
- How applicable notification requirements will be addressed
Businesses should work with the appropriate technology, legal, insurance, and other professionals when developing plans for their specific circumstances.
How AI Is Changing Cyber Risk
Artificial intelligence is changing the cybersecurity landscape for businesses.
Security technologies can use AI and machine learning to analyze information, identify unusual activity, and help detect potential threats.
At the same time, criminals can use AI-assisted tools to create more convincing phishing messages, impersonation attempts, and social engineering schemes.
That makes verification increasingly important.
An email, text, or other communication can look professional and legitimate while still being fraudulent. Employees should know how to independently verify unusual financial requests, account changes, or requests for sensitive information.
As AI technology continues to evolve, businesses should work with their technology providers to understand how emerging threats may affect their security practices.
Where Cyber Liability Insurance Fits Into Data Security
Data security practices are designed to help reduce the likelihood and impact of cyber incidents. Cyber liability insurance addresses a different part of the risk.
Insurance doesn’t replace strong cybersecurity practices, and strong cybersecurity practices don’t guarantee that a business will never experience a cyber event.
Even with safeguards in place, a business could still experience a data breach, ransomware attack, compromised account, system intrusion, or other cyber incident.
Depending on the policy and circumstances of the loss, cyber liability insurance may provide coverage for certain expenses associated with a covered cyber event.
Coverage varies by insurer and policy, but cyber insurance may address areas such as:
- Data recovery
- Customer notification expenses
- Certain legal expenses
- Cyber extortion or ransomware-related losses
- Business interruption resulting from a covered cyber event
- Liability arising from compromised customer or third-party information
- Certain investigation and response expenses
The exact coverage, exclusions, limits, deductibles, and requirements can vary significantly between policies.
That’s why business owners shouldn’t assume their existing business insurance automatically provides the cyber protection they need.
Data Security and Cyber Insurance Work Together
Think of cybersecurity and cyber insurance as two different components of managing the same business risk.
Security measures can help businesses reduce their exposure and potentially prevent or limit an incident.
Cyber liability insurance can provide financial protection for certain covered losses when an incident still occurs.
For business owners, that means the conversation shouldn’t necessarily be cybersecurity or cyber insurance.
It should be about understanding the company’s overall cyber risk and determining how prevention, response planning, and appropriate insurance coverage can work together.
Businesses should periodically review their cyber insurance as their operations change.
Hiring employees, collecting more customer information, introducing new software, accepting online payments, expanding remote work, changing vendors, or increasing revenue can all change a company’s cyber exposure.
Frequently Asked Questions About Data Security and Cyber Insurance
What are the most important data security best practices?
Important data security best practices can include multi-factor authentication, appropriate access controls, keeping systems updated, protecting sensitive information, educating employees, reviewing third-party access, and having a plan for responding to cyber incidents.
The appropriate safeguards will depend on the individual business and should be discussed with qualified IT or cybersecurity professionals.
What are the three core principles of data security?
The three commonly recognized principles are confidentiality, integrity, and availability.
Confidentiality focuses on preventing unauthorized access to information. Integrity focuses on maintaining the accuracy and reliability of information. Availability means ensuring authorized users can access information and systems when needed.
Does business insurance cover data breaches or cyberattacks?
Business insurance policies vary, and business owners shouldn’t assume a standard commercial insurance policy will cover every expense associated with a cyberattack or data breach.
Cyber liability insurance is specifically designed to address certain cyber-related risks and expenses. An insurance agent can review existing coverage and discuss what additional cyber coverage may be appropriate.
Does cyber liability insurance replace cybersecurity?
No. Cyber liability insurance and cybersecurity serve different purposes.
Cybersecurity practices are intended to help prevent, detect, and respond to cyber threats. Cyber insurance may provide financial protection for certain covered losses resulting from a cyber incident.
Businesses should consider both as part of a broader risk-management strategy.
Do small businesses need cyber liability insurance?
Cyber risk isn’t limited to large corporations.
Small businesses may collect customer information, process payments, use cloud applications, maintain employee records, communicate through email, or rely heavily on technology for daily operations.
Whether cyber liability insurance is appropriate depends on the individual business, its exposures, and its existing insurance coverage. An insurance professional can help business owners evaluate those risks and available coverage options.
Protect Your Business and Your Data Going Into 2027
Data security isn’t something businesses can afford to set and forget.
Technology changes. Employees come and go. Businesses adopt new software and vendors. Cyber threats continue to evolve.
Following data security best practices can help reduce your company’s exposure, but even businesses with strong safeguards can experience a cyber incident.
That’s why cyber risk management should include another important question:
If something does happen, is your business properly insured for it?
A data breach, ransomware attack, compromised system, or other cyber event can create costs that extend far beyond fixing the initial technology problem. Depending on the policy and circumstances, cyber liability insurance may help with certain expenses related to data recovery, customer notifications, business interruption, legal expenses, and other covered losses.
North Town Insurance helps Spokane and Inland Northwest business owners understand their insurance options and determine whether their current coverage reflects the risks their businesses face today.
Not sure what your current business insurance would cover if your company experienced a cyberattack or data breach?
That’s a conversation worth having before you need the coverage.
Talk With North Town Insurance About Cyber Liability Insurance
Have questions about your current business insurance or cyber liability coverage? The North Town Insurance team can help you review your options and understand what coverage may be available for your business.
Call or text North Town Insurance at (509) 483-3030.
Fine Print: This article is for informational and educational purposes only and does not constitute legal or insurance advice. Insurance policies vary significantly by carrier and state. To understand your actual coverage, exclusions, and deductibles, please review your specific policy documents or schedule a consultation with your licensed insurance agent.