Risk Management in IT: A CFO’s Perspective on Cybersecurity Investments

Cyberattacks are becoming inevitable; with breaches costing approx. $4.88M, CFOs must bridge gaps to safeguard finances and reputation.

Cyberattacks are no longer isolated incidents; they are an inevitable part of modern business risks. In 2024, the global average cost of a data breach reached an unprecedented $4.88 million, marking a 10% increase from the previous year. This trend underscores the escalating financial risks associated with cyber threats. Businesses that fail to prioritize cybersecurity investments often face severe financial and reputational consequences, which can lead to long-term damage far beyond immediate monetary losses.

A major challenge for CFOs is quantifying the impact of cyber threats. A recent survey revealed that 66% of CFOs struggle to fully grasp the role of Chief Information Security Officers (CISOs) and often find it challenging to see tangible returns on cybersecurity investments. This disconnect between financial leadership and IT security can result in inadequate protective measures, leaving companies vulnerable to attacks that could have been mitigated with proactive planning.

Cybercrime: An escalating global threat

The financial implications of cyberattacks are staggering. In 2023, cybercrime cost companies worldwide an estimated $8 trillion, a figure projected to nearly triple to $24 trillion by 2027. These statistics highlight the pressing need for CFOs to prioritize cybersecurity investments to safeguard their organizations’ financial stability.

Beyond financial costs, businesses must also consider the operational disruptions that follow a cyberattack. Companies may experience prolonged downtime, regulatory penalties, and loss of intellectual property. More critically, customer trust—an asset that takes years to build—can be eroded in a matter of minutes when data breaches expose sensitive client information.

Strategic investment in cybersecurity

Determining the optimal investment in cybersecurity is a complex task. The Gordon–Loeb model, a renowned economic framework, suggests that firms should invest up to 37% of the expected loss from a cyber breach in protective measures. This model assists CFOs in balancing the costs of cybersecurity investments against potential losses, ensuring resources are allocated efficiently.

However, a one-size-fits-all approach does not work when it comes to cybersecurity. Organizations must assess their specific risk landscape and industry regulations. For example, financial services firms handle vast amounts of sensitive customer data and are frequent targets of cybercriminals, necessitating higher security investments compared to businesses in other industries.

The role of CFOs in cybersecurity governance

While CISOs and IT teams are responsible for implementing cybersecurity frameworks, CFOs play a crucial role in governance. This includes:

• Risk Assessment and Budgeting: CFOs must collaborate with security teams to evaluate the potential financial risks of cyber incidents and allocate appropriate budgets for mitigation strategies.
• Cost-Benefit Analysis: Cybersecurity spending should be aligned with business objectives. CFOs must evaluate whether investments in AI-driven threat detection, cloud security, or employee training provide a justifiable return on investment.
• Regulatory Compliance: With increasing global regulations on data protection, CFOs must ensure their organizations comply with cybersecurity disclosure requirements. For example, the U.S. Securities and Exchange Commission (SEC) now mandates timely reporting of material cybersecurity incidents, further emphasizing the financial accountability of cybersecurity governance.

Reputation management and cybersecurity

Beyond financial metrics, CFOs must consider the broader impact of cyber incidents. A breach can erode customer trust, damage the organization’s brand, and lead to significant operational disruptions. For instance, in the United Kingdom, cyberattacks have cost businesses approximately £44 billion in lost revenue over the past five years, with 52% of private sector companies reporting at least one attack during that period.

Moreover, businesses in sectors such as e-commerce, healthcare, and financial services operate under heightened scrutiny. A single cyber incident can lead to lawsuits, compliance fines, and even executive-level accountability. CFOs must recognize that cybersecurity is not merely an expense but an investment in maintaining the company’s market reputation and stakeholder confidence.

Looking ahead: The CFO’s role in cybersecurity strategy

The digital landscape continues to evolve, and cyber threats are becoming more sophisticated. As a result, CFOs must recognize cybersecurity as a critical component of their risk management strategy. By investing appropriately in cybersecurity measures, fostering collaboration with IT leaders, and staying abreast of regulatory requirements, CFOs can protect their organizations from the financial and reputational damages associated with cyber threats.

A proactive cybersecurity strategy is not just about preventing losses—it is about building a resilient organization that can withstand digital threats while maintaining stakeholder trust. CFOs who embrace this mindset will play a pivotal role in shaping their organizations’ long-term success.

Authored by Devesh Dhar Dwivedi, CFO, CMS IT Services. Mr. Dwivedi comes with a rich experience of over 17 years in reputed organizations like MTAR Technologies, Smart Auto Systems Private Limited (a Mitsui Company), Highradius Technologies, Bharat Forge, etc. where he played a pivotal role in growth and profitability and was also able to bring around financial transformations by adopting new technologies and successfully implementing them in finance and accounts. 

Views are personal and do not represent the stand of this publication.