In an evaluation of 1,000 cyber risk assessments, 48% of firms performed external penetration testing less than once a year, if at all. That’s a staggering gap, especially in an industry where timing and risk precision are everything.
For private equity firms, this is more than a cybersecurity concern. It’s a portfolio-level business risk. One company’s exploited vulnerability can delay valuations, complicate exits, and erode the confidence of your investors.
Your Portfolio’s Posture Is Your Posture
Too often, private equity firms focus inward, reviewing their posture while overlooking the cybersecurity maturity of their portfolio companies. However, hackers don’t respect silos. If a single portfolio company suffers a breach, the ripple effects can negatively impact deal performance across the entire fund.
A consistent, transparent cyber program that spans your portfolio enables:
- Faster, data-backed decisions.
- Higher confidence from LPs and regulators.
- Fewer surprises at exit.
Standardization Builds Resilience
A key challenge is inconsistency. Without a unified approach to cyber oversight, private equity firms are left with a patchwork of practices, making it challenging to compare risk or prioritize remediation.
To effectively manage cyber risk across a portfolio, private equity firms benefit from a tiered approach, tailoring oversight based on the needs and maturity of each company. A structured model enables consistent benchmarking and prioritization, facilitating easier comparison of risk levels and alignment of remediation efforts.
Best practices include:
- Baselining and benchmarking cyber posture using standardized DDQs.
- Monitoring real-time remediation and maintaining continuous oversight.
- Centralizing insights to identify trends and elevate the right risks.
- Advising stakeholders with expert interpretation, not just raw data.
This kind of disciplined framework creates a unified view of portfolio-wide risk, supporting more confident decision-making across deal and operating teams.
Transparency Builds Value
Inconsistent testing, or none at all, leaves risk in the dark. It’s an absolute must to promote portfolio-wide onboarding, real-time data flow, and tri-party engagement among the sponsor, portfolio company, and cybersecurity advisors.
You gain a single source of truth and the ability to identify and mitigate weak links before they become financial liabilities.
Cyber Isn’t Just an IT Issue. It’s a Deal Issue.
When cyber risks go unmonitored, they don’t just threaten data; they also pose a significant risk to organizations. They jeopardize valuations, delay exits, and create friction with investors. As regulatory scrutiny shifts and expectations evolve, private equity firms have a responsibility to set a clear standard.
Establishing consistent, portfolio-wide oversight is a strategic imperative beyond good governance. The firms that take a proactive, structured approach to cyber risk will be better positioned to preserve value, move quickly, and build lasting trust with stakeholders.
How are you assessing and remediating cyber risk?
