Why Cyber Security Matters in the Tax and Accounting Industry
In 2021, the FBI received almost one million complaints related to cyber security, along with reported financial losses exceeding $6.9 billion. You might think that attackers are only targeting big businesses, but this is far from the case.
Small- and medium-sized companies are of increasing interest to hackers — and tax and accounting firms, in particular, are tempting targets. In line with this, cyber attacks against tax and accounting firms have increased by 80% since 2014.
It’s easy to see why cybercriminals are targeting SMB tax and accounting firms. After all, data is their currency of choice. Firms sit on a wealth of sensitive customer data that is lucrative to hackers — details like account numbers, transaction details, credit card numbers and personally identifiable information.
If these details get into the wrong hands, a hacker could use them for a range of nefarious purposes, including fraud and theft.
What is Cyber Security?
Cyber security is a vital tool to protect digital information from malicious attacks and guard online systems, devices, networks, data and more. Widely used across various industries for business as well as remote computing needs - this field of security provides an ever-evolving defense against cybercriminals looking to exploit confidential or sensitive material.
Why Cyber Security Is Important in the Tax and Accounting Industry
Given the sensitive nature of the data firms process and store, prioritizing cyber security is paramount. It is simply a risk that cannot be ignored.
However, in a landscape where technology budgets are tight and the complexities of cybersecurity seem difficult to grasp, moving from an awareness to actual implementation can be challenging.
So, to help you understand the benefits of a strong cyber security approach, here are the crucial reasons to bolster your security defenses.
1. Strong Cyber Security is a Competitive Differentiator
PwC estimates that financial institutions are over 30% more likely to be targeted by hackers than other companies. In this paradigm, it’s not a case of if you will suffer a cyber attack but when.
While this is an unfortunate reality, an attempted cyber attack is not the same as a successful one. If you put the proper defenses in place to secure cloud storage, data and IT infrastructure, you will be much more difficult to hack — and attackers will move on to another target with weaker defenses.
2. Avoid Financial Loss
Research shows that the average cost of a data breach in 2021 was an astonishing $4.24 million. This is enough to put some accountancy and tax firms out of business.
It’s interesting to note, too, that these financial losses aren’t just directly from data breaches. They include factors like downtime, legal repercussions, public relations handling, compliance fines and customer reimbursements.
Indeed, in today’s climate, poor handling of customer data is not an issue that’s taken lightly. By proactively securing your customer data, you will dramatically reduce the likelihood of ever ending up in the hot seat.
3. Meet Compliance Obligations
Under regulations like the Gramm-Leach-Bliley Act (GLBA), also known as the Financial Services Modernization Act, tax and accounting firms have a responsibility to protect their clients’ data and explain their processes for doing so in a written information security plan.
Failure to comply with GLBA can lead to fines of up to $100,000. For firms based in California or that have Latino customers in California, there’s also the California Consumer Privacy Act (CCPA) to comply with, which puts measures in place regarding how they collect personal data on California residents.
Both the GLBA and CCPA require strict measures to protect client data, meaning a cyber security posture is paramount to meeting your compliance obligations.
4. Mitigate Risk to Clients
Compliance and financial loss aren’t the only reasons to improve your security maturity. You should also implement a robust security program for the sake of your clients. If a hacker gets their hands on a client’s financial information, for example, they could drain money out of your clients’ accounts and jeopardize their future.
Even if a cybercriminal only manages to steal a client’s email address and password, they could cause widespread damage. By hacking into their account, they could pose as your client in order to conduct fraudulent activities, putting your client’s reputation at risk — and endangering their friends, family and business associates.
Ultimately, you have a duty of care to ensure you are properly securing your clients’ data.
5. Maintain Your Reputation
These days, it seems like everyday there is a new data breach in the headlines. For the companies that end up in the media, the repercussions are felt long after the news agenda has moved on.
This is because a data breach can damage your brand’s equity. Your customers may choose to work with another accounting firm who they believe will better protect your data, and your partners may also look to move their contracts elsewhere. In the long-term, this can impact your profits and your ability to find new clients.
What to Do Next
We’re here to help you demystify cyber security and better protect your data and infrastructure. If you’d like advice, contact us today.
Mauricio Prinzlau is the CEO and Co-founder of Cloudwards. He is at the helm of the company and steers a team of editors, writers and designers from all around the world.