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Many wholesale and distribution companies do not
perceive that they have any significant exposure to
cyber risk given that most of the publicity around
these incidents involves government entities, large
retailers and healthcare providers. While these industries certainly have a more acute exposure to
risks involving cyber attacks, wholesalers and distributors are far from immune.
Every wholesaler and distributor conducts business with their employees,
their vendors and their customers
through e-mail, wire transfer and electronic data entry. Every one of these
transactions exposes them to a potential cyber breach. An employee mistakenly sending a corrupted file, a hidden
virus or an inadvertent attachment can
result in allowing malicious third parties access to other organizations' computer systems. It is for these reasons
that companies take a look at the cyber
security measures they have in place.

POTENTIAL CYBER THREATS
Cyber threats can result from both internal and external sources. Far too often companies can become a victim of
employee theft. Employees have access
to a company's system and there are
countless ways a worker can steal information, disable systems or release confidential information. Another internal
threat can be caused unintentionally by
breaches caused by lost laptops, poor
password security and an employee being lured into a scam via e-mail.
External threats can be as sophisticated as third world government entities and organized crime, or as simple
as a hacker looking to distribute viruses
or malicious codes.
While most of the publicity surrounding cyber breaches is related to privacy
issues, the most alarming cyber breaches
that are less publicized are those that result in bodily injury or property damage.

For example, in recent news, there have
been situations where hackers had access
to a foundry in Germany and compromised the furnace to run at higher temperatures that ultimately resulted in the
system failing and costing the company
millions of dollars in losses. With this
in mind, it is easy to see how a malicious
party could take control of a manufacturer's production system in a manner that
could result in a major property loss or
the loss of a life.

STEPS TO MITIGATE RISK
When wholesalers and distributors review their cyber security measures, it
should extend beyond the IT department
to include operations, human resources,
sales and finance - all of which have a role
in defending companies from risk. There
are several fundamental security practices that companies should put into place
to prevent cyber threats, including:
q Educating employees on their responsibilities in the event of a cyber breach
and have it documented;
	q Ensuring your intrusion detection
software is state of the art and regularly updated;
q Conductingvulnerabilityriskassessments - ideally by third parties;
	q Implementingbest-in-classencryption on your systems;
q Backing up your data and software
and regularly test the effectiveness;
q Ensuring software updates are made
promptly and across all of your company's applications.

INSURANCE COVERAGE
The insurance that many companies
take to protect themselves from cyber
threats is through their general liability and property policies. However,
with cyber threats increasing so has the
number of exclusions and limitations
contained in these policies. The first
step in addressing the risk from an insurance perspective is to ensure that
the company understands how the coverage for these risks may be excluded
or limited. There is the ability to build
a cyber liability program that includes
coverage for bodily injury and property damage. The policies can be written
to provide traditional cyber liability, as
well as provide excess bodily injury and
property damage above more traditional policies.
Cyber insurance policies can be extremely complex and provide coverage
from internal impacts, such as viruses,
cyber vandalism and business interruptions, as well as third-party liability
that a cyber threat can create. These
policies also come bundled with prevention and loss response services.
Exposure to cyber threats continues
to grow in the manufacturing industry. Companies can protect themselves
from these threats if they implement
"best practices" internally to avoid attacks and the second step is to ensure
that their insurance program is designed to respond to these risks. q

Luke Foley is a producer at The Graham
Company, one of the largest insurance
and employee benefits brokerages in the
Mid-Atlantic region, He specializes in creating risk management programs for large,
privately held companies in the manufacturing and distribution industries. He can
be reached at lfoley@grahamco.com or
215-701-5332.
Bill Selman is a vice president and leader of
the manufacturing and distribution division
at The Graham Company. He is also part
of Graham's environmental and captive
insurance practices. He can be reached at
bselman@grahamco.com or 215-701-5233.

Spring 2016 www.wdimagazine.com

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Table of Contents for the Digital Edition of Wholesale & Distribution International - Spring 2016

Contents
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Wholesale & Distribution International - Spring 2016 - Cover3
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