Apr. 26, 2023
The SEC's proposed amendments to enhance and standardize cybersecurity risk management disclosures by public companies have several pros and cons. Pros: Improved Transparency: The proposed amendments aim to provide investors with more comprehensive and consistent information about a company's cybersecurity risk management, strategy, governance, and incident reporting. This would increase transparency and help investors make more informed decisions about their investments. Timely Notification: The proposed amendments would require companies to report material cybersecurity incidents in real-time, providing timely notification to investors. This would allow investors to take immediate action to protect their investments. Standardized Disclosure: The proposed amendments would standardize the disclosure of cybersecurity risk management information, making it easier for investors to compare companies and identify best practices. Cons: Increased Burden on Companies: The proposed amendments would require companies to report more information about their cybersecurity risk management, which could be time-consuming and expensive. This may particularly affect smaller companies that may not have the resources to comply with the new requirements. Potential for Over-Disclosure: Companies may over-disclose information to avoid regulatory scrutiny, which could lead to an excessive amount of information that may not be useful to investors. This could cause confusion and overwhelm investors who may not know which information is most relevant. Limited Scope: The proposed amendments only apply to public companies, leaving privately-held companies outside the scope of the proposed disclosure requirements. This may lead to an uneven playing field between public and private companies in terms of cybersecurity risk management disclosures. In conclusion, while the proposed amendments may increase transparency and provide timely notification to investors about cybersecurity risks, it may also create a burden for companies and lead to over-disclosure. Additionally, the limited scope of the proposed amendments may leave some companies outside the scope of the requirements. Overall, the proposed amendments may need to be carefully evaluated and balanced to ensure that the benefits of increased transparency outweigh the potential costs and risks. Addam Chupa EVP & CIO