What are the best practices for allocating cybersecurity risks in a contract?

2 Allocate the risks

The next step is to allocate the risks between the parties. This means deciding who is responsible for preventing, detecting, responding to, and recovering from a cyberattack. You should also define the roles and responsibilities of each party in terms of security policies, standards, procedures, and audits. The allocation of risks should reflect the nature and scope of the services, the value and sensitivity of the data, and the bargaining power and expectations of the parties.

3 Transfer the risks

The third step is to transfer the risks that you cannot or do not want to bear yourself. This means shifting the liability or the cost of a cyberattack to a third party, such as an insurer, a subcontractor, or a vendor. You should also consider the terms and conditions of the risk transfer, such as the coverage, exclusions, limits, deductibles, and claims process. The transfer of risks should complement and not contradict the allocation of risks in the contract.

4 Mitigate the risks

The fourth step is to mitigate the risks that you cannot or do not want to transfer. This means reducing the likelihood or the impact of a cyberattack by implementing security measures and controls. You should also establish a contingency plan and a crisis management team to deal with any potential incidents. The mitigation of risks should be based on a risk assessment and a cost-benefit analysis.

5 Monitor the risks

The fifth step is to monitor the risks throughout the contract lifecycle. This means reviewing and updating the security requirements and performance indicators, conducting regular audits and tests, and reporting and resolving any issues or breaches. You should also communicate and collaborate with the other party and the third parties involved in the contract to ensure compliance and alignment. The monitoring of risks should be proactive and adaptive to changing circumstances and threats.

6 Negotiate the risks

The final step is to negotiate the risks with the other party. This means finding a balance between your interests and expectations, and reaching a mutually acceptable agreement on the allocation, transfer, mitigation, and monitoring of cybersecurity risks. You should also document and formalize the agreement in clear and enforceable terms, and seek legal advice if necessary. The negotiation of risks should be based on trust and transparency, and aim for a fair and sustainable outcome.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?