We’re not in e-Kansas anymore. And there’s no denying that present day internet Oz, while extraordinary, is increasingly scary. Cyber attacks of various types continue to escalate across the globe. As aptly stated by one commentator: “Cybercrime is raging worldwide.” Reports of high profile cyber attacks make headlines almost every day. Recent headlines are filled with reports of sophisticated distributed denial-of-service (“DDoS”) attacks against the largest U.S. banks, which disrupted transactions for hours at a time. They also report some of the largest data breaches in history, which have affected the world’s most sophisticated corporate giants. And they report billions in intellectual property loss via cyber espionage. Indeed, the director of the National Security Agency has stated that “[t]he ongoing cyber-thefts from the networks of public and private organizations, including Fortune 500 companies, represent the greatest transfer of wealth in human history.”

The headlines confirm the reality: cyber attacks are on the rise with unprecedented frequency, sophistication and scale. They are pervasive across industries and geographical boundaries. And they represent “an ever-increasing threat.”

Even though no organization is immune from cyber risk, it is uncertain that companies are sufficiently aware of the escalating onslaught. Even companies that are sufficiently aware of the problem might not be sufficiently prepared. It is abundantly clear that network security alone cannot entirely address the issue; no firewall is unbreachable, no security system impenetrable. As noted by one observer: “[t]here is no fail-safe technology that is immune to hacking. Online security will evolve as hackers and security experts work continuously to outwit each other.” A recent survey conducted by global consulting firm Towers Watson notes “the growing awareness that the increasingly sophisticated cyber-attack capabilities of hackers could require a more comprehensive protective net than a reliance on even the most capable IT staff.

Originally published in the Insurance Coverage Law Report - December/January 2014.