Mega Monday offers risk and reward for online retailers

According to Mr Wares, non-physical damage business interruption cover to protect against website downtime is now available in increasing amounts to European buyers and has piqued their interest. Furthermore, data breach cover is being looked at by a growing number of European companies as they look to protect their reputations and anticipate more stringent breach notification rules, he said. This week's Mega Monday starts a two-week spending splurge that the UK online retailers trade body Interactive Media in Retail Group (IMRG) predicts will see £3.72bn spent in the following two weeks. This would represent a 14% increase on last year.hideVisa Europe alone expected to process 3.8 million transactions worth £265m and Britons are thought to have spent 15 million hours online. And the boom in sales was replicated across Europe and on the other side of the Atlantic in the US. Its Cyber Monday, which fell on November 26, reportedly ran up online sales of $1.46bn. For UK and European online retailers the increased sales in the build up to Christmas represent a critical period. For those that trade internationally global income, as well as domestic trade, is at stake. The risk of missing out due to avoidable network failure or a hacking event that cause any disruption to a web storefront will hit hard and the threat has never been greater, said Marsh's Mr Wares. "There is a real risk that you incur some downtime in that period and in particular on a day like Mega Monday. Retailers really depend on this time of year to get the sales in and so a day of downtime, or even a few hours, is going to hit them really hard," he said. The business continuity implications of any downtime are huge and the likelihood increases as web traffic peaks. It is therefore crucial that companies make sure their web infrastructure is able to cope with the traffic and extra demand and that resilience is built into their networks. "You need to ensure that should something happen to your infrastructure you can switch over to an alternative sale site," said Mr Wares. A further business continuity risk heightened during this busy period is the threat of hacktivist groups that may look to exploit retailers' fear of site failure. "If you are a big brand and you have done something unpopular or something to annoy a particular hacktivist group, perhaps this period might present a good opportunity for those with a grudge against your brand to do some real damage and bring down your online store front and affect sales and your reputation," said Mr Wares. Any hack that manages to steal personal data, particularly debit card and credit card info, is likely to be considered a breach of trust between consumers and that brand and reduce sales, pointed out Mr Wares. This seasonal threat should serve as reminder of the importance of proper risk mitigation efforts by risk managers at online retail stores and transfer of risk to the growing specialist cyber insurance markets is an increasingly attractive option, intimated Mr Wares. In cases of web store interruption caused by failures to infrastructure or hacking, non-physical damage business interruption cover is now available, said the broker. These policies are an attempt to cover the gaps in traditional business interruption (BI) policies that do not protect against intangible triggers. "There are specialist insurance markets now that can provide that cover for those type of events, triggered either by a hack or by the failure of your network equipment or software or human error. So insurance cover is available for site downtime," said Mr Wares. Although it is not widely purchased there is increasing interest, he added. According to Mr Wares buyers can now secure up to £100m limits, or the equivalent in euros, and this figure is set to increase as more insurers look to enter the market. However, pricing levels for such cover, which have been criticised by buyers as prohibitively expensive, are not yet clearly established. "Although this cover is available it hasn't been for a very long time and I think insurers are still trying to work out exactly what the right premium should be for that type of insurance. So its not a case of it (cost of cover) going up or down, it is a new insurance and insurers are still trying to find their feet in terms of the right price level," said Mr Wares. The other key development in the European cyber risk market is protection against breaches of personal data. Whilst widely available and purchased in the US where stringent data breach laws are in place, it has not, until now, been an area that has garnered much interest in Europe. Mr Wares believes this situation is changing, driven in part by draft EU data protection laws that are set to tighten. "We are talking about breach of personal data where insurers will pay for the liability that arises from that and for your own costs in managing that crisis. This type of insurance is widely bought in the US but not in Europe. However, insurers are entering that space at a rapid pace and it is now widely available. It is certainly an area that is getting a lot of interest from companies in the UK and Europe but not a wide take up just yet," said Mr Wares. "The main reason for this is the draft EU privacy legislation, particularly a planned 24-hour notification law. But even in the absence of that legal requirement I think companies are much more aware of their brand response because it is a breach of trust between your brand and your consumer base. How you respond to that is going to be critical to your reputation," he said. It is possible to purchase limits of £200m to £300m for data breach cover in the UK or the euro equivalent in Europe, he said.

Mega Monday offers risk and reward for online retailers

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