UK: Cyber Security And Lenders - How To Manage The Risks Faced By Borrowers

Highly publicised incidents affecting sophisticated and global businesses such as Facebook and the NHS demonstrate that cyberattacks have the potential to affect almost any borrower.

Whilst these risks cannot be eradicated, the consequences for lenders can be managed. In this Insight our Banking and Finance experts explore ways in which we can help you to protect existing and future investments.

Cyber security and lenders - how to manage the risks faced by borrowers

Information is valuable yet vulnerable. Most borrowers hold some degree of digitally stored sensitive, confidential and personal information. Some handle significant amounts of funds. Many are also involved in enabling commercial transactions to take place and completing these transactions online. Each online step provides opportunities for interference.

Borrowers may also be underprepared. Some lack the proper policies, procedures and precautions required to prevent an attack. Some are affected by vulnerabilities created in their supply chain by third party contractors and suppliers. And it is not just SMEs that suffer; the highly publicised attacks on Facebook and the NHS have demonstrated that large, sophisticated and global organisations can be just as vulnerable as smaller enterprises.

The Cyber Security Breaches Survey 2018 reported that:

  • over four in ten businesses (43%) and two in ten charities (19%) experienced a cyber breach or attack in the last twelve months; and
  • under three in ten businesses (27%) and two in ten charities (21%) have a formal cyber security policy or policies.

Combine these statistics with the potential impact that an attack can have on a borrower's reputation and service delivery and it seems to be a good time to take stock of what can be done to protect a lender's investment against the cyber risks that are facing borrowers.


Any business disruption can have an impact on a borrower's eventual success and cyber attacks have the potential to create problems with far reaching consequences. An attack could cause a minor complication, preventing access to systems for a few hours and incurring limited remediation costs. Alternatively, it could lead to the eventual demise of an enterprise, as per the data breach that eventually toppled Mossack Fonseca. A business may also be significantly affected if a data breach results in tampering with information.

Getting protected

As with so many other risk management strategies, preparation is key. If a borrower has taken steps in advance to protect a business against the opportunity for attack and put in place an appropriate disaster recovery or mitigation plan, this will minimise the potential for damage to the borrower's business and a lender's investment should an attack occur.

Action points

  • Before funding: You may find it useful to use a tool such as our Digital Risk Calculator as part of the due diligence processes to find out a borrower's digital risk score and identify their top five digital risks. This assessment, coupled with an analysis of the borrower's business and the key assets that drive its value could pay dividends. It should help to flag up whether a detailed enquiry into a borrower's infrastructure, policies and skills base in this area is required before funding takes place.
  • Documenting the transaction: We can build additional protection into the documents for transactions involving high-risk borrowers. This could include:

    • enhanced insurance requirements;
    • undertakings to notify the lender of breach. For example, in the event of a loss of personal data, the borrower could be obliged to give notice to the lender at the same time as it delivers the notifications required by data protection legislation or its regulators. We can help you to identify the action points that are relevant to the specific borrower;
    • ensuring that the covenants address the cyber threat that is most relevant to the business so that you do not need to rely on the material adverse change Event of Default; and
    • enhanced warranties or information covenants around data management and cyber security.
  • In the event of a breach: From a lender's perspective, clearly it will be important to get an understanding of the (hopefully short term) impact that an attack is going to have on the cash flow of the business. If this could present repayment issues then we suggest that you are alert to the risks of:

    • consequential (and potentially automatic) cross defaults into other contracts.
    • the business being unable to pay other creditors' debts as they fall due, resulting in a breach of solvency covenants and potential claims from creditors; and
    • requests for additional short term working capital;
    • potential breaches of financial covenants;

We recommend that the transaction documents are reviewed before entering into discussions with an affected borrower and that you talk to your legal advisers about the best way of granting leniency or documenting an amendment to the facility, if this is your aim. We will be able to guide you on the best way to protect your position and avoid inadvertently waiving your rights should enforcement action be required further down the track. Alternatively, if the interruption to business is more significant and time is of the essence, we can help you to quickly evaluate your options and take the right decision to protect your investment.

For further information on this topic you can read our article on understanding Digital Risk.

Read the original article on

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions